# Mortgage Refused - Gobsmacked!



## sadie (5 Mar 2009)

Just a warning to trader-uppers like ourselves who thought we were sitting pretty and that the banks would be falling over themselves to give us money. So be advised to get that full Approval in Principle before going  house hunting. 

We are a single income, wife at home, husband earning modest 40k salary, 2 children currently renting. 
No debts or loans, over 200k savings. 
We have been refused a mortgage OUTRIGHT by one financial institution as we wouldn't even qualify for the minimum 75k! 
Bascially they said it was 'responsible lending'. We would need a salary of 48k min to qualify for the 75k mortgage (just below 2 x salary). At the initial 'chat' stage we were told we'd probably get up to 180k no problem.

But listen to this, if we had NO children we would immediately qualify for 175k from the same bank!
Last year 2008 we were given full mortgage approval for 140k by another Bank.

What annoys me is a young couple, no kids, earning a combined income of only 40k can get 175k, when the Banks know full well, that in say 4 years time likelihood is that couple may have 2 children, and the same Bank themselves wouldn't lend them 75k at that stage - *because they know they won’t be able to afford the repayments.* 
This is what really, really makes me so angry about the whole property boom - young couples who bought in the last 5 years with the intention of starting families have already been lured into a LIFETIME of debt. And still the banks are bringing out packages aimed at First Time Buyers. 
*First Time Buyers today, Family in Crisis tomorrow.*


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## Not_near_it (5 Mar 2009)

Jeez thats terrible, thought with your amount of savings you would be sitting pretty.
Have you tries AIB? I got mortgage approval two weeks ago from them.
FTB, loan approval for 275k on my own, earning 48k per year, 25k savings.


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## Mr DT (5 Mar 2009)

If you have savings of €200k why do you need to borrow a further €75K?

What's the nature of employment? How long have they been in your current job?


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## spursfan1234 (5 Mar 2009)

exaclyt. number one how do you save 200k?? and why would you want a mortgage then


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## Mpsox (5 Mar 2009)

Without knowing how much you are looking to borrow, it's difficult to give an accurate reason why you may have been refused. However my understanding is that the banks are stress testing more given that interest rates are currently at an all time historical low and I would imagine that they are concerned that you would not have the ability to repay the loan, given your modest income, were rates to climb again.

Are you sure there are no other issues, eg credit history?


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## sadie (5 Mar 2009)

We sold our first house a few years ago, due to job move and then inheritance etc gave us the bank of savings. We have two children so had hoped when 'trading-up' to be able to afford more than a 3-bed semi in an area we don't like, which is what 200k would buy us. And then that'd be our savings gone entirely.
We have no other issues relating to bad credit history.


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## Mr DT (5 Mar 2009)

Nature of employment? Lenght of employment?


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## sadie (5 Mar 2009)

It's nothing to do with the nature of employment, I wasn't asked, we didn't get that far. The figures just didn't add up in the internal calculators - so there was no point proceeding with the application because the mortgage person knew it would be declined because the salary amount plus the 2 children just did not add up.


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## NorfBank (5 Mar 2009)

Some banks crucify you for having kids, some are more lenient.
Shop around.


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## Yellow Belly (5 Mar 2009)

I am a mortgage broker (former banker) and this is the kind of thing which we are experiencing daily. The banks may have taken out full page adverts to say that they are "open" for business however I think this was merely just to convince themselves.

I would hazard a guess that you tried AIB? They plus a few others really reduce your borrowing potential based on having kids- this in itself is a form of discrimination. 

You should try PTSB as their calculation method does not take into account whether you have children or not so hence you should qualify for a much large amount (although they are quite diligent on other lending criteria at the moment too). Alternatively try a good quality broker preferably an authorised advisor rather than multi agency fo some assistance. 

PTSB rates aren't as good at the moment as AIB, but needs must if you require a higher approval- just be careful that you can afford to service the loan from net salary (reduce net salary by 8-10% to account for all these taxes that could be on the way & run the figures again to be sure!)

Best of luck with it!


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## nadnerB (5 Mar 2009)

Not_near_it said:


> Jeez thats terrible, thought with your amount of savings you would be sitting pretty.
> Have you tries AIB? I got mortgage approval two weeks ago from them.
> FTB, loan approval for 275k on my own, earning 48k per year, 25k savings.


 
OK, this is wrong. They approved you on a mortgage that you are not going to be able to repay. This is what got us in trouble i the first pace and it is dishartening to see that AIB is now lending governament money at a loss...

Cheers,

nadnerB


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## CJPC (5 Mar 2009)

Stick with it Sadie, that's a baffling decision.

A bank gave me way more than they should have in 2006, I regret it now of course, but they should never have let me really (not denying it was 100 per cent my own fault) and then people like yourself get turned down.

By the way, Not near it, your loan does seem a bit mad unless there's something you're leaving out there.


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## eggerb (5 Mar 2009)

NorfBank said:


> Some banks crucify you for having kids, some are more lenient.
> Shop around.


 
Do they _all_ ask if you have kids? What are the possible implications of leaving that section on the form blank? Does the negative weighting they apply vary depending on the kids' ages?


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## Senna (6 Mar 2009)

nadnerB said:


> OK, this is wrong. They approved you on a mortgage that you are not going to be able to repay. This is what got us in trouble i the first pace and it is dishartening to see that AIB is now lending governament money at a loss...
> 
> Cheers,
> 
> nadnerB


 

Getting approval is one thing, but following it through is another.  They want to be seen to be lending and so give approval to large amounts, but once you take it to the next step, they suddenly cant lend as much.


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## nadnerB (6 Mar 2009)

Senna said:


> Getting approval is one thing, but following it through is another. They want to be seen to be lending and so give approval to large amounts, but once you take it to the next step, they suddenly cant lend as much.


 
It depends what kind of approval he got. If it is Approval in principle is one thing and can be revoked by the bank but to me approval means the final one te one when the bank sends out the loan offer and once this has been sent the bank cannot change its mind unless the loan is not drawn down for 6 months. 
Even if it was approval in principal it would be wrong, before giving approval in principle the banks must define the ability to repay of the customer and in the case above they certainly got it wrong.

Cheers
nadnerB


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## Bronte (6 Mar 2009)

How much did you want to borrow, what would the repayments on this amount be, how much is your current rent?  Do you have any other debt that you are currently repaying.  Try a different branch of the same bank.  It's always best to find out in advance how the box ticking works so you give the right answers.


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## Yellow Belly (6 Mar 2009)

eggerb said:


> Do they _all_ ask if you have kids? What are the possible implications of leaving that section on the form blank? Does the negative weighting they apply vary depending on the kids' ages?


 
Please see my text earlier in this thread.

From brokering experience- PTSB is where to apply for the maximum approval if you have got dependent children. Their underwriting system & criteria doesn't reduce approval amounts because of kids- only problem is their rates aren't as good as some other lenders.

Effectively at the moment these are your choices (this is a broad generalisation)

First Time


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## Yellow Belly (6 Mar 2009)

eggerb said:


> Do they _all_ ask if you have kids? What are the possible implications of leaving that section on the form blank? Does the negative weighting they apply vary depending on the kids' ages?


 
Please see my text earlier in this thread.

From brokering experience- PTSB is where to apply for the maximum approval if you have got dependent children. Their underwriting system & criteria doesn't reduce approval amounts because of kids- only problem is their rates aren't as good as some other lenders.

Effectively at the moment these are your choices (this is a broad generalisation)

First Time Buyers & Trade Up Mortgages try AIB & BOI (those without savings have a reduced chance). 
FTB & Trade Up (if you have kids) try PTSB
Investment Property- try ICS or AIB (low level of approvals being issued- very difficult)
Commercial Loans- try your own bank first (approvals commercially as scarse as hens teeth- this market is dead)

Hope the above rules of thumb save people some time


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## RMCF (6 Mar 2009)

Playing Devils Advocate here, but we all slated the banks for handing out mortgages far too easy in the past and bringing the country to its knees, now they are being slated for being responsible in their lending.

Can they win?


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## Yellow Belly (6 Mar 2009)

Can anyone define what they would see as:

* irresponsible lending or

* prudent lending?


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## sadie (6 Mar 2009)

They are lending responsibly to families with children, but still lending far too much to first time buyers (in my view). We were told by the first person we could get 130k so that's what we asked for. We only want 100k over 25yrs which would be around 550 a month (give or take). We are currently paying 700 in rent per month, which we are still finding difficult I might add that's why I want the smallest mortgage we can get away with to still keep some savings for emergency.


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## Bubbles34 (6 Mar 2009)

nadnerB said:


> OK, this is wrong. They approved you on a mortgage that you are not going to be able to repay. This is what got us in trouble i the first pace and it is dishartening to see that AIB is now lending governament money at a loss...
> 
> Cheers,
> 
> nadnerB


 

why would he not be able to repay that exactly?


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## michaelm (6 Mar 2009)

We're single-income (five kids) and keeping an eye out for a house in a specific area with a view to trading-up.  I might be looking for up to 5x gross salary . . but this thread has put a slight dent in my steely confidence.


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## Kemo_Sabe (6 Mar 2009)

sadie, the banks are doing you a favour

if your target home is 275 now (200 savings plus 75k mortgage), it'll be less than 200k within the next two years. You won't ever need a mortgage.

sit tight and good luck


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## sullivk (6 Mar 2009)

That does seem a bit strange! I got my mortgage approval in principle for €180k yesterday from AIB. 
I'm single, earn €36k per year and have 1 child. It is over 35 years though so maybe that's why!


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## Yellow Belly (6 Mar 2009)

sullivk said:


> That does seem a bit strange! I got my mortgage approval in principle for €180k yesterday from AIB.
> I'm single, earn €36k per year and have 1 child. It is over 35 years though so maybe that's why!


 
Don't count your chickens unfortunatley AIP's (approval in principle) isn't worth the paper it is printed on. You are never sure of anything until you get your full loan offer sanction received by your solicitor.

Just be careful- many banks at the moment are declining loans trying to get full loan offer even though they have been previously AIP'd.


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## Mr DT (6 Mar 2009)

sadie said:


> We only want 100k over 25yrs which would be around 550 a month (give or take). We are currently paying 700 in rent per month, which we are still finding difficult I might add that's why I want the smallest mortgage we can get away with to still keep some savings for emergency.


 
You are finding rent of 700 difficult. Then I would suggest you will find the costs of owning a house with a 500 per month mortgage difficult. (+ Insurance, life insurance, maintance, making it your own etc)

Hence this could be the banks problem?


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## nadnerB (6 Mar 2009)

Bubbles34 said:


> why would he not be able to repay that exactly?


 
Simply because they are lending this customer a 5.72 multiplier of his salary that is evidently irresponsible lending.
Considering that the money they are lending is my money too, I am entitled to be angry about it. Anything else?

Cheers,

nadnerB


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## sadie (26 Mar 2009)

*Re: Mortgage Refused - Gobsmacked! -Update*

I'd originally posted here about being refused a mortgage outright by one Bank - single income family, 2 kids, salary 40k. 
We successfully applied for and got approval from another bank in the meantime for 100k (2.5 x income). That's full approval for 3 months having submitted all the documents etc.


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## Robbie_C (26 Mar 2009)

I see how it may seem like dicrimination but an important factor to remember is that the 200K savings does not come into the equation at all.  The reason for this is that if you had €2million in savings but you were committed to spending the €2 million on top of the mortgage then as soon as you trade up the €2 million is gone or in this case the €200k is gone and basically what you are left with is a one income family with 2 kids paying back a mortgage.  The bank is assesing the ability of the one income approx €40K to repay the mortgage as the €200k will be gone as soon as you trade up.  

I can understand this from the banks point of view, giving the current climate but I do sympatise with your situation and im sure some banks wil help you out.


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## Bronte (27 Mar 2009)

*Re: Mortgage Refused - Gobsmacked! -Update*



sadie said:


> I'd originally posted here about being refused a mortgage outright by one Bank - single income family, 2 kids, salary 40k.
> We successfully applied for and got approval from another bank in the meantime for 100k (2.5 x income). That's full approval for 3 months having submitted all the documents etc.


 That's great Sadie, well done. If you're going for variable keep an eye on the rates and fix before they go up again as these extraordinary low rates won't be with us forever.  If on variable and you can afford more than the 500 a month try and chip away any extra you have.  It can be a better way of saving.


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