Banks are not lending what is people's opinion on this

TrishSimon

As the title says...are banks lending in relation to mortgages or do people feel their criteria is too harsh.
I ask because I have just had 2 x refusal letters sent to me by a broker we used last Oct 2014 when we were going for a mortgage on about 216,200K to borrow.

Both stated they didn't feel we had the capacity to pay back a mortgage because of an existing small mortgage I have € 601.88 ( rented and is covered by the rent ) and also some small loans we have now baring in mind we had the deposit at the time 10% obviously now changed and that we are paying € 1100 rent each month plus generally saving 800 - 1000 and have been doing since July 2012.
I really am not sure how banks work and think we can't pay back a mortgage when we are more or less doing that in rent already.
Very frustrating !

Obviously things have changed now and we are in the bracket of the 20% so a mortgage is a long way off for us but I really don't know how banks expect that people will ever own a home if they think like that.

seamus

Banks are actually lending and to a certain extent they're clamouring over eachother to get people in the door.

But yes, their criteria have changed and become stricter.

If we assume a repayment capacity of €1900/month going by your figures, then you should qualify for a mortgage of about 297k. But it's not that cut-and-dried. Your current property is rented, but it will not always be. There will be months where the property is not rented.

That's what's killing you. If you have a 3/4 month streak where your place isn't rented out, your repayment capacity becomes €1,300/month, which brings you down to a mortgage of just over €200k.
There will also be other ancillary costs associated with the rental property - management fees, maintenance, income tax, etc - which have to be factored in.

What are your options for disposing of the rental property? Your mortgage is small, so presumably you could sell it and walk away with nothing or just a small amount of negative equity?

TrishSimon

seamus wrote: »

Banks are actually lending and to a certain extent they're clamouring over eachother to get people in the door.

But yes, their criteria have changed and become stricter.

If we assume a repayment capacity of €1900/month going by your figures, then you should qualify for a mortgage of about 297k. But it's not that cut-and-dried. Your current property is rented, but it will not always be. There will be months where the property is not rented.

That's what's killing you. If you have a 3/4 month streak where your place isn't rented out, your repayment capacity becomes €1,300/month, which brings you down to a mortgage of just over €200k.
There will also be other ancillary costs associated with the rental property - management fees, maintenance, income tax, etc - which have to be factored in.

What are your options for disposing of the rental property? Your mortgage is small, so presumably you could sell it and walk away with nothing or just a small amount of negative equity?

We are looking to purchase a house in the 230-240K region so we dont want a huge amount and definitely can pay it back.
The apartment at the moment if sold would leave approx. 7-17K negative equity I believe so not a huge amount.
I have a tenant in there since Jan 2013 she wants to stay another year I haven't signed lease yet so not sure what I'll do there it looks like selling the apartment is becoming a reality we said we'd sell when she did not want to live there anymore but its not looking like that will be the case.
They said because I have a small loan with CU and hubby has a BOI loan which finishes June 2016 we cannot afford to pay a mortgage back but really I know we can.
I always just pay CU 410 not matter what I owe to them have done since I joined.
Its quiet disheartening, I think what will need to be done is sell the apartment, clear off my loan at least and go from there.
I'll hate having to tell my tenant she is a great person to have living there.

TrishSimon

Also broker said that even though I am covered by rent for the mortgage on the apt and all the costs that go with it the banks dont take that into account they will only take into account 300 euro max from the rent and then stress test you with say 440 which would be the balance of what her rent is.

Addle

Try being a single income applicant!

TrishSimon

Addle wrote: »

Try being a single income applicant!

Well I tell you something at this point and time I am looking at going abroad to get a chance at a better chance in life or else marching up to my local council offices and putting my name down on the housing list because as it stands we have no chance of buying a house.
Yes I have the apartment but its not suitable for us anymore I'm willing to sell it if that is what it takes but even if I did do that the banks would still refuse us as dont meet their criteria !

reddub2015

Totally agree they are not.
Have 38k in the bank, 0 personal debt now, we earn 94k gross. Looking for 247k. Turned down by bank of ireland Because I was paying off my debts rather than saving. Paying off debts does not equal ability to pay a mortgage apparently.

seamus

reddub2015 wrote: »

Totally agree they are not.
Have 38k in the bank, 0 personal debt now, we earn 94k gross. Looking for 247k. Turned down by bank of ireland Because I was paying off my debts rather than saving. Paying off debts does not equal ability to pay a mortgage apparently.

I guess there's some box-ticking going on. But there's also the fact that paying off debts is not the same as saving. When it comes to paying off small debts, people will go without to get it done. Not so much when it comes to saving. Just because you can repay €500/month on a loan, doesn't mean you will start saving €500/month when you're done.

That's not the same as paying off a mortgage debt, because you don't make short-term sacrifices to pay off your mortgage.

Kinet1c

TrishSimon wrote: »

They said because I have a small loan with CU and hubby has a BOI loan which finishes June 2016 we cannot afford to pay a mortgage back but really I know we can.

It's pretty naive of you to think they're going to give you a couple of hundred thousand when you've got outstanding loans and a poor credit rating, this is not the early 2000s. They were protecting you from yourself and the rules introduced today further protect you from yourself. Also pretty rich to come on here criticising the banks when you're clearly not what they'd consider a good candidate for a mortgage.

Trish56

Banks are definitely lending however you must qualify and two short term loans plus a bad credit rating is not helping. Can you not pay off the credit union loan ? Your rent, short term loan repayments and savings are all taken into account when looking at repayment capacity.

Also if you are in negative equity with your existing property the 20% deposit does not apply to you.

seamus

Trish56 wrote: »

Also if you are in negative equity with your existing property the 20% deposit does not apply to you.

Just to note this only applies if you're in negative equity on your own home.

Negative equity on a rental property does not exclude you from this.

In the simplest terms, the OP would need to move back into her apartment before trying to sell it in order to qualify for the exemption from the 20% rule.

mickman

reddub2015 wrote: »

Totally agree they are not.
Have 38k in the bank, 0 personal debt now, we earn 94k gross. Looking for 247k. Turned down by bank of ireland Because I was paying off my debts rather than saving. Paying off debts does not equal ability to pay a mortgage apparently.

Earning 94k gross, why do you have debts ?

TrishSimon

Just to update everyone I saw the broker yesterday he was very straight forward and said as long as people have any kind of debt the banks won't look at you, this is what he advised in order for us to qualify for the 10% deposit based on negative equity, he was very honest and I appreciated that there was no messing with him and he said to me sorry if all this is harsh but thats reality. It didn't bother me I prefer people to be honest then to tell you what you want to hear which is what the other broker did last year.

1. My apartment has to be sold I will walk away with negative equity of about 7-17k approx depending on how the market value changed from now to November.

2. Credit union loan must be cleared I have shares to match loan and its not a huge one but it has to go and he suggested not putting my shares off it as they would prefer to see the shares as savings.

3. Visa card has to be cleared or gotten rid of.

4. We have to save at least € 1500.00 to € 1800.00 per month from now until Novemeber then go back to him with no debts and savings. He said even if we were being gifted a deposit from parents which we were partially banks are getting tough on that too.

5. I will then do a switch up mortgage with KBC who I have the apt with already and go from there.

Sunderland123

Hi could you recommend your broker please they sounded straight and easy to deal with

reddub2015

mickman wrote: »

Earning 94k gross, why do you have debts ?

Just sold my house ( as condition on offer letter). I never missed a beat on my mortgage for 11 years. Bank of ireland refused because I was saving about 200 in to my account and 300 pm off my credit card. They said they cant include my credit card payments because it accumulates interest. Took them 4 months to tell me this. Now the new rules are in and I'm renting now. Curse the day I got involved with bank of ireland.

SpaceTime

I've been looking into this too and I think it's probably going to push me to emigrate. The rental market here is poor quality and extremely expensive for what you get in the cities and the banks are being very tight fisted.

I think I'll be packing my bags as I'm going to miss the mortgage boat entirety if I wait a few more years.

TrishSimon

Sunderland123 wrote: »

Hi could you recommend your broker please they sounded straight and easy to deal with

It was Garry from OMAC mortgages in D22 very sound bloke and no messing around with him.

TrishSimon

SpaceTime wrote: »

I've been looking into this too and I think it's probably going to push me to emigrate. The rental market here is poor quality and extremely expensive for what you get in the cities and the banks are being very tight fisted.

I think I'll be packing my bags as I'm going to miss the mortgage boat entirety if I wait a few more years.

What's your situation SpaceTime are you a first time buyer or do you own a property already ?

TrishSimon

Kinet1c wrote: »

It's pretty naive of you to think they're going to give you a couple of hundred thousand when you've got outstanding loans and a poor credit rating, this is not the early 2000s. They were protecting you from yourself and the rules introduced today further protect you from yourself. Also pretty rich to come on here criticising the banks when you're clearly not what they'd consider a good candidate for a mortgage.

I don't have a poor credit rating, my husband missed one payment which was purely an error once he paid it within 10 days of noticing it was missed and it was because his wages went in one day late. Broker said this is basically nothing and in actual fact one bank disregarded it and only wanted us to save more money so thanks I don't need protecting from myself.
We are actually good candidates for a mortgage because we have paid our rent on time and in full for over 2 years now we were clearing any debts we have all last year, my CU is not such a big deal because I have shares to match so no biggie. Both of the brokers I went to said we are ideal for a mortgage and AIB agreed they just wanted us to save about 6K more.
I already have a small mortgage with KBC so I am not a total muppet as you seem to think !!
We have a plan in place now and will be going back to the mortgage broker with no debts and a deposit in December.