Given too big of a mortgage?

baaaa · 17-11-2009 3:54pm #1

Does anybody know what are the criteria for determining the appropriate size of mortgage to give to someone?
I was kindly given 350k on the back of 4 weeks wages and a letter off my boss.

Scofflaw · 17-11-2009 3:59pm

I'm not sure if this is the right forum if you're personally concerned - this is more likely to provoke a general discussion on mortgage levels and bank lending than answer your specific question. Still, we'll see how it goes.

cordially,
Scofflaw

enda1 · 17-11-2009 4:01pm

Back in the day my parents say it was 2.5 times combined family's annual gross.

So you're earning €140k annual yeah?

seamus · 17-11-2009 4:04pm

enda1 wrote: »

Back in the day my parents say it was 2.5 times combined family's annual gross.

So you're earning €140k annual yeah?

Your interest rate back then was also in excess of 10%

MrMicra · 17-11-2009 4:06pm

You will be unable to repudiate the debt without bankruptcy if that what's you are driving at. The guidelines on lending have no statutory basis rather they form a code of conduct.

jayotala · 17-11-2009 4:06pm

Interesting topic. Some people get too much money and some people don't get any at all.

I guess it depends on your occupation, your earnings, your credit history, your savings (as in your deposit or contribution). If you apply on your own or with a partner.

I on the other hand can't get a mortgage, missed a few credit card payments in 2005.

baaaa · 17-11-2009 4:11pm

Ok sound.
I wish I was earning that.Got the mortgage 2 years ago,got into construction near the end and was grossing 1500 a week fairly sporadically.
When I applied for the mortgage none of my p60's were over 35k gross so the bank said 4 consecutive weekly payslips would be better.My payslips said 1,500 per week gross so the bank said 1,500 x 52weeks=salary of 75k.
I never earned over 35k gross.

baaaa · 17-11-2009 4:14pm

MrMicra wrote: »

You will be unable to repudiate the debt without bankruptcy if that what's you are driving at. The guidelines on lending have no statutory basis rather they form a code of conduct.

Yeah it's what I'm getting at,although bankruptcy would be nice at this stage.

kieransulli · 17-11-2009 4:18pm

A true story:

A friend of mine is a carpenter. After returning from the USA a few years ago, he was working in the construction industry and decided he'd find out what, if any, kind of mortgage he could get.

At the time he was being paid €600 per week. He went to his boss and told him he was going to apply for a mortgage. The boss "doctored" his pay slip to make it look like he earned €1,200 a week.

My friend went to a building society (i won't say which one), presented just TWO doctored pay slips and was offered €300,000 less than 24 hours later.

Luckily for him, he didn't take up this kind offer!

enda1 · 17-11-2009 4:31pm

baaaa wrote: »

Yeah it's what I'm getting at,although bankruptcy would be nice at this stage.

You do know this isn't the States?
You don't get to start again with a clean slate!

asdasd · 17-11-2009 4:31pm

Is the bank to blame in the latter case, though?

waffleman · 17-11-2009 4:42pm

baaaa wrote: »

Does anybody know what are the criteria for determining the appropriate size of mortgage to give to someone?
I was kindly given 350k on the back of 4 weeks wages and a letter off my boss.

According to the government it's still over 7 times your salary:

http://www.homechoiceloan.ie/Frequently-Asked-Questions.aspx

Home Choice Loan is a mortgage for First Time Buyers and is provided by a number of local authorities.
First time buyers can apply for a Home Choice Loan to purchase a new property or build their own home.
Home Choice Loan can provide up to 92% of the market value of a property purchased. The maximum loan amount is €285,000.
The loan is a normal Capital and interest bearing mortgage which is repaid on a monthly basis. Home Choice Loan offers one variable interest rate. The rate is currently set at 3.92% variable APR 3.99%
The mortgage term will be for a maximum of 30 years.

Gurgle · 17-11-2009 4:47pm

baaaa wrote: »

Does anybody know what are the criteria for determining the appropriate size of mortgage to give to someone?
I was kindly given 350k on the back of 4 weeks wages and a letter off my boss.

It never crossed your mind to first determine the appropiate size of mortgage for you to take?

You knew you had never earned more than €35k in a year, but you signed for this size of a loan. To put it bluntly - what in hell were you thinking?

murphaph · 17-11-2009 5:32pm

baaaa wrote: »

Ok sound.
I wish I was earning that.Got the mortgage 2 years ago,got into construction near the end and was grossing 1500 a week fairly sporadically.
When I applied for the mortgage none of my p60's were over 35k gross so the bank said 4 consecutive weekly payslips would be better.My payslips said 1,500 per week gross so the bank said 1,500 x 52weeks=salary of 75k.
I never earned over 35k gross.

You knew they were giving you a mortgage far in excess of what you would likely be able to repay then. Seems like your fault to me, sorry but people have to take responsibility for their actions.

mikemac · 17-11-2009 6:01pm

baaaa wrote: »

Ok sound.
I wish I was earning that.Got the mortgage 2 years ago,got into construction near the end and was grossing 1500 a week fairly sporadically.
When I applied for the mortgage none of my p60's were over 35k gross so the bank said 4 consecutive weekly payslips would be better.My payslips said 1,500 per week gross so the bank said 1,500 x 52weeks=salary of 75k.
I never earned over 35k gross.

You're responsible for sure
But this was sloppy work from a bank offical.
Surely you need to show a track record of consistently earning, not a few months here and there of high wages in construction.

Now I know in construction you can move to different sites so work isn't always a constant 52 week a year deal for many
And this was even more reason for the bank offical to check your P60's. 4 weekly payslips in a row means very little
Though you are responsible here OP

OMD · 17-11-2009 6:16pm

waffleman wrote: »

According to the government it's still over 7 times your salary:

http://www.homechoiceloan.ie/Frequently-Asked-Questions.aspx

Where does it say seven times salary?

jetfiremuck · 17-11-2009 6:20pm

Here we go again. If you go into a resturant that offers all you can eat for 10 euro then get sick as a dog from overeating....is the resturant to blame. FFS.

Diarmuid · 17-11-2009 6:25pm

baaaa wrote: »

My payslips said 1,500 per week gross so the bank said 1,500 x 52weeks=salary of 75k.
I never earned over 35k gross.

So you knew straight away that you couldn't afford the mortgage.
Why did you take the mortgage with that knowledge?

asdasd · 17-11-2009 6:26pm

Here we go again. If you go into a Restaurant that offers all you can eat for 10 euro then get sick as a dog from overeating....is the Restaurant to blame. FFS.

Thats not quite the same - most all you can eat places survive on a natural human tendency to not seem piggish. Unless Homer Simpson turns up.

Banks on the other hand were actively pushing mortgages. I was called into a bank to discuss stuff because I had transferred a sum of money from America where I had worked. In general they talked about setting up a saving account ( much good it earns me now) but also about mortgages and what I could afford with a 20% deposit.

The woman who was talking about the mortgage was shocked when I said stuff was overvalued - she was saying, and this is a near verbatim quote - that the time to get n was then ( 2006) and that prices would never be as low again.

I dont get into arguments in those situations, asdasd is a mild mannered chap off t'internet, so I said I would come back sometime to talk about mortgages.

They all believed the hype, and if experts believe hype the only hope fopr the rest of us is our own native intelligence, or counter experts. Boards and Property Pin were invaluable in that regards, they provided intellectual ammunition for my gut feeling that property was overvalued. But I have an Masters in Engineering . So I can do the math.

The banks are primarily to blame. I would let them go under.

OMD · 17-11-2009 6:29pm

Diarmuid wrote: »

So you knew straight away that you couldn't afford the mortgage.
Why did you take the mortgage with that knowledge?

Interest rates 2 years ago were about 5%, so the yaerly interest was €18,000 a year. How could someone earning 35K gross believe they could afford mortgage interest of 18K

Diarmuid · 17-11-2009 7:11pm

OMD wrote: »

Interest rates 2 years ago were about 5%, so the yaerly interest was €18,000 a year. How could someone earning 35K gross believe they could afford mortgage interest of 18K

eh... I know. That's what I was getting at.

baaaa · 17-11-2009 7:12pm

When I got the mortgage I thought I was on the up in construction and didn't really forsee any of this at all.At the time renting seemed wasteful and the only way seemed to be up,it kept getting boomier.
My broker told me that I could afford it if I rented out a room to a tenant and in hindsight I had too little knowledge of interest rates.
I accept that I have a responsibility and should have known what I was getting myself into but what the feck do I know about sub prime debt or market regulation?I worked on a building site for a reason.
From what I hear if the market had been regulated properly I might still have a job and a gaff.

Diarmuid · 17-11-2009 7:44pm

baaaa wrote: »

I accept that I have a responsibility and should have known what I was getting myself into but what the feck do I know about sub prime debt or market regulation?

Fair play for accepting responsibility but did you not even understand how much you would be paying back if the interest rate was 3%,4%,5%, and 6%? ie this :

	3%	           4%	           5%	           6%
20yrs	&#8364; 1,941.09	&#8364; 2,120.93	&#8364; 2,309.85	&#8364; 2,507.51
25yrs	&#8364; 1,659.74	&#8364; 1,847.43	&#8364; 2,046.07	&#8364; 2,255.05
30yrs	&#8364; 1,475.61	&#8364; 1,670.95	&#8364; 1,878.88	&#8364; 2,098.43
35yrs	&#8364; 1,346.98	&#8364; 1,549.71	&#8364; 1,766.41	&#8364; 1,995.66

waffleman · 17-11-2009 9:13pm

OMD wrote: »

Where does it say seven times salary?

http://www.homechoiceloan.ie/Frequently-Asked-Questions.aspx

FAQ 1 Answer

The maximum loan amount is €285,000.

FAQ 4 Answer

earn over €40,000 as a single applicant

285,000 / 40,000 = over 7 times salary. That's how i read it anyway?

McTigs · 17-11-2009 9:32pm

The maximum loan is 285,000

The minimum salary is 40,000

Nowhere does it say that the people on minimum salary can obtain maximum mortgage

waffleman · 17-11-2009 10:03pm

McTigs wrote: »

The maximum loan is 285,000

The minimum salary is 40,000

Nowhere does it say that the people on minimum salary can obtain maximum mortgage

I'll agree on that however it doesnt say you cant obtain the maximum.

But come on this is subprime lendiing whatever way you look at it. So you get told by the bank to get lost but you have this nice scheme from Fianna Fail only for newly built homes to bail out developers backed up by guess who? that's right the taxpayer. Look at the list of "authorised brokers". Some heavily associated with hawking subprime loans in recent years e.g. IFG. If I was a betting man I'd say you'd get the maximum if you wanted it. I just hope people arnt that stupid.

baaaa · 17-11-2009 10:18pm

Diarmuid wrote: »

Fair play for accepting responsibility but did you not even understand how much you would be paying back if the interest rate was 3%,4%,5%, and 6%? ie this :

    3%               4%               5%               6%
20yrs    &#8364; 1,941.09    &#8364; 2,120.93    &#8364; 2,309.85    &#8364; 2,507.51
25yrs    &#8364; 1,659.74    &#8364; 1,847.43    &#8364; 2,046.07    &#8364; 2,255.05
30yrs    &#8364; 1,475.61    &#8364; 1,670.95    &#8364; 1,878.88    &#8364; 2,098.43
35yrs    &#8364; 1,346.98    &#8364; 1,549.71    &#8364; 1,766.41    &#8364; 1,995.66

Yeah I knew those figures when I got it alright,I just didn't really understand how and why rates rise and fall.

Royal Rover · 17-11-2009 10:43pm

There are hundreds of stories like this - one of my mates is/was a broker attached to one multinationals - he often laughed what some of his clients were doing - ie a factory worker on 35k and he's missus on 30k getting a mortage for 350k - madness - but he didn't care once he got paid and why should he - if the regulators were to come in a prosecute all these individuals now they couldn't - bosses forged p60's etc for employees to secure loans etc, i don't have any sypathy for anyone who went along this route - people got n way over there heads without sparing a moments thought to what life would be like in 2010 - the housing market in ireland will take a number years to bottom out, the government is still helping thousands - and once interest rates rise people will be powerless to prevent repossession - it will happen to thousands trust me- don't blame the brokers who gave out the mortages

asdasd · 17-11-2009 10:45pm

ie a factory worker on 35k and he's missus on 30k getting a mortage for 350k

with a combined salary of 65K that is far from the worst story from the boom.

PaulieD · 18-11-2009 1:54am

asdasd wrote: »

with a combined salary of 65K that is far from the worst story from the boom.

Ah, but what if one of them becomes unemployed.

18-11-2009 2:05am

baaaa wrote: »

Ok sound.
I wish I was earning that.Got the mortgage 2 years ago,got into construction near the end and was grossing 1500 a week fairly sporadically.
When I applied for the mortgage none of my p60's were over 35k gross so the bank said 4 consecutive weekly payslips would be better.My payslips said 1,500 per week gross so the bank said 1,500 x 52weeks=salary of 75k.
I never earned over 35k gross.

If you never earned over 35K / gross per annum and you actually decided to take out a mortgage of 350K you can't really blame the bank. There has to be a certain level of personal accountability in life. We all make mistakes, nowadays it seems folk look to blame someone else for them.

In saying that the bank should have been more stringent in this particular case. Did you get a 100% mortgage ? I am presuming that you didn't have a substantial deposit (rightly or wrongly but I reckon rightly somehow)

baaaa wrote: »

From what I hear if the market had been regulated properly I might still have a job and a gaff.

The market was regulated by supplu and demand, folk on 35K a year applying for 350K mortgages did f it up a bit though. In 2004 I borrowed €209,000 when I was on €50K year and gave it serious thought before I actually went through with it. I remember working out the repayments and my bills along with petrol and other must spends and seeing how much would be left at the end of the month. I think the bank were willing to lend me another €15K or so but I didn't want to borrow that much.

Given too big of a mortgage?

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