Minimum joint income for mortgage

Janey_Mac

Hi,

I'm doing some preliminary investigation into getting a mortgage. No plans to do anything about it for a year or two but if we know what's needed we can make certain our accounts are in good shape come the time and boost our chances of getting the OK.

I'm clear on most of what needs sorting; we have some savings, I'm saving more, he's starting saving this week (or else! ) I'm starting to look at what expenditures can be cut down so the current accounts don't look quite as anaemic as usual just before payday...

Problem is, I'm seeing advice that a minimum joint income of €60k would be needed for a couple to be considered for a mortgage. From what I see this is fairly recent, and a year or two ago a couple with a joint income of €45k (and everything else looking healthy) would have been considered.

We're each on €23k at the moment, and while I hope to be earning more a few years down the line, I amn't optimistic enough to think we're going to make it to €60k between us.

Does anyone know if that figure is being strictly stuck to? Or does anyone know what level of savings, or of current outgoings that could be spent on a mortgage instead (like rent) might be enough to compensate for not meeting that income level?

killers1

Janey_Mac wrote: »

Hi,

I'm doing some preliminary investigation into getting a mortgage. No plans to do anything about it for a year or two but if we know what's needed we can make certain our accounts are in good shape come the time and boost our chances of getting the OK.

I'm clear on most of what needs sorting; we have some savings, I'm saving more, he's starting saving this week (or else! ) I'm starting to look at what expenditures can be cut down so the current accounts don't look quite as anaemic as usual just before payday...

Problem is, I'm seeing advice that a minimum joint income of €60k would be needed for a couple to be considered for a mortgage. From what I see this is fairly recent, and a year or two ago a couple with a joint income of €45k (and everything else looking healthy) would have been considered.

We're each on €23k at the moment, and while I hope to be earning more a few years down the line, I amn't optimistic enough to think we're going to make it to €60k between us.

Does anyone know if that figure is being strictly stuck to? Or does anyone know what level of savings, or of current outgoings that could be spent on a mortgage instead (like rent) might be enough to compensate for not meeting that income level?

Hi Janey_Mac,
The part about having to have a joint combined income of €60k is complete rubbish. Based on 2 applicants with no dependents and both under the age of 35 a combined income of €43k would allow them to borrow €200k based on the bank's current policies. The bank look at the stressed repayment on the amount you are looking for so in the case of €200k this amounts to approx €1010pm. If you can save your deposit (8%-10% of the purchase price) and show a total of at least €1,250pm being either paid into your savings or split between savings & rent for one continuous year or more you will have no difficulty obtaining a mortgage approval at that level. The one thing I would suggest is to try to be consistent with your savings and lodge the same amount in each month. If you are renting or paying rent at home always make sure that it is paid by Standing Order via your bank accounts and not by cash as the bank will not factor that in to show affordability. Also try to ensure that your current accounts are kept in good order and by that I mean that you are not going overdrawn without an overdraft facility and 'referral fees' are evident on your accounts as this would be a red flag to an underwriter. Best of luck with your savings!

Janey_Mac

killers1 wrote: »

Hi Janey_Mac,
The part about having to have a joint combined income of €60k is complete rubbish. Based on 2 applicants with no dependents and both under the age of 35 a combined income of €43k would allow them to borrow €200k based on the bank's current policies. The bank look at the stressed repayment on the amount you are looking for so in the case of €200k this amounts to approx €1010pm. If you can save your deposit (8%-10% of the purchase price) and show a total of at least €1,250pm being either paid into your savings or split between savings & rent for one continuous year or more you will have no difficulty obtaining a mortgage approval at that level. The one thing I would suggest is to try to be consistent with your savings and lodge the same amount in each month. If you are renting or paying rent at home always make sure that it is paid by Standing Order via your bank accounts and not by cash as the bank will not factor that in to show affordability. Also try to ensure that your current accounts are kept in good order and by that I mean that you are not going overdrawn without an overdraft facility and 'referral fees' are evident on your accounts as this would be a red flag to an underwriter. Best of luck with your savings!

Thanks a million, that's the news I was hoping to hear! Really helpful advice as well, some of it new to me. It's good to know I'm thinking along the right lines in terms of what needs to be sorted out.

I have a decent start on the savings, all done by standing order so it's consistent, so hopefully between the two of us that will be up to deposit amounts in two or three years.

Can I ask how you calculated the €1250 per month rent and savings target? Is it just a percentage of the 200k mortgage amount? We're at about €1000 a month on those at the moment, so it's good to see the target to aim for there.

killers1

Janey_Mac wrote: »

Thanks a million, that's the news I was hoping to hear! Really helpful advice as well, some of it new to me. It's good to know I'm thinking along the right lines in terms of what needs to be sorted out.

I have a decent start on the savings, all done by standing order so it's consistent, so hopefully between the two of us that will be up to deposit amounts in two or three years.

Can I ask how you calculated the €1250 per month rent and savings target? Is it just a percentage of the 200k mortgage amount? We're at about €1000 a month on those at the moment, so it's good to see the target to aim for there.

Hi Janey_Mac,
As I said the stressed repayment on €200k is €1,000pm and that is the figure you need to show you can afford. However if you are living at home and just saving €1,000 the bank can take the view that whilst you are still saving the stressed repayment amount you are not used to or demonstrated an ability to pay the bills associated with living in your own home i.e. utilities, groceries etc etc... If you are living in rented accommodation and between saving & rent you are spending €1,000pm you'll be fine as you are also covering the bills etc aswell and are used to having to pay for food, utilities etc. The only reason I said an additional €250pm was in case you were going to be making the jump from living with your parents straight into your own property and the additional €250pm shows you can afford the extra expense.... I'm not saying it's an absolute necessity but save as much as you can and be consistent...

chris85

Also most applicants will need more than 8-10% deposit being mentioned. Most in the business will tell you that although the banks are advertising 92% mortgages the most they will realistically give is 80% so would aim at 20% deposit.

killers1

chris85 wrote: »

Also most applicants will need more than 8-10% deposit being mentioned. Most in the business will tell you that although the banks are advertising 92% mortgages the most they will realistically give is 80% so would aim at 20% deposit.

Chris I'm sorry I have to disagee with that and I'd love to know what lenders you think operate that policy?. KBC are the only bank at the moment that don't offer more than 80% loan to value to first time buyers.. Whilst the bank will want to see that you have more funds available than the 8-10% deposit to cover your stamp duty, legal fees, fit out etc.. they certainly don't reduce your loan to value. If a banks loan to value ratio is 92% that's how much they'll give you so long as you qualify for that loan amount.

chris85

killers1 wrote: »

Chris I'm sorry I have to disagee with that and I'd love to know what lenders you think operate that policy?. KBC are the only bank at the moment that don't offer more than 80% loan to value to first time buyers.. Whilst the bank will want to see that you have more funds available than the 8-10% deposit to cover your stamp duty, legal fees, fit out etc.. they certainly don't reduce your loan to value. If a banks loan to value ratio is 92% that's how much they'll give you so long as you qualify for that loan amount.

Ok they say they offer 92% but the lending criteria are prohibitive to get this and generally 80% is whats happening out there. This is a good aim for as will avoid the OP being disappointed if doesnt get it and better to save for 80% and get a lower rate.

killers1

chris85 wrote: »

Ok they say they offer 92% but the lending criteria are prohibitive to get this and generally 80% is whats happening out there. This is a good aim for as will avoid the OP being disappointed if doesnt get it and better to save for 80% and get a lower rate.

Currently banks lending 90-92% ltv have a more generouis calculator than KBC (80%) so to say their policy is prohibitive is wrong. The average application will qualify for a higher loan amount with AIB or BOI @ 92% than they will with KBC @ 80%. The 90-92% finance available from these lenders is also at a better rate than KBC

I do agree that the more you can save towards the purchase price the better and some lenders do offer a slightly lower rate where the loan to value falls below 80% and if you can aim for this bracket even better.

I'd just be conscious that to say banks only lend 80% you're sending out a message that is far from accurate & disheartening for people who read these threads. Some people, for lifestyle reasons etc may want to buy a house and are saving like mad to do so (rightly or wrongly - not my place to judge) but I just want to try to give an accurate assessment of what's really happening out there..

chris85

[QUOTE=killers1;77233104I'd just be conscious that to say banks only lend 80% you're sending out a message that is far from accurate & disheartening for people who read these threads. Some people, for lifestyle reasons etc may want to buy a house and are saving like mad to do so (rightly or wrongly - not my place to judge) but I just want to try to give an accurate assessment of what's really happening out there..[/QUOTE]

Fair enough but I would say the same thing about saying they are giving out 92% mortgages. People may then be disheartened if they don't get 92% and have not planned for an 80% mortgage.

I may not be clear really. They are giving out 92% mortgages but hard to get I guess best way to put it. Best to aim to 80% to be sure not to be disappointed.

killers1

chris85 wrote: »

Fair enough but I would say the same thing about saying they are giving out 92% mortgages. People may then be disheartened if they don't get 92% and have not planned for an 80% mortgage.

I may not be clear really. They are giving out 92% mortgages but hard to get I guess best way to put it. Best to aim to 80% to be sure not to be disappointed.

Hi Chris,

Apologies I don't want to seem like I am contradicting you all the time but it's the highlighted sentence above that I don't agree with. I can see your point in relation to trying to have as much savings as possible and borrow as low a loan to value as one can afford and I agree wholeheartedly. I can only offer by way of an example....

I send an application to AIB (their policy is that they offer 92% finance) and I ask them to assess the case and give me a maximum loan amount that the applicants salary allows them to borrow and they have a proven repayment capacity for. The bank decide that €230,000 is the clients maximum borrowing potential. The condition on the approval will read as follows;

'Subject to maximum finance of €230,000 or 92% of the purchase price whichever is the lower'

This confirms that the bank are committed to giving 92% finance before they even receive property details. The only time they would not stand over 92% finance is when the property turns out to be a 1 bed apt because their policy says the max they lend on these is 75% ltv. In every other case, where the property is anything more than a 1 bed they will give up to 92% finance and will NEVER insist on a lower loan to value.

Anyone out there with an AIB AIP want to back me up here?!