Loan Offer Renewal after Initial Mortgage Approval

Afurosan

Hi All,

I received a loan offer for a home I put a deposit on last year. The house was supposed to be ready at the end of last year but I've been told the completion of the build has been delayed and may not be completed until April but my loan offer expires in March.

Thinking the house would be ready last year, I had paid off the rest of the deposit, purchased furniture and put deposits down on a couple of items. I've continued to save just above my repayments capacity threshold but I've also removed some amount of money for personal use. However my savings balance is still around €15k.

I spoke to the bank in the hopes of reapplying for the mortgage and I was told my repayment capacity is now around €300. Which shocked me because I presumed that as long as I continues saving the correct amount and my account was in a net positive, I would have the same repayment capacity.

I'm a bit deflated about it all. Don't know if the house will be ready in time or if I'll be back in square one.

I just wanted to share this to save someone else the heartache. The house isn't yours until the mortgage is drawn down and you've gotten your keys.

herbalplants

I am confused. So you don't have the 10% deposit you need to show in order to buy? You didn't pay it to the new house. What is the 300? 300 a month?

phormium

Without being entirely sure of the story/amounts etc your repayment capacity is based on the stress tested mortgage repayment and your income. The fact that interest rates have quite probably risen since your initial approval this will have increased the amount of repayment and therefore the amount of income needed to sustain it, if your income hasn't increased sufficiently in that time then the repayment for the amount you wanted may now be too high for your disposable income. That may be where the difference is arising.

Afurosan

I've actually paid the deposit for the house fully. I paid fully when I signed my contract and loan offer late last year.

I've basically been told that my repayment capacity is €300 i.e I can only afford a mortgage of €300pm, because I've removed money from my savings account in the last 6 months.

I'm not sure I understand how exactly this conclusion of the €300 was reached because as I said, I continued to save more than the amount stress tested and there's still money in my savings account.

Afurosan

Actually the interest rate has not risen since I received the loan offer and I actually earn nearly €10k more than I did then.

JVince

I suspect that the payment buffer is €300.

Eg, the stress test amount.

Your actual payment capacity is based on your earnings.

The only other reasonable explanation is that they think your spending on furniture and deposits on other goods (both poor decisions) has been seen as everyday spending and you will need to show receipts etc to have this excluded.

Ideally, you move in. Put "free" very basic furnishings in until you get a feel for the place. Then furnish.