mortgage stress test

serenity13

hi, i am a first time buyer and like many others i was recently refused a mortgage. looking for circa 120k, 5 year permanent position in civil service, savings record, deposit, no loans,icb perfect, earning roughly 28k per annum. renting also for 800 a month.
the letter i received said they could not go into details of why i was refused but i did not meet the repayment criteria. so i rang because i wanted more of an explanation of this- mortgage would roughly be 521 a month and i am currently paying 800 in rent. the person on the phone said with the mortgage stress test, taking rising rates into account, if the mortgage went to over 700 a month i would only have 210 a week to survive on which is not sufficient for a single person to survive - i survive on well less at present with the high rent!

so just wondering what do banks see as a sufficient amount to survive on.
thanks!

chris85

serenity13 wrote: »

hi, i am a first time buyer and like many others i was recently refused a mortgage. looking for circa 120k, 5 year permanent position in civil service, savings record, deposit, no loans,icb perfect, earning roughly 28k per annum. renting also for 800 a month.
the letter i received said they could not go into details of why i was refused but i did not meet the repayment criteria. so i rang because i wanted more of an explanation of this- mortgage would roughly be 521 a month and i am currently paying 800 in rent. the person on the phone said with the mortgage stress test, taking rising rates into account, if the mortgage went to over 700 a month i would only have 210 a week to survive on which is not sufficient for a single person to survive - i survive on well less at present with the high rent!

so just wondering what do banks see as a sufficient amount to survive on.
thanks!

ok so say your take home pay is about €1800 a month. The repayments will rise over the next few years so it could be up to €700 in the not too distant future. Thats 40% of your income basically, not to mention to possibility of pay decreases and tax increase over the next few years as the goverment have stated the civil service may not be safe from future paycuts.

40% of your income is a lot to be paying on accomodation. Generally 25%-30% of income being paid to accomodation is about right.

Also lets not forget house insurance to be paid as well as higher bills if the property is larger than what you are renting now as well payment protection you may want.

You are in a steady job for the moment but civil service is not what it was before for security and the bank will be aware of this also.

unclebill98

Your set out goings can not exceed circa 40% of your take home wage. This is based on where you'd be with the new mortgage and with the mortgage payment stressed at 2-3% above the rate your getting.

bailes

OK, so the Banks are now more than ever applying strict criteria to their loan underwiting process.

as mentioned before the banks apply a higher rate than the current rates on the assumption that rates will go up and this is the 'stress test' lets say the current rate is 4.5% they crunch the numbers based on 7.5% and if you have enough money left over to survive after that you get the green light.

The fact is that they all have different Net Disposable Income requirements.

You say that you have saved the deposit and that you are currently paying rent of €800 thats the good news however you are looking for 4.3 times your salary. this is a problem for them this case is borderline case but maybe it could be done.

P.m. if you are not sorted yet.

Regards,