How to show mortgage repayment capacity when you've no debt?

[MelF]

My heart is broken with the various mortgage criteria lately. I've a hefty six-figure deposit, and the amount I want to borrow is well below the 3.5 time salary limit. Due to the nature of my business (self-employed freelancer) I've saved over the years in lump sums, but broker maintains that because I've no car/credit card debt and thus can't show 'repayment capacity' I haven't a hope.
My yearly business accounts are healthy and my savings account shows all lump sum savings over the last two/three years, but seems the banks need six months of me saving my pocket money like a good little boy.
Is there any Irish lender that doesn't infantilise people like this, and are willing to work with adults who suit their finances to cut their cloth? No joy with a broker, who basically told me to take out a small loan in order to 'prove' capacity, and come back to him in six months. All seems a bit mad Ted to me!

 

[PGF2016]

Change broker?

Or why would you not go direct to a bank? Was not a freelancer but otherwise was in a similar position (big deposit, not borrowing max amount) and the bank official we dealt ensured our approval went through quickly (less than 2 weeks).

 

[CPM_81]

Apply directly to the banks and see what they say?

 

[MelF]

AIB already turned me down because I'd no debt - headscratching to me at the time, which is why I went to a broker but he basically sent me off with a flea in my ear too, so it seems this is a 'thing'!

 

[MelF]

Change broker?

Or why would you not go direct to a bank? Was not a freelancer but otherwise was in a similar position (big deposit, not borrowing max amount) and the bank official we dealt ensured our approval went through quickly (less than 2 weeks).

Did you have to show monthly savings/repayments? Only debt I have is a small mortgage which doesn't seem to count for whatever reason.

 

[Sconeandjam]

Go to the credit union and get a small loan of a few thousand for say 6 months but pay it back sooner. They will see you can pay on time and more than what is required. I had to do that to get a mortgage when I moved here. Silly when you have the money there and your business accounts show funds and cash flow.

 

[Rasputin]

It might make sense to just open a regular saver account and move 2-3k in there each month rather than once off lump sum, that will show capacity to repay on a monthly basis the same as paying back a loan, which seems ludicris to take out debt that you dont need.

 

[MelF]

Go to the credit union and get a small loan of a few thousand for say 6 months but pay it back sooner. They will see you can pay on time and more than what is required. I had to do that to get a mortgage when I moved here. Silly when you have the money there and your business accounts show funds and cash flow.

Problem is I've found a house I want to buy and unlikely it'll still be around in 6 months! I get that self-employed mortgages are always trickier but honestly didn't anticipate this level of box-ticking lunacy despite a healthy financial position.

 

[Indigo]

I was in exactly the same position as you a year ago. Large deposit, no debt, self-employed. But I was doing what Rasputin suggested and making it very obvious how much I was saving on a monthly basis. Even though that doesn't help you immediately, I would start doing that from now.

The only think I can think of to try right now is Finance Ireland. They're meant to be more flexible/more understanding of self-employed applicants. They might be willing to provide AIP on the provision that you show you can save a certain amount monthly between now and drawdown.

 

[PGF2016]

Did you have to show monthly savings/repayments? Only debt I have is a small mortgage which doesn't seem to count for whatever reason.

In fairness yes, we did.

I'm still very surprised that banks would turn away a good customer based on the information provided.

 

[Paul F]

@MelF There are some posts on this forum that suggest that Bank of Ireland and Finance Ireland are two of the more flexible lenders when it comes to being self-employed. Maybe contact them. (With Finance Ireland, I believe you have to go through a broker.)

 

[lomber]

Correct BOI should be able to lend the money (at a price!) go straight to the bank.

 

[mustang01]

Correct BOI should be able to lend the money (at a price!) go straight to the bank.

Interesting. Is showing monthly repayment capacity not a consideration for BOI then? I’d be in a very similar position to the OP with good but irregular income and very little debt.

 

[lomber]

All you can do is try. As another poster said Finance Ireland also will consider odd cases.
If you go to them and have evidence of recent and current cashflow I realise it comes in drips and drabs but what till the drab to apply with all documents and make sure another drab comes in a few weeks while underwriting is taking place that should be ok.

 

[dubdub123]

Haven you applied to Haven? I've heard they are good in respect to self employed, so might be worth a chat..
In general its a good idea to start the process of mortgage application much earlier than you plan to purchase, so you can get feedback regarding any potential red flags.
As another poster said, might be worthwhile starting the regular savings to demonstrate ability to repay on an ongoing basis.
Best of luck

 

[Brendan Burgess]

I've saved over the years in lump sums, but broker maintains that because I've no car/credit card debt and thus can't show 'repayment capacity'

I am not sure I understand this.

Are you saying that some months, you will not be able to afford your mortgage repayments. But then you will have a good month and can clear the arrears?

I would certainly change the broker. They should be able to present your case.

It makes no sense for someone with lots of cash to borrow money just to show that they can repay it.

Brendan

 

[MelF]

I am not sure I understand this.

Are you saying that some months, you will not be able to afford your mortgage repayments. But then you will have a good month and can clear the arrears?

I would certainly change the broker. They should be able to present your case.

It makes no sense for someone with lots of cash to borrow money just to show that they can repay it.

Brendan

I've basically set up my income to best suit my business cashflow and to ensure I don't overspend. I pay myself 70k per year, and set up a standing order for a couple of grand per month to cover small mortgage/household expenses ( plus there's usually a surplus in my personal account at the end of each month, which I use to pay off bigger one-off credit card expenses like holidays/insurance etc). Then a remaining bigger salary lump sum at the end of the year around tax time, the balance of which I throw directly into savings.

But seems lenders want to see me saving monthly instead, (or show that I'm already able to pay existing debt per month etc) without taking into account my overall income/ability to repay, or the fact that I'm debt free!
I really don't see why they can't average the lump sum out over 12 months but nope.

 

[syndrome777]

You need to show 6+ months of saving/rents paid, you need to save the same amount and not touch that money for daily living/anything else. This is sufficient for most banks.
Also... apply directly to the banks, you can apply online to AIB, BOI, EBS and PTSB. You can also do it at the same time.

To answer your latest post, the banks do want to see consistency, where you can prove you can save/repay the same amount every month, cover your other commitments and still have enough money to live off. They don't care if you have 100k in one month and then nothing for the 6 months, as you can easily spend the 100k all at once. I hope I make sense, but it's the lending rules which are there to protect banks/and you from 2008 repeating.