Mortgage on a €25k salary

Discussion in 'Mortgages and buying and selling homes' started by icb, Apr 18, 2013.

  1. icb

    icb Registered User

    Posts:
    12
    First post!

    I've got a lot of answers from previous threads but I'm hoping for some advice specific to my financial position.

    Monthly in
    €1,770

    Monthly out
    €200 rent
    €250 social (eating out/netflix/cinema)
    €40 lunches
    €20 prepay phone
    €10 phone insurance
    €520

    Disposable income €1,250
    If needed I could trim the social budget a little.

    Some months I earn bonus (around €2,000 a year it should be higher this year but my bonuses are never guaranteed so I have omitted them on mortgage calculators with a worst case scenario attitude)

    I have €600 savings and no loans (one credit card with a zero balance)

    I have a clean ICB report that shows all loans paid off on time.

    I am in permanent full time employment.

    My AIB current account is messy, withdrawals here and there, transfers back and forth to friends accounts when they've paid for something on their card out of convenience etc, it's looks extremely unorganised. I've been paying rent with cash which I've seen to be a bad move!
    I've since set up a monthly standing order for it.

    My parents have told me they will drop my rent to €150 a month to allow me save more for my own home (either very generous or they want to get rid of me!!)

    My plan/hope is to open up an EBS savings account and save €1,250 per month starting May. (€1,000 may be more realistic pending discipline!)

    For a home that will cost €100,000 (which I would look to live in and rent the second bedroom)

    When is a realistic time for me to apply for a mortgage?
    Should I arrange my wages to be lodged direct to EBS?
    I'd like a mortgage that I could pay extra to each month with a view to greatly lessen the 30/35 year term.

    Any advice is greatly appreciated!
    Please ask any questions that will assist in more accurate feedback advice!
     
  2. bugler

    bugler Frequent Poster

    Posts:
    356
    You will probably need to put 5/6 months of saving behind you, that is ignoring the fact you will need at least €8,000 of a deposit for a house costing €100,000, along with 1% stamp duty. You will also need solicitor fees and other miscellaneous fees.

    I am not sure if banks operate any different criteria dependent on grades of salary. I have heard it said that someone on less than €30,000 may find it difficult to get a mortgage, but I will ignore that for now.

    In my experience, AIB may lend approximately 4 times salary. That would put a €100,000 house within reach. You would need to demonstrate repayment capacity on the mortgage if the SVR climbed by 2%. A €92,000 mortgage at rates of 6.25% over 35 years would mean monthly repayments of €540.11. Assuming your combined rent and savings per month exceed that you should be ok.

    Keep your current account with the bank you intend to apply to (it does not have to be EBS). Don't go overdrawn.

    What I can't confirm is whether or not your salary will be an issue for the banks, another poster may help you there.
     
  3. icb

    icb Registered User

    Posts:
    12
    Thanks for the quick response bugler!

    Information I've seen online seem to weight towards €30k being a general minimum salary and also that

    'lending levels are subject to a monthly repayment burden, typically not exceeding 35% of borrowers disposable income'

    Which tells me if my disposable income is €1,250 the safe figure for an approval would be €437 per month which seems to make the €100,000 home out of my reach.

    I guess I need to really focus on savings as much as possible as consistently as possible.

    My P60/payslips may help me out as they will show I've earned more due to a lot of six day week overtime/bonuses.

    I really appreciate your help/advice.
     
  4. Bronte

    Bronte Frequent Poster

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    11,950
    What type of property are you planning on buying? Have you figured out if you could live on your current salary, pay a mortgage and run a house?
     
  5. burmo

    burmo Frequent Poster

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    237
    Welcome!

    Definitely your first task over the next couple of months will be to build up at least, at least, 10k savings. You're going to need it for the deposit, and you should always have a least a couple of thousand set aside for life's events.

    I believe that mortgage refusals are logged somewhere, so it would be better for you to put yourself in a realistic situation before applying. In the mean time you can entertain yourself on www.daftdrop.com :)
     
  6. icb

    icb Registered User

    Posts:
    12
    Bronte,

    I'm hoping for a nice apartment at the 90-110k price range with a view to move in and also rent out a room.

    Pending costs I may look to rent out both rooms for a year and stay at home to pay more towards mortgage/saving.

    I guess I need to focus on getting to the 10/15k savings mark and give it some more serious thought.

    I haven't got enough definite answers at the moment.

    Running a house cost to include:
    Electric bill
    Heating bill
    Food
    Management fees (/bins if excluded)
    Property tax
    Furnishing it

    I'd like you to let me know what I'm missing and what kind of costs I could expect monthly?

    Thanks
     
  7. icb

    icb Registered User

    Posts:
    12
    Burma,

    Yes focusing on tidying up current account and getting to the 10/15k savings mark as soon as possible is my priority now.

    Between deposit/the 4% extra to cover solictor fees etc/life events/ I think 15k mark is possibly a minimum.

    I guess there can only be an amount too little and not too large.

    Thanks for introducing me to daftdrop.com, seems pretty amazing!
     
  8. burmo

    burmo Frequent Poster

    Posts:
    237
    It's good that you have a plan. When you get the discipline to get to 15k then you'll probably see a bit clearer what steps are next. ;-)

    Age? Location? Desired area(s) to buy in?

    A single piece of advice about an apartment... please for your own sake don't consider anything without gas heating... electric heating is 3x more expensive; they were cheap and dirty to install and that's why we have them in Ireland.

    By renting a room in your primary residence you can make up to 10k tax free. If you rent out both rooms then you will be a landlord, you have to register with the PRTB and pay income tax on the rent, etc. and your tenants have much more rights than the 'rent a room' scheme. Something to consider.

    Your current expenditure has 250 euro for social activities? But nothing for clothes, food (outside of lunches), commuting, holidays, presents, health insurance, car, maintenance (gas boiler, etc.), tv license, etc.? You should carefully split out your expected monthly expenditure in the apartment and expected rent and see how comfortable you would be. If you look around here on the money makeover section there is a standard template. Fill it out here and lots of helpful people will give you feedback on it.

    And yes, it will seem more challenging when you start adding up the expenses. But it is very possible, or I wouldn't be spending my time here. Start a spending diary and that will help focus your mind on where your money goes.

    "Discipline is simply choosing between what you want now and what you want most."
     
  9. Bronte

    Bronte Frequent Poster

    Posts:
    11,950
    Can you put figures to those.

    If you are not going to live in the apartment are you willing to become a landlord and all that entails. What would be the rental on such an apartmen?. Your interest rate would be higher for an investment. In addition some banks require larger deposits for apartments.
     
  10. icb

    icb Registered User

    Posts:
    12
    Burmo,

    Age I'm unsure of, what is reasonable for an apartment in Dublin in general?

    Location I'm hoping Clonsilla/Clonee/Dublin 15 in general.

    Thanks for the heating advice, it's one of many things I'm not aware of to check!

    Because I'm back home for a few years now I've had it all too easy not having to be conscious of at home food/bills expenses.

    I'll need to try figure out what I paid when I rented an apartment back in 2006ish!

    From the little bit more research your last response had me do, renting one room sounds like it'll be a lot more feasible.

    I'll get filling out that template!

    "Discipline is simply choosing between what you want now and what you want most."
    That quote is excellent and very true!
     
  11. burmo

    burmo Frequent Poster

    Posts:
    237
    ICB, I meant your age! :) Also gender would be good to know, but not necessary.

    Good that you want to be in Dublin 15 from a price perspective.... lots of cheap houses and apartments.
     
  12. icb

    icb Registered User

    Posts:
    12
    Burma,

    Ha, I see!

    26
    Male
    My family home is in D15, happy here for now!
    Yes, I've seen a few options for around that price range, some nice around Dunboyne also.
     
  13. icb

    icb Registered User

    Posts:
    12
    Age: 26
    Spouse’s/Partner's age: single

    Annual gross income from employment or profession: €25,000
    Annual gross income of spouse: €0

    Monthly take-home pay: €1,770

    Type of employment: e.g. Civil Servant, self-employed Retail manager

    In general are you:
    (a) spending more than you earn, or
    (b) saving? I had been spending more than I earn as I had maxed credit cards, I've recently cancelled/paid all off. Now I am in a position to save and my month to month outgoings are quite low.

    Rough estimate of value of home: N/A
    Amount outstanding on your mortgage: N/A
    What interest rate are you paying? N/A

    Other borrowings – car loans/personal loans etc None

    Do you pay off your full credit card balance each month? Current balance €30 in credit
    If not, what is the balance on your credit card?

    Savings and investments: €600

    Do you have a pension scheme? No

    Do you own any investment or other property? No

    Ages of children: None

    Life insurance: None
     
  14. Bronte

    Bronte Frequent Poster

    Posts:
    11,950
    Excellent that you've paid off the credit card. In about a year when you've at least a 10% deposit and you've genuinely saved the same amount diligently every month and you've your bank account in proper order you should come back on here.

    I think the suggestion of a 30 or 35 year mortgage is horrendous. Others disagree.

    At that time we will see also if banks are willing to loan 90% on 2 bed apartments. Currently it's impossible to get loans for one beds and difficult or 2 + beds but it does depand on location and bank. Dublin is a good bet for 2 beds though.
     
  15. icb

    icb Registered User

    Posts:
    12
    Wow time really really flies!

    I have saved €70k

    My income is steady

    It's my intention to have my savings reach the €100k mark and then look for a matching amount mortgage.

    Scary looking back on comments above where there was talk of nice apartments in D15 area for €100k mark!!!

    Times have certainly changed, again!
     
  16. dub_nerd

    dub_nerd Frequent Poster

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    1,331
    I read back over the thread now you've bumped it. Scary indeed. Unfortunately you were starting to save for a mortgage just when Dublin property prices were coming off the floor, and rebounding very strongly.
     
  17. PGF2016

    PGF2016 Frequent Poster

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    172
    Fair play. Great saving. An example to all.
     
  18. Gordon Gekko

    Gordon Gekko Frequent Poster

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    1,841
    What is your income now?
     
  19. Chris2014

    Chris2014 Frequent Poster

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    82
    I think you should go to college part time for a couple of years or get a raise some other way and aim to have a mortgage by ~30.

    The difference between being on 25k and 30k is huge for a mortgage.
     
  20. username123

    username123 Frequent Poster

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    1,244
    I'm assuming OP got raise in the interim as i don't see how they could save 70k in three years otherwise....
     
    Gordon Gekko likes this.