Talked to a few banks about a year previously about mortgage approval and we got preliminary approval for an amount (let’s call it X roughly 4 x my salary).
Rang up today to see if the game had changed much and by god it has.
Firstly, they took our net post-tax income and divided it by 4 as they reckoned that this was the max mortgage it was “safe” for us to pay. Then they worked backwards using the term length and the stress test rate of 6.4% to work out the max loan amount, which comes to about 2.25 times annual salary.
Previously, they were happy enough to go with 4 x salary and our chunky (about 20%) deposit as the amount paid with mortgages repayments (non-stressed) working out as slightly less than rent.
A couple of things that struck me…they seem happy to give me a mortgage till I am 65.
Also they think the max “safe” mortgage monthly payment comes to almost half of what we are paying in rent at the moment and also nearly half of the mortgage payment that they thought was okay this time last year.
Now I’m bloody spooked…
Some disclosures:
Married
No kids yet
Wife out of work
Rural or Urban gaius?
I know (you probably do too) as fact that no bank wants to give a cent towards a rural mortgage.
They are giving out some of course, but they make it extra sticky for anyone lookng outside of suburbia.
I am absolutely stunned that last year they had no problem with me paying 40%+ of net income towards a mortgage (with term ending when i get to 60) but now they only want me paying 25% towards a mortgage that would end when i am 65. The only thing that has changed in the meantime is that I’ve had a pay increase.
Seems to me that they don’t really want to give out mortgages…
Anybody else having similar experiences?
I like the 25% of after tax income as a rule of thumb. It seems sensible to me. I don’t know where that leaves families that rent!
6.4%…wonder when SVR’s were last at that level? cso.ie/px/pxeirestat/Statire … able=fim09
Late 98?
Would have thought 35% to be a sensible enough limit based on international experience. Adding 2% to stress test is normal enough but reducing borrowings to an effective multiple of 2.25 doesn’t suggest a lot of confidence in the loudly trumpeted recent “recovery”.
Maybe they didn’t get the memo and i need to bring paper cuttings from the Indo next time to let them know about how everything is fine again.
There has to be a point where 25% of net seems ridiculously conservative if one is on big money. 25% of 3k or 4k net yes but when you’re taking home 6k net you can surely afford a greater percentage no??
This criteria would leave us only able to borrow 2.18 times joint income.
Am I happy or am I sad? Not sure! We’ve been planning to borrow 3 x joint income which at stress test conditions (as per your post) would leave us at 34% of net going out on the mortgage.
I’d be surprised if this was the only criteria though. That bank may be just closed to business such as yours. Can’t be seen to be saying ‘no mortgages here’, so they set funny criteria?
Not necessarily. It’s taken us 6 years to get to this point. How many more years would it take for vendors to accept this new paradigm when all the indo propaganda is telling them that things are on the way back up?
Now I did only make a phone call to follow up on previous mortgage approval. It may be that if I were to actually call in again (as the helpful lady advised) that I might get an entirely different answer or that some important fact has been misunderstood skewing all the calculations. I politely said no to her kind invitation to drop into their branch saying “Sure there’s no point. There’s not much I can buy with that” and she left it at that. Definitely got a mixture of “we are closed for business” or “you have to show us you’re really keen to get a loan”.
I don’t want to disclose the first two (other than to say that the levels are relatively ordinary, nothing too big or small) but it was AIB I was talking to.
Spoke to Ulster bank. They’ll lend 3.5 times income. They said wife’s income doesn’t really make much of a difference to what they’ll loan but I was invited to include bonuses and per diem expenses that I receive. The mortgage advisor openly spoke about how the end of MIR is decreasing the amount that they will loan to FTB’s.
Because I’ve had a payrise in the last year, it works out as nearly the same amount that AIB were prepared to loan me last year despite being a lower multiple of salary.
Which proves that MIR was simply a government-subsidised mortgage top-up. Lower mortgages being offered will put downward pressure on prices in the medium to long term.
