Why do renters equate the ability to pay rent to mortgage eligibility?

JizzBeans · 10-06-2021 9:09pm #1

A common argument renters make, is that because they can afford to pay their rent regularly , they would be able to service a mortgage as it would be a similar amount. The inference being that they should somehow be eligible for a mortgage.

Another argument that renters/prospective buyers make is that "they done everything right" by going to college, getting the masters and attempting to land a higher paying job etc, etc.

Are they valid points? Its a little more complicated that points suggest I would have thought.

Smee_Again · 10-06-2021 9:10pm

Desperation.

10-06-2021 9:12pm

Are these "arguments" ones you conjured up on the spot? Either you're hopelessly naive or out for a spot of fishing.

Oymyakon · 10-06-2021 9:12pm

Most working people can pay for a mortgage, the issue is that if everyone was offered mortgages, house prices would go up even more due to increased competition.

JizzBeans · 10-06-2021 9:14pm

Deleted User wrote: »

Are these "arguments" ones you conjured up on the spot? Either you're hopelessly naive or out for a spot of fishing.

Not my arguments, guests or callers on the radio, Newstalk etc. Why would I be hopelessly naive?

Shebean · 10-06-2021 9:17pm

It use to be the case that you could aspire to home ownership without being laughed at. The way it's working out now is that if you work hard you can aspire to paying rent to a vulture fund.
People feel lied to maybe. Certainly left behind.

Piriz · 10-06-2021 9:18pm

JizzBeans wrote: »

A common argument renters make, is that because they can afford to pay their rent regularly , they would be able to service a mortgage as it would be a similar amount. The inference being that they should somehow be eligible for a mortgage.

Another argument that renters/prospective buyers make is that "they done everything right" by going to college, getting the masters and attempting to land a higher paying job etc, etc.

Are they valid points? Its a little more complicated that points suggest I would have thought.

I would say they are valid points to an extent, the property market has gotten away from a lot of people who's expectations for themselves they are discovering are unattainable.. yeah people made the right moves and still its unattainable.. people might not have ever been in a position to apply for a mortgage so will be naive to the criteria laid out by the banks..

historically they might have been eligible for a mortgage but in this globalised and wealth divided world they are not.. I'm not optimistic it will improve unfortunately

djan · 10-06-2021 9:19pm

I think the issue is when someone has been paying 1300 eur rent per month for close to 10 years being told that they cannot afford a mortgage of 700. This being due to the often ridiculous estimated spending of having a child (over 1k in some cases).

That understandably does not sit well with those effected.

JizzBeans · 10-06-2021 9:25pm

djan wrote: »

I think the issue is when someone has been paying 1300 eur rent per month for close to 10 years being told that they cannot afford a mortgage of 700. This being due to the often ridiculous estimated spending of having a child (over 1k in some cases).

That understandably does not sit well with those effected.

700 euro, wow.

In any case a mortgage isn't just about monthly repayments. There's also the deposit, stamp duty, solicitors fees and all sorts of costs.

Bigmac1euro · 10-06-2021 9:29pm

JizzBeans wrote: »

700 euro, wow.

In any case a mortgage isn't just about monthly repayments. There's also the deposit, stamp duty, solicitors fees and all sorts of costs.

Yes but I think the point is that even when they have all that it’s a struggle I purchased last year it was a nightmare in fact it was the most stressful situation of my life they left no stone unturned which is fair enough. People are going to moan and I certainly did you can’t stop it, this thread is going nowhere goodluck.

FromADistance · 10-06-2021 9:36pm

JizzBeans wrote: »

A common argument renters make, is that because they can afford to pay their rent regularly , they would be able to service a mortgage as it would be a similar amount. The inference being that they should somehow be eligible for a mortgage.

Another argument that renters/prospective buyers make is that "they done everything right" by going to college, getting the masters and attempting to land a higher paying job etc, etc.

Are they valid points? Its a little more complicated that points suggest I would have thought.

It's would be a fair point if taken in isolation however what it obviously fails to acknowledge is people's specific circumstances & take into account that one can move to cheaper accommodation / seek HAP if one becomes unemployed. Obviously that's difficult with a mortgage & there's no help available if you become unemployed (bar whatever the mortgage company offers such as interest only).

Anyhow let's be honest, property affordability is the real issue at the moment and the lack of new & affordable property for first time buyers to get on the ladder.

10-06-2021 9:41pm

The problem with forever renting, is that it's not being geared up as a thing you can realistically expect to do.

If a mortgage on a house is 1k a month, for argument sake, then renting should come in at, or below, that cost. If people knew they had a monthly outgoing that was the same or less than a mortgage on an equivalent property, and knew they had some level of security, it'd make sense to rent forever.

These funds coming in and buying up everything, aren't really a bad thing as such. In a functioning property market, where I could opt to rent a house for the same price as a mortgage, but not have any concerns or worries about things like boiler maintenance, property taxes, changing the electric shower, etc. then that'd be appealing.

The issue with renting in it's current form, is that people who are renting the properties are trying to recoup back the entire cost of the property, including it's ongoing maintenance fees, as quickly as they can, and thus, you end up with rents that are more expensive than a mortgage, and they keep getting revised upwards at every opportunity.

Don't get me wrong, I can fully understand why they do that, but it makes renting a very unappealing situation to be in.

crooked cockney villain · 10-06-2021 10:13pm

JizzBeans wrote: »

A

Another argument that renters/prospective buyers make is that "they done everything right" by going to college, getting the masters and attempting to land a higher paying job etc, etc.

.

What a lot of these people are saying, in dog whistle form, is this.

"I went to school with a lad who never did a tap of work, dropped out with barely a junior cert, while he moved from warehouse to cash in hand to warehouse I and my now missus were doing four years of business studies, a year of travel, an unpaid internship and now we both have been 5 years in Irish Life/ AIB/ Allianz Insurance/ insert "good job" name company here.

Your man from school did a bricklaying apprenticeship at some point and he and his hairdresser missus have two kids and bought a house three years ago."

Quite a lot of people were sold a lie in school. The dosser, the lad who showed up half the time, might not have even done a JC, often due to various current economics was on a much better path than the lad who was told to go to college.

The primary problem in this instance is that the corporate world has minimal union coverage and, to my knowledge, SEO minimum rates don't exist in the majority of it.

Many graduates, after 4 years, are offere an unpaid internship, or a salary that the blurb describes as competitive.

25K is not competitive. And a raise of 3 or 5% a year is not competitive either.

It's bull****, and Deco your man who dropped out would laugh at anybody who tried offering him that to sweep floors on a building site, never mind do a trade.

Tork · 10-06-2021 10:15pm

So tell me, when did you buy your house OP? What is your job?

10-06-2021 10:21pm

Tork wrote: »

So tell me, when did you buy your house OP? What is your job?

"I'm a renter myself and am happy to play my part in keeping petrol in the landlord's second Audi" - OP.

Snotty · 10-06-2021 10:35pm

[Deleted User] wrote: »

If a mortgage on a house is 1k a month, for argument sake, then renting should come in at, or below, that cost.

Traditionally this is not how rent/mortgages rates differed, rent would have been higher as renting has benefits over a mortgage that make it more attractive for certain people or more likely certain age groups and demographics.
Renting doesn't tie people to a specific area, they can move for work and better opportunities, renting also doesn't incur any capital outlays, like if the roof is going to fall in, you can just phone the landlord and not worry about what it will cost.
This footloose value to renting is definitely of most benefit to those early in their career and there comes a time when those benefits of renting are out weight by the need to provide a stable home for yourself and loved ones.

Nika Bolokov · 10-06-2021 10:39pm

crooked cockney villain wrote: »

What a lot of these people are saying, in dog whistle form, is this.

"I went to school with a lad who never did a tap of work, dropped out with barely a junior cert, while he moved from warehouse to cash in hand to warehouse I and my now missus were doing four years of business studies, a year of travel, an unpaid internship and now we both have been 5 years in Irish Life/ AIB/ Allianz Insurance/ insert "good job" name company here.

Your man from school did a bricklaying apprenticeship at some point and he and his hairdresser missus have two kids and bought a house three years ago."

Quite a lot of people were sold a lie in school. The dosser, the lad who showed up half the time, might not have even done a JC, often due to various current economics was on a much better path than the lad who was told to go to college.

The primary problem in this instance is that the corporate world has minimal union coverage and, to my knowledge, SEO minimum rates don't exist in the majority of it.

Many graduates, after 4 years, are offere an unpaid internship, or a salary that the blurb describes as competitive.

25K is not competitive. And a raise of 3 or 5% a year is not competitive either.

It's bull****, and Deco your man who dropped out would laugh at anybody who tried offering him that to sweep floors on a building site, never mind do a trade.

Your spot on.

Deco if he qualified as en electrician at say 21 or 22 would be on about 55k these days in no time working for someone else and then doing nixers on top of that. If he works for himself hes likely earning even more.

Fintan who has a Business degree gets 2% pay rises every now and again at Big Box company X, earns less than Deco and is treated much worse but feels superior.

His day to day job involves producing TPS reports that nobody reads or can remmber asking for and he is at a loss as to how Deco who does something actually useful is earning more given he did everything right. (Likely has a Masters too).

Fr_Dougal · 10-06-2021 10:43pm

Weak sauce

10-06-2021 10:43pm

If you can pay rent, and demonstrate financial prudence for a couple of years whilst holding down a relatively steady career you can pay your mortgage.

I get the sense some (only some) mortgage holders get a kick out of seeing renters stuck in that trap. Not all of us have a partner or can rely on parents to give a small push so the struggle is different for all.

Also majority of banking/finance jobs generally pay ****e unless you meander into a specialist position. A Sparks would pay better than operational and management roles in many of these industries.

Deco and Fintan lol. Very clichéd names. I've seen more than a few Decos in the bank for sure.

Nika Bolokov · 10-06-2021 10:56pm

Amira Brief Flame wrote: »

If you can pay rent, and demonstrate financial prudence for a couple of years whilst holding down a relatively steady career you can pay your mortgage.

I get the sense some (only some) mortgage holders get a kick out of seeing renters stuck in that trap. Not all of us have a partner or can rely on parents to give a small push so the struggle is different for all.

Also majority of banking/finance jobs generally pay ****e unless you meander into a specialist position. A Sparks would pay better than operational and management roles in many of these industries.

Deco and Fintan lol. Very clichéd names. I've seen more than a few Decos in the bank for sure.

Agree, many people would be surprised at the incomes in the trades.

I remember being in a lift in one of the previous big name companies mentioned and an admin standard office employee was talking about a former employee who had a fantastic degree from UCD but left the company to work on building sites in Canada was nuts, insane etc, her colleague simply replied 'hes just bought a house'.

Leg End Reject · 10-06-2021 11:28pm

djan wrote: »

I think the issue is when someone has been paying 1300 eur rent per month for close to 10 years being told that they cannot afford a mortgage of 700. This being due to the often ridiculous estimated spending of having a child (over 1k in some cases).

That understandably does not sit well with those effected.

That must be a kicker and I'd imagine a major contributing factor is that fact that banks have a Herculean task repossessing when owners default.

I understand the need to have realistic borrowing limits, but there's no reason for someone to keep a home when they don't meet the repayments. A glut of repossessions would change mindsets and the housing market.

grassylawn · 10-06-2021 11:46pm

Why wouldn't you count rent payments as evidence of capacity?

They clearly are, and they were accepted as such for us.

We had a baby too.

Some of the normal meanspirited bollocks on this thread really.

Donald Trump · 10-06-2021 11:49pm

crooked cockney villain wrote: »

What a lot of these people are saying, in dog whistle form, is this.

"I went to school with a lad who never did a tap of work, dropped out with barely a junior cert, while he moved from warehouse to cash in hand to warehouse I and my now missus were doing four years of business studies, a year of travel, an unpaid internship and now we both have been 5 years in Irish Life/ AIB/ Allianz Insurance/ insert "good job" name company here.

Your man from school did a bricklaying apprenticeship at some point and he and his hairdresser missus have two kids and bought a house three years ago."

Quite a lot of people were sold a lie in school. The dosser, the lad who showed up half the time, might not have even done a JC, often due to various current economics was on a much better path than the lad who was told to go to college.

The primary problem in this instance is that the corporate world has minimal union coverage and, to my knowledge, SEO minimum rates don't exist in the majority of it.

Many graduates, after 4 years, are offere an unpaid internship, or a salary that the blurb describes as competitive.

25K is not competitive. And a raise of 3 or 5% a year is not competitive either.

It's bull****, and Deco your man who dropped out would laugh at anybody who tried offering him that to sweep floors on a building site, never mind do a trade.

Most graduates, after 4 years, are starting another part of their education by entering the workforce and starting to learn on the job. Salary is not as important in the first few years (as long as you can afford it) as the experience. It is another investment in yourself.

College is not for everyone, but if you have a degree you have a basic foundation to fall back on. Education is always a good investment as long as you make an effort at it.

screamer · 10-06-2021 11:53pm

Because banks look for proof of saving money every month as an indicator that you’ll be able to pay mortgage.People renting obviously can’t save very much if they’re paying massive rent, so they equate that demonstrating your ability to save a chunk of money with the ability to pay a chunk of money in rent. To be honest, it should be taken into account, and it’s a valid point.

Vestiapx · 11-06-2021 12:02am

Donald Trump wrote: »

Most graduates, after 4 years, are starting another part of their education by entering the workforce and starting to learn on the job. Salary is not as important in the first few years (as long as you can afford it) as the experience. It is another investment in yourself.

College is not for everyone, but if you have a degree you have a basic foundation to fall back on. Education is always a good investment as long as you make an effort at it.

You are right but so many graduates think that the degree is the end. I have a degree and a useful one at that and I'm a manager and I could leave it tomorrow to do site work for 25% more. I don't because I prefer to work my physically comfortable job as a base and do nixxers for added income, a change is as good as a rest.

The chan chan man · 11-06-2021 12:05am

Because everyone should be entitled to a fair shot. A couple shouldn’t have to earn €100k between them to buy a 3 bed semi in Dublin. Somethings gotta give here.

dockysher · 11-06-2021 12:08am

Does paying for a session on the beer ever now and then serve as proof you can repay a mortgage?

Finty Lemon · 11-06-2021 12:17am

The chan chan man wrote: »

Because everyone should be entitled to a fair shot. A couple shouldn’t have to earn €100k between them to buy a 3 bed semi in Dublin. Somethings gotta give here.

Whats gotta give
Foreign holiday x2 every year
The beauticians bill
Weekend takeaways
PCP cars
Takeaway coffee bullshxt
Asos
Premier league 'pilgrimages' (pis$ups)
De fags
There's a chunky deposit to be had within 40 months for most mid earning couples out of this junk. Just sayin.

markodaly · 11-06-2021 12:25am

JizzBeans wrote: »

700 euro, wow.

In any case a mortgage isn't just about monthly repayments. There's also the deposit, stamp duty, solicitors fees and all sorts of costs.

Please tell us how a person or couple paying 1300 a month rent CANNOT afford a mortgage of 700 a month..

Go on.. I think Ill be waiting a while.

Vestiapx · 11-06-2021 12:42am

The chan chan man wrote: »

Because everyone should be entitled to a fair shot. A couple shouldn’t have to earn €100k between them to buy a 3 bed semi in Dublin. Somethings gotta give here.

What part of Dublin.

nolivesmatter · 11-06-2021 1:05am

grassylawn wrote: »

Why wouldn't you count rent payments as evidence of capacity?

They clearly are, and they were accepted as such for us.

We had a baby too.

Some of the normal meanspirited bollocks on this thread really.

Right. Rent is literally the closest thing to paying a mortgage you can use to gage a persons capacity to pay a mortgage.

Flinty997 · 11-06-2021 1:16am

markodaly wrote: »

Please tell us how a person or couple paying 1300 a month rent CANNOT afford a mortgage of 700 a month..

Go on.. I think Ill be waiting a while.

The idea being...

If you have a change if circumstance lost your job etc, and you are renting you can walk away. If you have a mortgage you can't.

That's why your ability to pay rent in the short term isn't enough. Also why 100% mortgages are a bad idea.

But it's not a normal market. So that traditional thinking isn't as useful as it once was.

Flinty997 · 11-06-2021 1:17am

nolivesmatter wrote: »

Right. Rent is literally the closest thing to paying a mortgage you can use to gage a persons capacity to pay a mortgage.

Arguably long term savings and a history not spending money on high rents would be more desirable.

listermint · 11-06-2021 1:19am

JizzBeans wrote: »

A common argument renters make, is that because they can afford to pay their rent regularly , they would be able to service a mortgage as it would be a similar amount. The inference being that they should somehow be eligible for a mortgage.

Another argument that renters/prospective buyers make is that "they done everything right" by going to college, getting the masters and attempting to land a higher paying job etc, etc.

Are they valid points? Its a little more complicated that points suggest I would have thought.

Unsure how you can make this argument from one of the rooms upstairs in your parents house

jimmycrackcorm · 11-06-2021 1:20am

djan wrote:

I think the issue is when someone has been paying 1300 eur rent per month for close to 10 years being told that they cannot afford a mortgage of 700. This being due to the often ridiculous estimated spending of having a child (over 1k in some cases).

I don't believe this is the case in reality. The 1k only comes into effect if you're paying that for crÃ¨che fees and that absolutely does get taken into account in repayment capacity.

Also, not many people taking out mortgages only paying back 700 in a location where they are paying 1300 rent. So perhaps a little out of range as an example.

nolivesmatter · 11-06-2021 1:24am

Flinty997 wrote: »

Arguably long term savings and a history not spending money on high rents would be more desirable.

Why the bolded part? Paying a high rent over a long period of time shows reliability. That money would then be freed up to go towards a mortgage. Surely it's less impressive to have been just living at home for free?

derfderf · 11-06-2021 1:36am

nolivesmatter wrote: »

Why the bolded part? Paying a high rent over a long period of time shows reliability. That money would then be freed up to go towards a mortgage. Surely it's less impressive to have been just living at home for free?

Outside of a mortgage, the options are high rent, live at home, or be homeless. What are people supposed to do? Particularly if their parents live in a different country.

markodaly · 11-06-2021 1:39am

Flinty997 wrote: »

The idea being...

If you have a change if circumstance lost your job etc, and you are renting you can walk away. If you have a mortgage you can't.

That's why your ability to pay rent in the short term isn't enough. Also why 100% mortgages are a bad idea.

But it's not a normal market. So that traditional thinking isn't as useful as it once was.

If you have a mortgage you will have some equity built up so you can use that.
Also, banks may well give you mortgage holidays as we have seen during Covid.

Unemployment in Ireland is not really an issue, especially for well-educated professionals. Housing affordability is though. That is what we are discussing.

Traditional thinking is now dead. We are in a new economic era for the next few decades. The old way of scimping and saving is gone.

Flinty997 · 11-06-2021 1:57am

nolivesmatter wrote: »

Why the bolded part? Paying a high rent over a long period of time shows reliability. That money would then be freed up to go towards a mortgage. Surely it's less impressive to have been just living at home for free?

At the end of this long period, all things being equal who will have more money, the person not paying rent or the person paying rent.

markodaly wrote: »

...
Traditional thinking is now dead. We are in a new economic era for the next few decades. The old way of scimping and saving is gone....

That's what people said the last time...but yet here we are... again...

...Ghost... · 11-06-2021 2:05am

derfderf wrote: »

Outside of a mortgage, the options are high rent, live at home, or be homeless. What are people supposed to do? Particularly if their parents live in a different country.

The other option taken is to have some babbies and get your low rent (paid for by the tax payer) house handed to you by the council.

caveat: mostly applies to *single mothers

*Might not be actually single

The DayDream · 11-06-2021 2:16am

There are bigger questions to be asked here, like how did we get to the point where housing is unaffordable and insecure for so many.

We cannot and should not allow the psychopathic greed that fuels capitalism be the driving force behind necessities like housing, water and healthcare. But we have.

As a single person you have to basically be on a 6 figure income now just to rent a 1 BR fkn flat in anywhere that isnt Leitrim. And when you get old who knows where you'll end up.

StupidLikeAFox · 11-06-2021 2:26am

To get a mortgage, banks care about 3 things:
- Deposit (can be from gift or savings)
- Steady income
- Proof of repayment capacity (consistent payments over time, which can be from rent and/or savings)

Zaney · 11-06-2021 8:32am

Both rents and mortgages suffer from our increasing protection of the tennant/occupier. Evictions and reposessions are next to impossible and expensive in legal fees even if they do happen. So landlords factor in a certain amount of non-payment when Settings rents and banks are unwilling to give a mortgagage to people they perceive to be a risk.

Not saying we should have lots of evictions/repossessions, just that there are consequences in the market.

nonethepfizer · 11-06-2021 8:40am

some mortgage providers don't (well didn't anyway) consider rental payments as proof of disposable cash...

so if you had €2,000 a month, and €1,000 went on rent.... the mortgage provider would only consider the €1,000 left as disposable income to cover a mortgage.... so if you're mortgage was €800, this leaves you €200 a month in their eyes for bills and spending...

of course they're going to say no....

this got people into the situation where they either had to save for larger deposits, to bring down mortgage payments, or move home to get the rental payments off their bank statements...

There is also some rule for mortgages over 300 (320k ?) where you need a threshold of monthly disposable cash, even if your mortgage is far lower, another thing that was pricing people out of the market, even though they could afford it...

We had this issue with our mortgage, that's where the "if I can afford rent, I can afford a mortgage" argument comes from, especially as rents are usually higher than a mortgage....

thankfully the rules are starting to change as mortgage providers see people borrowing less...

The Mighty Quinn · 11-06-2021 8:52am

Leg End Reject wrote: »

That must be a kicker and I'd imagine a major contributing factor is that fact that banks have a Herculean task repossessing when owners default.

I understand the need to have realistic borrowing limits, but there's no reason for someone to keep a home when they don't meet the repayments. A glut of repossessions would change mindsets and the housing market.

On this point - I completely agree by the way - I've often wondered, if you bought the house for say 300K, borrowed 260K for it. Paid mortgage for a decade, you now owe 190K. House has gone up in value to 320K. You lose your job, stop paying mortgage. In repossession case, does the bank sell house on the market to fund what they're owed? In which case, of the 130K surplus here, after solicitors fees and this and that, does the person who took the mortgage out get 100K back for themselves or does the bank keep it, as the asset is theirs until fully paid for?

Leg End Reject · 11-06-2021 9:45am

The Mighty Quinn wrote: »

On this point - I completely agree by the way - I've often wondered, if you bought the house for say 300K, borrowed 260K for it. Paid mortgage for a decade, you now owe 190K. House has gone up in value to 320K. You lose your job, stop paying mortgage. In repossession case, does the bank sell house on the market to fund what they're owed? In which case, of the 130K surplus here, after solicitors fees and this and that, does the person who took the mortgage out get 100K back for themselves or does the bank keep it, as the asset is theirs until fully paid for?

I think any equity is returned to the previous owner, but the bank might look for a quick sale and not the full market value.

The Mighty Quinn · 11-06-2021 9:54am

Leg End Reject wrote: »

I think any equity is returned to the previous owner, but the bank might look for a quick sale and not the full market value.

In which case if you knew you weren't going to be in a position to repay your mortgage for the foreseeable, you'd be best off selling the house yourself and riding off into the sunset to your rented accommodation with your equity, if any.

Allinall · 11-06-2021 10:07am

The Mighty Quinn wrote: »

In which case if you knew you weren't going to be in a position to repay your mortgage for the foreseeable, you'd be best off selling the house yourself and riding off into the sunset to your rented accommodation with your equity, if any.

You can do that at any stage, regardless of whether you will be able to pay the mortgage or not, once the house is in positive equity.

The Mighty Quinn · 11-06-2021 10:28am

Allinall wrote: »

You can do that at any stage, regardless of whether you will be able to pay the mortgage or not, once the house is in positive equity.

Oh of course, but if you can pay the mortgage, you'd likely be staying there and it wouldn't be an issue. I was talking about the situation where you have your home and can't meet the payments for it.

Leg End Reject · 11-06-2021 10:49am

The Mighty Quinn wrote: »

Oh of course, but if you can pay the mortgage, you'd likely be staying there and it wouldn't be an issue. I was talking about the situation where you have your home and can't meet the payments for it.

People don't though because it's now nigh on impossible for banks to repossess a family home, so many defaulters sit tight.

There are of course many genuine cases, but the so-called strategic defaulters have made mortgage lending more difficult for everyone.

Tacitus Kilgore · 11-06-2021 11:11am

Finty Lemon wrote: »

Whats gotta give
Foreign holiday x2 every year
The beauticians bill
Weekend takeaways
PCP cars
Takeaway coffee bullshxt
Asos
Premier league 'pilgrimages' (pis$ups)
De fags
There's a chunky deposit to be had within 40 months for most mid earning couples out of this junk. Just sayin.

You forgot about the avocados

Why do renters equate the ability to pay rent to mortgage eligibility?

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