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How does the 10% Mortgage deposit exemption work?

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  • 24-02-2020 1:53pm
    #1
    superhelpful
    Registered Users Posts: 26 ✭


    This is something I've been failing to wrap my head around. The banks require 10% deposit minimum to get a mortgage approval.

    However it says in certain cases this can be waived. Specifically where there is clear ability to repay.

    https://www.bonkers.ie/guides/mortgage/what-are-the-central-banks-lending-rules/




    Mate #1 says its ridiculous, someone could go an get 100% mortgage. End of times, blah blah blah.

    Mate #2 says it doesn't work like that, theres an intricate process and you'd want to be on 100k plus to be given this.



    Has anyone any experience of how the LTV exemption works or how subjective it is. How do banks make their decision?


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    #2
    Oral Surgeon
    Registered Users Posts: 3,240 ✭✭✭Oral Surgeon


    superhelpful wrote: »
    This is something I've been failing to wrap my head around. The banks require 10% deposit minimum to get a mortgage approval.

    However it says in certain cases this can be waived. Specifically where there is clear ability to repay.

    https://www.bonkers.ie/guides/mortgage/what-are-the-central-banks-lending-rules/




    Mate #1 says its ridiculous, someone could go an get 100% mortgage. End of times, blah blah blah.

    Mate #2 says it doesn't work like that, theres an intricate process and you'd want to be on 100k plus to be given this.



    Has anyone any experience of how the LTV exemption works or how subjective it is. How do banks make their decision?

    Reminds me of the quote;

    "in order to get a loan/mortgage, one must first prove that they do not need it..."

    IMO exemptions are there in theory and for those on good income but you have to ask yourself why you can't get 10% deposit if on a good wage...!?? Alarm bells.....


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    #3
    superhelpful
    Registered Users Posts: 26 ✭superhelpful


    Oral Surgeon wrote: »
    Reminds me of the quote;

    "in order to get a loan/mortgage, one must first prove that they do not need it..."

    IMO exemptions are there in theory and for those on good income but you have to ask yourself why you can't get 10% deposit if on a good wage...!?? Alarm bells.....


    Well said. This isn't specific to me, I'm saving my deposit and slowly chasing that ever moving goalpost.

    I just wondered what the story was the exemptions. They seemed a bit wishy washy on the rules


  • Options
    #4
    Static M.e.
    Registered Users Posts: 3,087 ✭✭✭Static M.e.


    I think banks have the freedom or latitude which allows them to make a certain amount of exceptions per year where the bank percieves that there is a low risk but that the person (or couple) doesn't meet all of the requirements of the Central bank rules. I dont think it's a bad thing at all, it allows flexibility in an otherwise rigid\fixed system.

    It is probably is a bit wishy \ washy from the outside and when you compare diffferent banks but I would fairly confident that inside the banks it's based on an assessment (formula) of your ability to repay. Again, that little bit of flexibility is a good thing IMO..


  • Options
    #5
    Woshy
    Registered Users Posts: 1,429 ✭✭✭Woshy


    I would have thought that LTV exemptions would be for second time buyers who are required to have a 20% deposit. I can't see any instances where the banks would use one of the these exemptions so a buyer can put down less than 10%


  • Options
    #6
    blindside88
    Registered Users Posts: 1,968 ✭✭✭blindside88


    Woshy wrote: »
    I would have thought that LTV exemptions would be for second time buyers who are required to have a 20% deposit. I can't see any instances where the banks would use one of the these exemptions so a buyer can put down less than 10%

    I think you are correct. There are 2 exemptions that banks can seek for a borrower:
    1) where the borrower is not a first time buyer and would ordinarily require a 20% deposit, the bank can seek an exemption to this and allow them to have a 10% deposit.
    2) the general borrowing limit is 3.5times combined income. The bank can seek an exemption to allow up to 4.5 times combined income to be used


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  • Options
    #7
    milhous
    Registered Users Posts: 415 ✭✭milhous


    blindside88 wrote: »
    I think you are correct. There are 2 exemptions that banks can seek for a borrower:
    1) where the borrower is not a first time buyer and would ordinarily require a 20% deposit, the bank can seek an exemption to this and allow them to have a 10% deposit.
    2) the general borrowing limit is 3.5times combined income. The bank can seek an exemption to allow up to 4.5 times combined income to be used

    For 2nd properties (investment properties) the deposit is supposed to be 30%, I wonder if there are exemptions there too?


  • Options
    #8
    superhelpful
    Registered Users Posts: 26 ✭superhelpful


    Static M.e. wrote: »
    I think banks have the freedom or latitude which allows them to make a certain amount of exceptions per year where the bank percieves that there is a low risk but that the person (or couple) doesn't meet all of the requirements of the Central bank rules. I dont think it's a bad thing at all, it allows flexibility in an otherwise rigid\fixed system.

    It is probably is a bit wishy \ washy from the outside and when you compare diffferent banks but I would fairly confident that inside the banks it's based on an assessment (formula) of your ability to repay. Again, that little bit of flexibility is a good thing IMO..


    I've not really formed an opinion on it yet.


    Static M.e. wrote: »
    but I would fairly confident that inside the banks it's based on an assessment (formula) of your ability to repay


    I suppose I'm most curious about this part and the mechanics of it. If anyone had been through the process before I'd be curious to know how they were evaluated.



    A lot of people are saying that it would only apply to second time buyers, but that doesn't seem to be written down anywhere.



    I'm a first time buyer myself ftr.


  • Options
    #9
    Oral Surgeon
    Registered Users Posts: 3,240 ✭✭✭Oral Surgeon


    superhelpful wrote: »
    I've not really formed an opinion on it yet.






    I suppose I'm most curious about this part and the mechanics of it. If anyone had been through the process before I'd be curious to know how they were evaluated.



    A lot of people are saying that it would only apply to second time buyers, but that doesn't seem to be written down anywhere.



    I'm a first time buyer myself ftr.


    IMO and in my experience rules are made to be broken and they will be broken for the right customer, you won't find all of these exceptions in a book. I would imagine that it's an individual assessment that has too many variables to put rules on.
    I got a 100% mortgage as a post grad student! Ah the good auld days!!


  • Options
    #10
    superhelpful
    Registered Users Posts: 26 ✭superhelpful


    Oral Surgeon wrote: »
    IMO and in my experience rules are made to be broken and they will be broken for the right customer, you won't find all of these exceptions in a book. I would imagine that it's an individual assessment that has too many variables to put rules on.
    I got a 100% mortgage as a post grad student! Ah the good auld days!!


    Haha, I would run a mile from any bank giving 100% mortgages. But thanks for the info. Even knowing that their process is 'supposed' to be subjective to the bank helps.


  • Options
    #11
    Galway56736
    Registered Users Posts: 27 ✭Galway56736


    superhelpful wrote: »
    Haha, I would run a mile from any bank giving 100% mortgages. But thanks for the info. Even knowing that their process is 'supposed' to be subjective to the bank helps.

    Why?

    Thats a extra risk they're deciding to take on. If they're the cheapest rate surely you take their money if it suits you?

    If you're investing in such a bank then fair enough but as a customer makes no difference to you personally.


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    #12
    superhelpful
    Registered Users Posts: 26 ✭superhelpful


    Galway56736 wrote: »
    Why?

    Thats a extra risk they're deciding to take on. If they're the cheapest rate surely you take their money if it suits you?

    If you're investing in such a bank then fair enough but as a customer makes no difference to you personally.


    I suppose out of fear? I was young enough when the financial crisis happened in 2008 but any bank giving out 100% mortgages doesn't inspire me with confidence.


    Also I imagine the rate they'd give me at a <90% LTV wouldn't be amazing.



    Maybe I'm being overcautious though, this is all quite new to me.


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