Getting a mortgage whilst unemployed

Howdy folks,

Go easy on me here, as I'm not really clued into the whole world of mortgages at all and have no real interest/knowledge in them.

A friend was asking me about this earlier on, and I said I'd throw up a thread on here asking (I'm always banging on about boards in real life, and he's not a member here, so figured I'd make the thread for ease of use).


The long and short of it is that he wants to buy a house. He currently has about €4,000 saved with his Credit Union, and owes about the same. However, he reckons he's gonna be able to save about €40,000 in the next two years, with some contract work. He predicts that by December 2017, his credit union will have no loans and a savings account of about €45,000 - €50,000.

However, he knows that the contract work he's got for the next two years, will most likely have dried up and be gone by then, so he will effectively be unemployed.

He's 30 now, so will be 32/33. He said he has been keeping an eye on property prices in areas he'd live in, and reckons he could pick up a house for between €90-110k. He said they'd be do-er uppers but he wouldn't mind. (this is assuming house prices don't sky rocket in the next 2-3 years).


Anyway, what he was really asking me was what would his chances be of actually getting a mortgage in that position. He reckons he'll have a bit of work on when his current contract expires, but it'll be dribs and drabs, and so, on paper, he'll be effectively unemployed.


So the short version is, what chances does an unemployed 32 year old have of getting a €100,000 mortgage with €40,000 in savings to secure against it. He has a good history of getting and repaying loans with the Credit Union, but (much like myself) only ever deals with the credit union, and never had a loan from a bank.



Myself personally, I've only ever gotten loans from the Credit Union (don't think they do mortgages though?), so although I've an idea what the CU look at when considering loans, I've no idea how mortgages work with banks or what they take into consideration, etc. (hence the thread).


Cheers for anyone able to offer any insight.

Henry Ford III

Unemployed? Not a hope I'd say.

OU812

firstly he doesn't have €40,000. He's got €40,000 minus expenses such as legal. To then there's the other €60,000 (+). How's he going to pay it back ? Without evidence of a steady income for about three years. he hasn't got a single chance & would be wasting everyone's time.

Unless of course he has hard cold evidence of a massive windfall in the future that's going to wipe out the debt, even at that, I'd say his chances are less than 70/30

NIMAN

He can forget about it. Harsh but true.

OU812

To be honest, my thinking was somewhat similar to ye guys, but then I wasn't so sure (although obviously ye guys would know a bit more than me, as I'm not really clued in).

As far as I know, if you save money and go for a mortgage, the money you saved is used against the cost of the house (ie; its not like a credit union where you would still borrow the full 100k and your savings (40k) are secured against it - with a mortgage, the 40k you saved would actually go to the house cost?).

So effectively he'd be getting a loan of 60k. If that was agreed to be repaid over 15 years, it'd work out around €100 a week, give or take? Would a bank not see that as a fairly safe agreement with someone in their early 30s? Especially considering that they'd have a stake in the house and ultimately less to lose if anything went awry? (I presume that if they did take the house off him, and it re-sold for 65k, the bank would get their money first, so it's not as high-risk as a bigger mortgage?).


As I say when he was first talking to me about it I kinda wrote it off, too, but when we started discussing the merits of it, i felt he had a convincing argument. But again, i presume banks have a few boxes they need to tick and if they can't tick them all then it doesn't matter how persuasive you are?

He was saying to me he'd make an average of about 5k per year on oddjob stuff, but it was the longer contracts that landed him a half-decent pay (which is what he has for the next 2 years. It could be extended but he's presuming it wont be).

OU812 wrote: »

firstly he doesn't have €40,000. He's got €40,000 minus expenses such as legal.

Out of curiousity, what kinda cash would that be? I haven't looked into it myself but he was saying he reckons the 'misc' costs would be at most 2-3k? Would that be right? Or is he being a bit optimistic?

I'll see him tomorrow afternoon/evening at some point and will show him the thread. So if anyone cares to elaborate on their replies and be a bit more detailed (like OU812) it'd be great. I understand the basics of savings/loans, but never dealt with mortgage related stuff before so I can't really fill in the blanks for him and he's not the best in the world with the ould computers. I did do a bit of Googling today trying to find out what is the general criteria, but not much of substance appearing.

A few boards threads showed people with a lot less money than he reckons he'll have, going in for mortgages a lot bigger than he intends on, so I thought, after reading a few threads on here, that he'd have been laughing, but apparently not.


Cheers for the replies

FortySeven

I put down a similar amount on a similar priced house just a few months ago, was very difficult even with me and my partner both in full time employment. Legal fees ran to around 3000 more. Your friend hasn't a hope in hell of getting a mortgage without a job and a work history. Why doesn't he complete the contract work then get a job? 2 years work in what sounds to be a skilled role would get you a job no problem.

Or is he a drug dealer or something?

NIMAN

They ask for months upon months of wage slips, P60s, bank statements etc etc.

They want a letter from your employer to say you are in full time work.

Someone just coming with a pile of cash looking for a (relatively) small mortgage to add to it, will struggle badly. The way the banks are now especially, its very tough to get a mortgage and you really have to show a good solid financial history.

FortySeven

Or is he a drug dealer or something?

Jesus, you'd hope there's more money than that in drug dealing! :eek:

FortySeven wrote: »

Why doesn't he complete the contract work then get a job? 2 years work in what sounds to be a skilled role would get you a job no problem.

Well my presumption is that he will go for a job if something is there, but he's 'hoping for the best' while 'expecting the worst'.

I presume he's not expecting to be out of work for the rest of his life, but he's just taking things at face value at the moment. For all he knows the contract he has now could be extended for another 10 years and he'd be laughing, but as 2 years is all he's signed up for so far, then that's all he's counting on.

NIMAN

NIMAN wrote: »

They ask for months upon months of wage slips, P60s, bank statements etc etc.

They want a letter from your employer to say you are in full time work.

Someone just coming with a pile of cash looking for a (relatively) small mortgage to add to it, will struggle badly. The way the banks are now especially, its very tough to get a mortgage and you really have to show a good solid financial history.

I've no idea what his financial history is like, but I presume that this contracted work he has will pay him a set fee every week/month etc. for the next 2 years (could be wrong, but that's my assumption). So a 3 year finance check will only show one year outside of the 2 years (and i'll be honest and say I've no idea if he's been a poor or rich man in the last year).

I'd imagine he has an accountant that would take care of all the above? (or if he doesnt have one, I'd presume he can get one easily enough).


As I say, I've no idea how it works with mortgages, nor do I know his finances, but I'll show him the thread tomorrow though.

booooring!

Not a chance in he'll if he doesn't have full time employment. Let's see it from the banks perspective. His income is 188 per week. 100 gone on mortgage, 28 on food and that leaves 50 euro per week to pay for house insurance, water charges, electricity, property tax, heating, clothes and general expenses. This will come to more than 2600 for the year. Banks don't care about "potential work". They care about someone who is permanent employment earning at least 35000 per year or two people applying for the mortgage earning 35k between them.

Im in full time employment for the last three years earning 32k. Had 25k deposit and needed 65k of a mortgage for a lovely house. Bank said I needed to be earning minimun 35k. 35k between a married people or couple is also sufficent.

OU812

Deleted User wrote: »

Out of curiousity, what kinda cash would that be? I haven't looked into it myself but he was saying he reckons the 'misc' costs would be at most 2-3k? Would that be right? Or is he being a bit optimistic?

At least double, maybe 3-3.5 times that. Depends on Solicitor, search fees etc.

I did a quick calculation using BOI's rate of 3.9% [new customer], fixed for three years. He'd be starting off on a LTV of 60/40. Basically borrowing 60% of the price. I kept the numbers simple such as €100k borrowed over 15 years & it comes out at €423 a month [total repayment €76,140].

Realistically it's totally do-able, for the first three years anyway. They also give you €1,200 back in cash, so he could throw that off the principle & save some money there over the term - he's effectively borrowing €60k for the first month, or however long it takes to come through, then pay down the new €1,200, so his borrowings are €58,700, that'd take about another tenner a month of payments.

I'm not sure if BOI allow that on fixed rate though.

At the end of the three years though he could have a problem, interest rates are at a historic low now & the 3.9% is an artificially low rate to start with. A 1% increase in interest rates would add about €30-35 a month to his payments. And he still has to have something in place to pay for it.

Atlantic Dawn

He will have no chance of getting any loan if he is unemployed, even if he has the amount he is looking for in the account already. Being unemployed means no money coming in to service a loan, it's complete basket case, no supply for his demand.

phormium

No chance. A lender's number one criteria for a loan is ability to repay, he won't have any.

Secondly credit unions are now very regulated and must lend within certain guidelines, someone with no income other than possible sporadic or social welfare is not going to be eligible to borrow sufficient to buy a house, a few hundred for Christmas expenses maybe, the equivalent of a small mortgage then no.

Thirdly, I don't think the credit union will be doing it the way you think. For a loan for a property like that the property becomes the security so his savings would be used to pay for the house and he would not be borrowing the full 100k. Not that this would make any material difference he still doesn't have the income.

The credit union mortgage/secured loan plan would probably work fine once he had any type of secure income coming in that was sufficient for the small mortgage he thinks he will need.

Quorom

Without referring to the above poster KKV's friends position, it is possible to get a mortgage and be unemployed. A bank's criteria for assessing affordability is not employment, but income. Say, for example, you were unemployed but you had a trust fund from your parents that gave you steady income of 40,000 net per annum. A bank would give you a mortgage subject to certain restrictions being placed on the trust fund.