Rejected by AIB for mortgage?!

house277

Hello

I got a mortgage a year ago with KBC but am switching to AIB however all seemed fine in the process until we got a letter stating we'd been rejected due to capacity to repay.

However I thought we were in a great position and only thing changed since original mortgage was 1 kid, however we've good earnings so didn't think would be an issue.

Does anyone have an ideas why we would have been rejected? Our details are:

Mortgage value €500k
House value €650k
77% LTV

2 finance professionals in full-time roles, combined gross income €157k + possible bonuses etc.
1 baby, childcare is €800 per month
€30k savings in bank
€3k car loan

Mortgage with KBC was about €2,300 per month and car loan is €300 per month until November.

So we've about €8,200 net income monthly with €3,100 going out for mortgage and childcare and another €300 on the loan so €3,400 out, leaving €4,800 for other living expenses.

Originally KBC offered us a much larger mortgage than required so I thought we'd be in a great position for AIB - less than 80% LTV with good capacity to repay so am very surprised we were rejected.

Any thoughts?

athtrasna

Why the need to switch?

blindside88

athtrasna wrote: »

Why the need to switch?

I imagine it's to take advantage of AIB's low interest rate. OP you should also try EBS, there rate is quite good (slightly higher than aib) but they are also giving €2k cash back for every €100k borrowed so you'd have €10k cash to clear the car loan or clear off the mortgage. Although AIB, EBS and Haven all have the same underwriter they seem to have different practices. Myself and my brother in law were don't turned down by AIB and were given mortgages by Haven

house277

athtrasna wrote: »

Why the need to switch?

lower interest rate - worth about €90 per month in lower repayments.

Income is c 100k per annum. Central bank regulation is 3.5 times income. I suspect this is why you are disallowed.

maximum12

[Deleted User] wrote: »

Income is c 100k per annum. Central bank regulation is 3.5 times income. I suspect this is why you are disallowed.

That's net income. Gross income is 157k.

I'm guessing the op is close to qualifying and that may change if the car loan is paid off.

house277

maximum12 wrote: »

That's net income. Gross income is 157k.

I'm guessing the op is close to qualifying and that may change if the car loan is paid off.

sure if that was the case id just repay the car loan right now, only 3k - they didn't tell me that however.

rather than just rejecting id prefer them to suggest that as obviously have 30k savings we can use to do that.

house277

Just checked there - only €1,200 left on car loan.

Michael D Not Higgins

maximum12 wrote: »

That's net income. Gross income is 157k.

I'm guessing the op is close to qualifying and that may change if the car loan is paid off.

It's silly really, denying a mortgage to someone who can clearly afford it. OP, unless you have some high spending habits that are scaring AIB off, I'd clear the car loan and try again.

loyatemu

AIB's lending criteria are very tight, especially if you have kids. They stress test the mortgage @ 6% and require that you have (I think) 2050 + 250 per child left each month after the mortgage and all other loans have been paid; I'm not sure how they treat childcare costs. You don't say how long your mortgage is for, but 500K over 25 years at 6% is 3226 per month. If you have 30K in savings you should pay off that car loan for a start, it's only costing you money.

ifeelstupid

+1 on paying off the car loan - banks see it as a negative when applying for a mortgage and I would imagine you will qualify if that is gone. They don't look at the fact that there is only a small amount left - just input the €300 additional repayment into their calculator. Your loan advisor in AIB should probably have pointed this out - although in fairness to them they probably thought in your fairly healthy financial position that you would be approved. Also clear any credit cards if you have them.

Michael D Not Higgins

loyatemu wrote: »

AIB's lending criteria are very tight, especially if you have kids. They stress test the mortgage @ 6% and require that you have (I think) 2050 + 250 per child left each month after the mortgage and all other loans have been paid; I'm not sure how they treat childcare costs. You don't say how long your mortgage is for, but 500K over 25 years at 6% is 3226 per month. If you have 30K in savings you should pay off that car loan for a start, it's only costing you money.

But with income of 8200/month, they would be left 1574 after all those expenses and the childcare. It's just AIB being overly protective since their loan book is in a shambles.

maximum12

house277 wrote: »

sure if that was the case id just repay the car loan right now, only 3k - they didn't tell me that however.

rather than just rejecting id prefer them to suggest that as obviously have 30k savings we can use to do that.

Why assume they'd tell you that ? Go and see your branch relationship manager to discuss.

Claw Hammer

€500k is a large mortgage. If one spouse has to give up work and or more children come along then the loan may be unaffordable. It is not stated where the balance of the funds for the house are coming from. Also why is there a car loan at all if there are savings? It looks like either the "savings" are a gift or there is financial illiteracy. I would expect that as the property is costing €650 the banks would need a much better LTV than 77%. I would think they would want 50%.
I would think the bank do not regard it as prudent to finance this property at this time given the risks. Perfectly good house can be got for less and when the family has stopped expanding and equity has built up then a house at €650k should be considered.

ifeelstupid

Claw Hammer wrote: »

€500k is a large mortgage. If one spouse has to give up work and or more children come along then the loan may be unaffordable. It is not stated where the balance of the funds for the house are coming from. Also why is there a car loan at all if there are savings? It looks like either the "savings" are a gift or there is financial illiteracy. I would expect that as the property is costing €650 the banks would need a much better LTV than 77%. I would think they would want 50%.
I would think the bank do not regard it as prudent to finance this property at this time given the risks. Perfectly good house can be got for less and when the family has stopped expanding and equity has built up then a house at €650k should be considered.

Open to correction but from my reading of OP they already have bought/built the house and have an existing mortgage on it and are looking to refinance for a better rate

Dr Turk Turkelton

Claw Hammer wrote: »

€500k is a large mortgage. If one spouse has to give up work and or more children come along then the loan may be unaffordable. It is not stated where the balance of the funds for the house are coming from. Also why is there a car loan at all if there are savings? It looks like either the "savings" are a gift or there is financial illiteracy. I would expect that as the property is costing €650 the banks would need a much better LTV than 77%. I would think they would want 50%.
I would think the bank do not regard it as prudent to finance this property at this time given the risks. Perfectly good house can be got for less and when the family has stopped expanding and equity has built up then a house at €650k should be considered.

Did you read the op?

The_Conductor

I'd echo what the others have said- simply pay off the car loan, and reapply- and you should sail through.

runawaybishop

blindside88 wrote: »

I imagine it's to take advantage of AIB's low interest rate. OP you should also try EBS, there rate is quite good (slightly higher than aib) but they are also giving €2k cash back for every €100k borrowed so you'd have €10k cash to clear the car loan or clear off the mortgage. Although AIB, EBS and Haven all have the same underwriter they seem to have different practices. Myself and my brother in law were don't turned down by AIB and were given mortgages by Haven

That cash back is a joke. Most expensive 10k the op would ever get.

Op, clear the car loan and any credit cards you have.

Bigus

I think I'd take the rejection as a call to action and clear the car loan and build a bigger pile of cash or pay down existing mortgage capital to be ready to take advantage of really good mortgage offers on lower LTV offers in the future from an existing bank or newcomer mortgage provider to the irish market.

If you knocked 25 k off the capital now and paid an extra 300 pm in capital off the mortgage with the ceased car loan out lay where would this leave you in 1 year ?

A very attractive mortgage proposition, and consequential good terms .

iainBB

There is another factor for the banks these days and that is very few people can afford a 500 k house so very limited stock for that asset to sell on to.

In Dublin house prices are steadying out due to the bank restrictions and top end house can't sell as easily to others it might be worth 500 plus but it's worth what people get a mortgage for it. Not what the paper value is.

Banks are not as interested in an house worth 500k with no one to sell it too if things go bad.

April 73

OP - how many years has your mortgage left to run?
You might be better overpaying if you have taken out a very long-term mortgage. €2300 a month doesn't seem very high for a €500k mortgage so I can only guess that it is a long mortgage.

What would do with the extra money that moving might save you ever month?

astrofool

runawaybishop wrote: »

That cash back is a joke. Most expensive 10k the op would ever get.

What is the interest rate on the cash? Mortgage rates are usually the lowest rates you'd pay on any loan, what's the cheaper 10k that can be got?

Graham

astrofool wrote: »

What is the interest rate on the cash? Mortgage rates are usually the lowest rates you'd pay on any loan, what's the cheaper 10k that can be got?

You wouldn't generally take a €10k loan over 25/30 years.

mirrorwall14

runawaybishop wrote: »

That cash back is a joke. Most expensive 10k the op would ever get.

Op, clear the car loan and any credit cards you have.

If you plan to over pay the mortgage and shorten the term but could really do with the cash moving in is it still an awful option?

Johngoose

So kbc not all its cracked up to be?Which bank is the absolute cheapest for a mortgage?

iainBB

Johngoose wrote: »

So kbc not all its cracked up to be?Which bank is the absolute cheapest for a mortgage?

it depends on so much. mortgage type, amount borrowed, duration left. LTV.
first time buyer etc.

Here are all the rates and products that are out there that you can currently buy (of course it excluded trackers.)

http://www.mortgages.ie/go/customers/mortgage_rates?product=2

But the cheapest on the list is:
Kbc Switcher<50% Variable KBC 3.15
KBC trading up<50% Variable KBC 3.15

Muff Richardson

iainBB wrote: »

There is another factor for the banks these days and that is very few people can afford a 500 k house so very limited stock for that asset to sell on to.

In Dublin house prices are steadying out due to the bank restrictions and top end house can't sell as easily to others it might be worth 500 plus but it's worth what people get a mortgage for it. Not what the paper value is.

Banks are not as interested in an house worth 500k with no one to sell it too if things go bad.

We've a pre approved €500k mortgage, we've been bidding for the last few months on houses mostly ranging between €490 - €510k...haven't come close to sale agreed, most of those had exceeded €530k by the time we gave up.

iainBB

Muff Richardson wrote: »

We've a pre approved €500k mortgage, we've been bidding for the last few months on houses mostly ranging between €490 - €510k...haven't come close to sale agreed, most of those had exceeded €530k by the time we gave up.

I am not saying that there is no one buy houses at the 500K plus range just that the CB has really hurt the top end of the market house prices.

We got our house valued a few weeks ago as we where changing mortgage companies, The guys was saying the house was worth a lot more then what people will be able to pay for it and if we where to sell should break up the property into two plots ( we have a large side garden enough for a 4 bed house ) and sell them independently we would get more for the two plots due to the restriction in place by the CB the top end of the market is in Dublin

seamusk84

Even with your earnings that is a very big mortgage with sizeable repayments. Added to this you are paying a high amount in childcare, and they would also be thinking you may have more kids in the short to medium term so that bill could increase. This does add an element of risk, although I would say the decision to reject was discussed between a few people in the credit department.

I'd recommend going back to them and asking for the exact reason for rejection and trying to push it a bit.

runawaybishop

mirrorwall14 wrote: »

If you plan to over pay the mortgage and shorten the term but could really do with the cash moving in is it still an awful option?

The rates on those mortgages typically aren't as good so you'll pay a lot for that cash over the term. Even if they are as good the long term and interest add up to a very expensive loan.

Cyrus

Some of the posts here are baffling, banks aren't interested in 500k houses because they don't sell? Meanwhile in d4, 6, 16 and blackrock stillorgan and mount Merrion not to mention plenty of other areas sales are being agreed at 800k plus every day of the week

Op aib are a shambles at the moment, speak to Ulster bank and try get someone from private banking you shouldn't have an issue getting sorted