Can mortgage offer be withdrawn after pay cut?

Hi all,

The likelihood is that I won't get a whole lot of sympathy here given the fact people aren't all that fond of public sector workers at the moment but try not to judge me too harshly. I earn a fairly modest salary of €26,697 and I am currently in the process of buying a house. I was initially told by the site foreman that the house would be finished by the end of the year but now the builder has told me that it won't be ready until January. My mortgage advisor had told me that if the completion date goes into next year, I would have to produce salary certificates and payslips again as it will be a new financial year. My concern is that given that paycuts for public sector workers now look inevitable, is there a possibilty that the bank may withdraw the loan offer on the basis of a reduced salary? I have signed and accepted the loan offer letter, I have signed contracts and I have also paid €17,000 of a deposit on the house.

Any advice would be great.

Thanks.

i guess the point is the cost of the house and what percentage you are paying into the mortgage ...
in my opinion, people should always count in a generous buffer into their mortgage payments planning and allow for some unexpected unpleasant surprises - there is no point stretching yourself ...
question is, will you be hit by the paycuts? you can't know for sure ... is there a chance you could try to find out whether there will be cuts in your particular area and involving you?

haminka1 said:

i guess the point is the cost of the house and what percentage you are paying into the mortgage ...

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Thanks for your reply haminka1, and you're right I should give those details.

The purchase price of the house is €170,000. I've been offered an 88% mortgage of €150,000. The monthly repayments are €545 on a 2 year fixed rate. I get paid weekly so I've done all my calculations on that basis and I work out that the repayments will account for about 30% of my weekly take home pay. I worry that if my pay is cut by 7% in the December budget (which is the amount quoted by 'informed government sources' in last Sunday's papers), I simply won't qualify under the banks criteria anymore.

You ask: "question is, will you be hit by the paycuts? you can't know for sure ... is there a chance you could try to find out whether there will be cuts in your particular area and involving you?"

The reports pretty much everywhere indicate that the cuts will be across the board, whether you are a senior public servant earning over €100,000/annum or a lowly grade 3 like myself.

maybe put the pressure back on the builder to get the move on as you may have mortgage approval issue in January... I'm sure he wants sale to go thru and would get it finished to suit?.

or... some banks consider rental income .. can you let bank know you are renting a room out?..would bank consider it?

Hi Chlipps, thanks for your reply.

chlipps said:

maybe put the pressure back on the builder to get the move on as you may have mortgage approval issue in January... I'm sure he wants sale to go thru and would get it finished to suit?

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I thought that too but I spoke with the builder today and he said that there was nothing he could do, that there was no way he could finish the house before the end of the year. As for the rent-a-room idea, that's something I will have to consider.

dotcom said:

My mortgage advisor had told me that if the completion date goes into next year, I would have to produce salary certificates and payslips again as it will be a new financial year.

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Personally I think this is nonsense, the fact that it's a new financial year will not result in a request for a new salary certificate and payslips. The only time these are requested are when they go out of date (3 or 6 months from date of issue depending on the lender), otherwise everyone who supplies these documents in December will have to produce new ones the next month.

The lender has agreed to lend you money based on the facts when your mortgage was underwritten, legally (open to correction from the legal eagles) you have signed and accepted the loan offer meaning a binding contract exists with the lender. They cannot just change the conditions as they wish unless of course there is a condition on the loan offer allowing them to request a new salary cert and payslips before cheque issue.

The only person who can answer this for sure is your mortgage advisor, I would doubt if the lender can request new documents but these days almost anything goes.

www.moneybackmortgages.ie

Hi NorfBank, thanks for your reply.

NorfBank said:

The only time these are requested are when they go out of date (3 or 6 months from date of issue depending on the lender), otherwise everyone who supplies these documents in December will have to produce new ones the next month.

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I think the offer letter goes out of date in January anyway (it was issued in October and I'm pretty sure she told me it was valid for 3 months) although I've no idea why she told me it was because of January being a new financial year.

The short answer is yes they can ask for further documents, for the following reasons, if your loan offer expired. The banks at this stage can do what they want so prepare yourself for this. Please note if your income goes below 25,000 some lenders refuse to lend altogether ( confirm with your broker )

Can you.

1. Contact your solicitor to get their legal opinion ? was there completion date documented on your contracts ? was there a timescale ? etc.

2. Sometimes and only sometimes you can ask your broker to change a small item on your loan offer thus changing the date of same for example...if you have a 1 yr fixrate say you now want a 2 year rate ( change back later if req ) and get the new loan offers issued. ( get him to check with the lender, all diff )

3. Get a new salary cert done prior to the budget and keep same until needed ( cheaky but does work )

4. Get the builder to reduce the price ( ask solicitor )

Good luck....

Hi senni, thanks for your advice. I'm going to have a chat with my solicitor and see what she says and in the meantime keep my fingers crossed that I don't get too big a hit in the budget!

Thanks also to everyone else for their input. I hope I'm worrying unnecessarily. We'll wait and see!

hi dotcom

as far as i know the bank has given you a loan offer as long as what you have supplied is correct . ie your salary . if your circumstances change they are entitled to cancel or decrease ur loan offer . i dont know if the salary cert before the pay decrease will work . if there decreases across the board then the bank will be aware of this and be extra careful to cover their backs

if my maths is correct ur getting 5.5 times ur salary so 7% decrease using the same multiple will give mortgage approval of 143k approx so 7k short so see what the builder can do . check with ur solicitor will you lose your deposit if you cant complete the sale due to the delay of the builder . totally out of your control .

p.s. im open to be corrected on the legal stand point of the banks