Case study Getting high mortgage on low savings

[masterboy123]

Hi,

I want to ask your opinion on the following case.
A married couple with two children. Only 1 spouse is working in a permanent job and annual income of €90,000. Monthly savings in the range of €200.
Approval in principle is €220,000.
New homes cost €380,000.

Is there any way around to increase the lending amount? The bank has suggested showing more monthly savings in the next 3-6 months and returning for a case review.

Thanks

 

[RedOnion]

Is there any way around to increase the lending amount?

Yes.
They could try demonstrate more monthly savings for the next 6 months....

What's monthly take home pay? About 5,200?
Are they currently renting? How much is rent?
And what are their ages? It'll determine maximum term.
And what total savings have they got?

 

[masterboy123]

Yes.
They could try demonstrate more monthly savings for the next 6 months....

What's monthly take home pay? About 5,200?
Are they currently renting? How much is rent?
And what are their ages? It'll determine maximum term.
And what total savings have they got?

1. Monthly take home is €4900.

2. Paying rent €1200.

3. Ages 38 and 35.

4. Savings of only €5000.

5. The last 6-9 months were unusual, and the money spent was more than the incoming.

 

[RedOnion]

4. Savings of only €5000.

This is the biggest problem here.

Are they first time buyers, and eligible for help to buy?

The rent is almost enough to show they can meet mortgage repayments, but there's not much buffer. And their savings are only enough to pay stamp duty & legal fees.

The only real option is to very structured, and build up their savings every month.

 

[NoRegretsCoyote]

5. The last 6-9 months were unusual, and the money spent was more than the incoming.

I had a conversation with a broker recently and he said it's best to have "clean" finances for at least six months before approaching a lender.

No unusual outgoings and a regular pattern of rent plus saving sufficient to cover stressed mortgage repayments.

 

[ClubMan]

1. Monthly take home is €4900.
2. Paying rent €1200.

4. Savings of only €5000.

Monthly savings in the range of €200.

5. The last 6-9 months were unusual, and the money spent was more than the incoming.

Is it really only the past 6-9 months?
Only saving €200 on a post rent income of €3,700 seems strange if they want to buy a house.

 

[Sue Ellen]

Perhaps a Money Makeover thread would not go amiss to see where savings might be achieved.

 

[PGF2016]

Is there any way around to increase the lending amount?

The only way to do this is to show the ability to pay back a larger lending amount. So either...
1. Save more / spend less consistently (over at least 6 months)
2. Earn more.

 

[masterboy123]

This is the biggest problem here.

Are they first time buyers, and eligible for help to buy?

The rent is almost enough to show they can meet mortgage repayments, but there's not much buffer. And their savings are only enough to pay stamp duty & legal fees.

The only real option is to very structured, and build up their savings every month.

Yes first time buyers and eligible for HTB.

 

[masterboy123]

Perhaps a Money Makeover thread would not go amiss to see where savings might be achieved.

Thanks for signposting.
I am not fully aware of their financial situation, but was curious to know how come I had no problem getting a 400k mortgage on the similar pay scale but no children back then.

 

[ClubMan]

Thanks for signposting.
I am not fully aware of their financial situation, but was curious to know how come I had no problem getting a 400k mortgage on the similar pay scale but no children back then.

What savings and savings track record did you have though?

 

[masterboy123]

What savings and savings track record did you have though?

The only info that I posted already. But will ask more details now.
Thank you all

 

[Monbretia]

Children and a dependent adult greatly reduce borrowing capacity, hard to save too while paying rent, bit of a catch 22 and always was!

 

[ClubMan]

The only info that I posted already. But will ask more details now.
Thank you all

I meant you.

Thanks for signposting.
I am not fully aware of their financial situation, but was curious to know how come I had no problem getting a 400k mortgage on the similar pay scale but no children back then.

You're comparing your situation with your friends' but it may be an apples and oranges comparison.

 

[masterboy123]

I meant you.

You're comparing your situation with your friends' but it may be an apples and oranges comparison.

It's possible. The main difference is that I was able to show monthly savings of 20% of the pay. I suppose that worked out well.