What are my options if I can’t get a big enough mortgage?
So what happens if the banks or building societies won’t offer you a big enough mortgage?
Is there anything you can do?
Or are you destined to continue renting or (even worse) living at home with the folks for the rest of your life?
Well, don’t give up hope just yet.
Here’s a few things to try first:
Option 1: Speak to a Mortgage Broker
The first thing to keep in mind is that just because one bank didn’t come up with the goods, it doesn’t
mean that another one won’t offer you what you need.
Each bank and building society have different lending criteria, or rules, to decide how much they would lend
you.
This means that one bank may offer you significantly more than another.
That’s one of the reasons we’d suggest that you use a mortgage broker, rather than applying to lenders
directly. A good broker will know which lenders will suit which customers, and who will lend more money.
And most brokers won’t charge you a fee, because the lenders pay their fees.
If you haven’t done so already, the first thing you should do is to get a maximum approval in principle figure, so you know where you’re at.
Either contact your broker, or make an online mortgage application
Option 2: Rent A Room Scheme:
Are you planning on buying a property with more than one bedroom? If you are, you should consider the Government’s ‘Rent a Room Scheme’.
Under the scheme, you can rent out a spare room, or rooms in your home, to tenants and earn rental income
of up to €10,000 per year without having to pay any income tax on the rent you receive.
Some lenders (but not all) will take this additional income into account when they are working out what
you can borrow, which means you could borrow more.
So make sure to mention the scheme if you are planning on renting out a room.
For obvious reasons, the lenders will not increase what you can borrow if you are buying a studio or
1 bedroom apartment, because you’d have no spare rooms to rent out.
Option 3: Is a Specialist Lender an Option?
The ‘high street’ banks and building societies tend to favour PAYE workers and people with spotless credit
histories.
If you are self employed or have a less than perfect credit history, a specialist lender may be the way to go.
Theyare more expensive than the standard lenders, but it’s an option to keep in mind.
Speak to your broker. There are 4 of these lenders out there, so just make sure the broker has access to all or at
least most of them, so they can get you the best deal.
Option 4: Can Someone Act as a Guarantor?
The use of guarantors doesn’t seem that common anymore, but a few lenders will still allow you to use a family
member to guarantee your loan.
This helps to increase the amount you could borrow.
As far as I can tell, a lot of lenders are reluctant to use guarantors these days, because they want to be sure you
can make the repayments on your own.
Speak to your mortgage broker for more details.
Option 5: Buy a home with a friend or family member:
This may not be your ideal scenario, but it’s an option that’s becoming more and more common in recent years.
If you are both working, it will significantly increase what you can borrow, allowing you to buy a home, albeit it
with someone else.
I have 3 friends who got on the property ladder by buying with their brothers or sisters, and it’s worked out
pretty well for them so far.
It is important however, to set a few ground rules before you buy, to save hassle later on.
If you think it could be an option for you, here’s some things to consider:
moving.ie/Guides/buying_prop … riends.asp
Option 6: Affordable Housing Scheme
The affordable housing scheme is a government scheme which aims to help people on lower incomes get on the property ladder.
Only specific homes are covered under this scheme, generally in new developments.
What makes them affordable is that they are available at prices that are much lower than the market value.
There can be a lot of demand in certain areas, so you may not be lucky enough to get one, but it’s certainly an option worth considering.
You can download a guide explaining the scheme at the Affordable Home site
Option 7: Buy A House Far, Far Away (And Commute)
It’s probably not what you want to hear, right?
But buying outside the city in the commuter belt is an option that more and more people have to go for, to buy their first home.
Just one suggestion though. If you plan to buy in a town you don’t know too well, it’s vital to do your homework. And one thing you must do, is to drive the commute in rush hour to see just how long it will take to get to and from work.
And whatever you do, when an estate agents says that the property is “35 minutes to the city centre” please take it with a pinch of salt.
