Key Post: How much of a mortgage could we get?

Discussion in 'Mortgages and buying and selling homes' started by paz amor, Dec 5, 2002.

  1. paz amor

    paz amor Guest

    Myself & husband have salaries of €25k & €32k & savings of €25 & hope to rent out a room in a flat we buy, how much of a mortgage could we afford given that we would have to use the savings for the deposit & other expenses such as solicitors fees, stamp duty, land registry, insurance etc…..
    Would we have to get a mortgage indemnity bond?
     
  2. Re: How much of a mortgage could we get?

    Hi Paz,

    Assuming the salaries quoted are basic and you have no loan commitments your maximum borrowing capacity is €214,000. This must represent no more than 92% of the house price hence you could buy at €233,000 using €18,640 of your savings as the deposit and €6990 towards the Stamp. Under the REA package your legal fees would be €869 and you'd need a further €900 for legal outlays and the valuation. Total savings required = €27,399. Obviously if you buy a cheaper house they costs would be less.

    Lenders do "bond" loans over 75/80% but they cover this cost themselves.

    Kind regards,

    Sarah

    www.rea.
     
  3. Guest1

    Guest1 Guest

    How much of a mortgage could we get?

    Hi,

    Hate to go over Sarah's head - but by my calculations Irish Permanent would lend you just under €230k over 25 years - same 92% loan to value limit applies.

    Sarah - Who were you using as max lender?
     
  4. Re: How much of a mortgage could we get?

    Oops, yes you're right! I worked on 3.75 times joint but PSTB come in at €234,773.

    Sorry!

    Sarah

    www.rea.ie
     
  5. Party Pooper

    Party Pooper Guest

    How much of a mortgage...?

    Just out of interest - 3.75 times seems a little high in tems of lending multiples. Is this an average multiple or would you need particularly secure employment (civil servant/doctor etc) in order to avail of this?
     
  6. ClubMan

    ClubMan Frequent Poster

    Posts:
    43,689
    Re: How much of a mortgage could we get?

    Sarah - following on from the previous query, would it be possible to summarise the lending criteria that are generally used and/or how individual institutions approach this - and maybe we could make it a key post/FAQ as this type of query seems to arise very frequently? For example, what are multiples are generally used? Are they generally applied to total income or disposable income? What means other than income might be considered and how is it factored in? WHat are the Central Bank "guidelines"? What form of stress test is normally applied to gauge affordability of particular mortgage repayments? Etc....
     
  7. >>How much can I borrow

    Hi Clubman,

    I don't think it would be feasible to post the criteria of each lender as each has a detailed guide however as a rule of thumb the following might help;

    Single applicant earning less than €30,000 - 3.25 times salary
    Single applicant earning €30,001 - €59,999 - 4 times salary
    Single applicant earning €60,000 - 4.5 times salary

    Joint applicants (both earning) combined income less than €50,000 - 3 times joint income
    Joint applicants (both earning) combined income greater than €50,000 - 3.75 times joint income

    Joint borrowers (one earning) income less than €50,000 - 3 times salary
    Joint borrowers (one earning) income between €50,000 - €59,999 - 3.25 times salary
    Joint borrowers (one earning) income greater than €60,000 - 3.5 times salary.

    Salary is defined as basic pay (as shown on payslips/bank statements) plus a percentage of additional income such as overtime, bonus and commission. Some lenders only take a maximum of 10% regardless, some will allow all additional income for occupations such as guards, nurses, etc. Most lenders will add in income from "rent a room" but only from single applicants and the property must have more than one bedroom (!).

    Finally if applicants have other loan commitments such as loans or maintenance the annualised repayments must be deducted from the gross salary before applying the salary multiple.

    The above is a general guide - it's not the most aggresive criteria on the market in all groups - but should give potential borrowers an idea of their ballpark loan amount.

    Kind regards,

    Sarah

    www.rea.

    Note for the self employed

    Most lenders will ask for an accountant's certificate rather than full accounts and most will work on the last year's figures as long as the figures are "reasonable". The lender will also look for 6 months personal/business bank statements which should give a good indication of your income.

    Note for self employed posted recently by Sarah elsewhere and added here by ClubMan for ease of access.
     
  8. ClubMan

    ClubMan Frequent Poster

    Posts:
    43,689
    Re: How much of a mortgage could we get?

    Thanks a lot Sarah - that's very helpful and probably comprehensive enough as a starting point for people who ask this question. I've added it to the key posts for ease of referral and it might help reduce your AAM workload! ;)
     
  9. paz amor

    paz amor Guest

    .

    Just a quick query re; above. Guest 1 u corrected Sarah by stating that we wud get a €230 loan -
    so what cud we buy at?
    Also, how cud we get such a high loan when the max is supposed to be 3.75 times our salaries?
     
  10. paz amor

    paz amor Guest

    .

    Also Sarah are those figures you refer to gross or net salary? Do some mortgage lenders only refer to your take home pay? & Finally, when you're going to get a mortgage, will they take in to account how long you are contracted to your employer for (& will you be penalised if say, you only have a contract of 6 months left but you are confidant that you will get another 2 year contract?)
     
  11. max mortgage

    Hi Paz,

    Some lenders work on an income multiple, some work on the mortgage repayment not exceeding a percentage of your take home (net) pay. In your case the net salary route works out slightly higher.

    If you are not permanently employed the lenders will underwrite your application on the basis of your employment history and the sector in which you work. If your employer will confirm that you will be offered a new contract you should be OK.

    Kind regards,

    Sarah

    www.rea.ie
     
  12. paz amor

    paz amor Guest

    3.75 times salary

    So when you refer to 3.75 times our joint salaries, you are referring to 3.75 times our net or our gross yearly salaries?
     
  13. Re: max mortgage

    Hi Paz,

    Gross basic salary plus 50% gross additional regular income such as bonus, commission, overtime. For some professions (nurses, teachers, guards, etc.) all overtime will be taken.

    Kind regards,

    Sarah

    www.rea.ie
     
  14. Re: >>How much can I borrow

    Hi,

    I'm a newcomer to the site and was wondering if anyone can give me any pointers.

    I am single, earning a salary of 45K and eager to buy a property costing 250K.

    I feel confident that I could afford the repayments on 250K. My difficulty, however, is raising the money for the deposit. I have a couple of thousand euro in savings and have been doing the SSIA in full for the last 16 months.

    Does anyone know what the maximum I would be allowed borrow in percentage terms. Is it possible to borrow 100 percent?

    Thanks

    Little Skellig
     
  15. rainyday

    rainyday Guest

    Re: max mortgage

    Hi Little Skellig - Ulster Bank offer 100% mortgages to restricted list of professions - see this post for more details.
     
  16. Re: max mortgage

    Thanks Rainyday

    Sadly I do not fit into any of the above occupations.

    Any other ideas?!

    Little Skellig
     
  17. rainyday

    rainyday Guest

    Re: max mortgage

    No magic solutions I'm afraid - though you might get some further ideas from our raising the dreaded deposit key post.
     
  18. pouring

    pouring Guest

    This needs revision.

    Single applicant earning less than €30,000 - 3.25 times salary
    Single applicant earning €30,001 - €59,999 - 4 times salary
    Single applicant earning €60,000 - 4.5 times salary

    I know of single applicants earning c.€40k who got over 5 times their income , no guarantees required, where they had saving of about 15% . These approvals were granted since August 2003 .

    The banks are fuelling the housing market with these high multiples but a person on €40k will have a takehome of about €2500 a month.

    The term will be 25-30 years.