Applying for a mortgage while subletting a room

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denbear

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Hi all

Just a query I wanted to run by people.

I'm debt free, long time civil servant on around 68k a year and have near ten grand in savings and am eligible for the first time buyers grant.

I rent at the moment and am paying €1360 per month as I'm here 10 years

I sublet a room for €800 per month and this goes into my main account.

I've been saving for about two years regularly enough.

I've been told by one of the big banks that I should have six months savings of around €800 a month in addition to what I am saving (my share of the rent is only €660) but I'm covering the rent every month. I took in someone extra so I could just afford a holiday !

I am banking on first time buyers being open to second hand homes (which I suspect it will be shortly)

Subletting the room seems to be coming back to haunt me!

Question is - is there a good resource on what I can do to straighten out my bank account ? I probably will have to cut back on everything for six months just to prove I can pay it.
 
It’s not fully clear what’s happening here.

Can you clarify:
-your monthly salary
-your share of the rent
-your proceeds from the sublet
 
Apologies yes

-your monthly salary - €3200
-your share of the rent - €600
-your proceeds from the sublet - €800
In addition to that Im saving nearly €400 per month
 
If I were you I'd go to a mortgage broker who will be able to find a bank that is ok with your situation. It looks fine to me (not a financial person, just a single person who went through the mortgage application process). You're putting away/paying €1000 a month. That's more than my mortgage (a third more), so you can definitely afford a mortgage. I would say that bank person you met was being fussy.
 
How much and over what term were you looking to borrow?

Is the issue not the subletting but the savings per month?

While your rent is €1360 you can only afford it because you're subletting. From a lenders perspective you've scope for a mortgage repayment of €960 (net income from employment less non-accommodation expenses). At that you'd have no precautionary savings which would mean you've no financial flexibility to deal with shocks. So it's unlikely they'd be willing to lend what much.

Even ignoring the need for a monthly savings buffer, the sum is probably not enough from the lenders perspective to service a typical 3.5-4x LTI mortgage.
 
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Don't think subletting per se is coming back to haunt you, its the fact that you spent your savings instead of saving them. And the bank are wondering why.
Back when I originally applied for a mortgage I gave the bank several statements and they went back a couple of years and found 2 months after my original landlord had actually passed away and probate had started, but the family hadn't actually told me and another couple beside me who rented from the same landlord, so the payment bounced as her account was closed and returned to us. I think we both called up the estate agent (who was another family member) to ask where we could pay our rent!. I had to actually explain this to the bank that the rent bouncing was this, and could demonstrate the payment being paid after this to the new landlord's account. That's the level of scrutiny mortgage applications get now, times have changed.

They basically want to see that you can afford to spend on rent plus savings at least the same amount that you would pay if they gave you a mortgage, if that makes sense. Its fairly common for people not to go on holidays for several years before applying for a mortgage.
 
I would carefully study your expenses. For someone, who is supposedly trying to save, your expenses are relatively high. For lots of person, saving for a mortgage mean no holiday and a restricted lifestyle for at least a couple of years. You spend more than 3k a month as a single person after accommodation and your accommodation is cheap.
I would suggest taking notes of all your expenses and review them. From that, decide where you can make savings. Look at your insurance, phone, subscription, utilities as well as your daily and lifestyle expenses. You need to know where you spend to be able to save
 
denbear said:
your monthly salary - €3200
-your share of the rent - €600
-your proceeds from the sublet - €800
In addition to that Im saving nearly €400 per month
Click to expand...
€68k pa should be more than €3.2k take home. Have you significant deductions into a pension?
Are you not mis counting above Sublet income double as you only put what you pay (€600) and then include €800 proceeds.
Put another way, income is €4k (salary plus sublet) and expense (rent is €1.36) Net per month = €2.6k from which you save €400. That seems low savings high spending to me. Obviously I don't know what outgoings you have. Can you cut back on these and save more?
 
denbear said:
your monthly salary - €3200
-your share of the rent - €600
-your proceeds from the sublet - €800
In addition to that Im saving nearly €400 per month
Click to expand...

You earn 4,000 per month, made up of 3200 net wage and 800 rental income

Out of which you save 400 per month?


To have just 10k in savings while being a "long-time" civil servant seems very low. IMHO, you should be saving 10k per annum.
 
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