Chances of getting a mortgage?

Ormus

I'm looking to get a small mortgage (150k property approx) and have about 20% of the purchase price to put forward.

However, my bank account, while not in an alarming state, is not squeaky clean. I am usually a few hundred overdrawn on my current account, my credit card is often not far from maxed out, and I've even been known to dip into my savings account from time to time.

Given that I'd have to submit a years worth of bank statements as part of my mortgage application, is there much chance of me getting a mortgage, or should I just sort out my accounts and keep them in perfect order for a year before I even apply?

Apologies if this has been asked already.

Would appreciate some wisdom if anyone is willing. Thanks.

McGrath5

What bank are you applying to OP?

I had a couple of late credit card payments leading up to the point I applied for a mortgage, and the bank did not take any notice of it.

It would be taken on a case by case basis.

Proxy

Definitely case by case... to be honest as bad as your situation might seem, the banks criteria might fit with it. The biggest factor to them is, can you pay them back each month? I think the base criteria (at least my understanding with my own was) to be able to pay back the mortgage each month while still having €1200 after their stress testing. If you can show to them that you'll have x y and z paid back in a certain way or time, you'll be ok.

A bigger question is - do you want a mortgage right now? House hunting and all that goes with it can be quite stressful, with a LOT of hidden costs. You'll need half of that 20k for furniture and fittings etc. How did you even manage to raise 20k while being overdrawn and in debt? I would advise to service those debts first and then be in a better state overall, financially and personally, to look for a mortgage.

Eldarion

The biggest question is why the hell do you have a nearly maxed out credit card AND a current account overdraft while also having money in savings? Stories like this makes me feel they really need to teach personal finance classes in secondary school.

Credit Card Interest Rate: Minimum 9% all the way up to 20%+
Overdraft Interest Rate: Interest Rate 11%+ AND a fee.
Typical Savings Account Interest Rate: ~ 1%

Savings Account is DEFINITELY the best return on your money there. :rolleyes:

Apologies if this came off harsh.

Ormus

Proxy wrote: »

Definitely case by case... to be honest as bad as your situation might seem, the banks criteria might fit with it. The biggest factor to them is, can you pay them back each month? I think the base criteria (at least my understanding with my own was) to be able to pay back the mortgage each month while still having €1200 after their stress testing. If you can show to them that you'll have x y and z paid back in a certain way or time, you'll be ok.

A bigger question is - do you want a mortgage right now? House hunting and all that goes with it can be quite stressful, with a LOT of hidden costs. You'll need half of that 20k for furniture and fittings etc. How did you even manage to raise 20k while being overdrawn and in debt? I would advise to service those debts first and then be in a better state overall, financially and personally, to look for a mortgage.

Thanks a lot, that's very helpful. I actually have more than 20k, was factoring other expenses into it. Of course I don't want a mortgage (has anyone ever?), but I do want my money to be invested instead of spent on rent. I'm sure you understand.

Ormus

Eldarion wrote: »

The biggest question is why the hell do you have a nearly maxed out credit card AND a current account overdraft while also having money in savings? Stories like this makes me feel they really need to teach personal finance classes in secondary school.

Credit Card Interest Rate: Minimum 9% all the way up to 20%+
Overdraft Interest Rate: Interest Rate 11%+ AND a fee.
Typical Savings Account Interest Rate: ~ 1%

Savings Account is DEFINITELY the best return on your money there. :rolleyes:

Apologies if this came off harsh.

Ha well it came off a little harsh but I'm sure your heart is in the right place.

Perhaps they do need to teach personal finances in school but you should never be the teacher as you've missed a very logical explanation here.

But genuinely thanks for the reply.

Eldarion

Ormus wrote: »

Ha well it came off a little harsh but I'm sure your heart is in the right place.

Perhaps they do need to teach personal finances in school but you should never be the teacher as you've missed a very logical explanation here.

But genuinely thanks for the reply.

Because you're saving for the down payment right? It will still count against you when the bank is assessing your application. Clear your debts first, then save.

Dumping funds sourced from credit into a savings account to give the appearance of a down payment, which is what you're effectively doing by adding money to a savings account instead of clearing your debts, shows a very poor understanding of financing and money management.

chris85

Eldarion wrote: »

Because you're saving for the down payment right? It will still count against you when the bank is assessing your application. Clear your debts first, then save.

Dumping funds sourced from credit into a savings account to give the appearance of a down payment, which is what you're effectively doing by adding money to a savings account instead of clearing your debts, shows a very poor understanding of financing and money management.

+1

In fairness OP you might not like how this is put but this is right. You are going into the red each month which means cashflow is all wrong. You may be putting too much into savings rather than clearing credit card but either way cash flow is wrong. This is more evident by dipping into the savings account. The banks want something consistent for savings. I set it up that I save a certain amount I know I will definitely meet every month to go into savings no matter what. I then put a little more into it if I can/want, or if I am saving for other big expenses coming up I have another small savings account for this. But no matter what I have a main savings account which is primarily for mortgage deposit, this gets a regular amount in on time every time and never gets dipped into.

By all means talk to the bank about a mortgage but dont be surprised if they come back to you about this same things. Take six months and get your accounts all in order for the bank. Most only require six months statement.

Ormus

Eldarion wrote: »

Because you're saving for the down payment right? It will still count against you when the bank is assessing your application. Clear your debts first, then save.

Dumping funds sourced from credit into a savings account to give the appearance of a down payment, which is what you're effectively doing by adding money to a savings account instead of clearing your debts, shows a very poor understanding of financing and money management.

Nope, that's not it. That would be a ridiculous way to manage my finances.

Diane Selwyn

OMG! The suspense is terrible - what is the 'logical' reason for using an overdraft/credit line when you have money saved? Is it in a deposit or investment you can't access?

Mrs OBumble

Well if he can't access it, how is he able to dip into it???

Seriously OP, learn what the word interest means, find out how much you're paying on your credit card interest each month, and research how much the bank is charging you for having an overdraft.

Then sort your problem out, stay righteous for six months. And only then start thinking about asking for more debt.

(I think that the person who said this first was not harsh at all, just honest.)

alibab

I dont think you have a hope in hell with a overdraft and credit card debt of getting any mortgage to be honest despite the amount of savings

Little Bubbles

I thought banks only look for 6 months savings history. Or do they look for longer.

jimmi

Little Bubbles wrote: »

I thought banks only look for 6 months savings history. Or do they look for longer.

We have to show a year's worth of savings and six month's current accounts.

Little Bubbles

jimmi wrote: »

We have to show a year's worth of savings and six month's current accounts.

We just back from meeting broker. They want to show 12 months of savings even though we have the deposit.
I dont want to show how i got an extra 4000. Is there any way aroung not saying where i got it. Could i say I won it?