Are banks idiots?

Here is the situation: my boyfriend and I are in new jobs a month as we were travelling since January. We are looking for 100% mortgage, it's 180K which is easily affordable to us as we have a good combined income. Even if one of us was to lose our job in the morning the other could still cover the mortgage repayments no problem. We applied to PTSB who initially said we should be successful but then came back and said we would only get 92%, due to the fact that we had just started new jobs!!
How is it that they see us as low risk to give us 92%, but when we ask for another 8% suddenly we're high risk? I understand that each insititution has eligibility criteria but as far as Im concerned there is very little risk involved, we have evidence of savings (though none till our SSIA comes thru) and have always paid loans on time.

Yes, we could borrow the 14K and get a 92% mortgage but why should we have to? We both have letters from our employers and all the relevant documentation. We have good jobs and work in a field where there is a skill shortage. Is there any bank out there who will see it from our point of view and understand that there is no risk in giving us 100%?!!

Were you in employment before you went travelling?

Have you qualifications?

Either of these factors could influence a lender's decision.

There are other lenders offering 100% mortgages - First Active, Ulster Bank, ICS, Bank of Ireland and EBS. Worth shopping around.

Liam D Ferguson
www.yourfirstcastle.com

Following on from Liam - if either/both of you have a probationary period in your new jobs these will have to have been completed before you can draw down a 92% or a 100% mortgage.

Sarah

www.rea.ie

A 100% mortgage is also based on the fact that you are borrowing the full cost of the property not just on your salary. So if you ever go into negative equity the house would be worth less than the mortgage. This happened in the UK a few years ago and the banks got burnt claiming back the money.

Negative equity is arguably irrelevant as long as the property owner is not planning to move in the forseeable future and can afford the repayments (i.e. is not in danger of repossession).

Not to the bank it isn't

If they are getting the mortgage repayments then surely it is irrelevant to them too?

But only if they are getting the repayments?

If the market value of a property falls below the initial purchase price or the initial loan size and the borrower is still meeting the repayments then surely the lender doesn't care?

If the market value of a property falls below the initial purchase price or the initial loan size and the borrower is still meeting the repayments then surely the lender doesn't care?

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Agree, Dont see why the lender would be concerned so long as payments are being met,... but there is a possiblilty of every mortgage falling into arrears from the executive higher earners to the first time buyers, which they lenders are more than aware of.however where the lender has loaned 100% of the Purchase price to negate against the possibilty of it falling into arrears and repossesing a property that has fallen into negative equity they look for security of employment , ie at least 12 months permanent employment ( its 6 months for 92% ) . To be honest its prudent lending, and the banks should be applying more prudent lending across trhe board, not just for mortgage applications.

Banks get very tetchy in business loan scenarios when the market value of security held (for example shares) is subject to even temporary variations in value. That is why they are usually reluctant to accept quoted shares as collateral against such loans.

It is still a risk for a bank to lend 100% on a property. They don't take into account any type of personal situation Whether you can make the repayments or not. Banks are getting very tetchy of full lending as no-one can pre-empt what the housing market or job market will be.

Madam said:

Here is the situation: my boyfriend and I are in new jobs a month as we were travelling since January. We are looking for 100% mortgage, it's 180K which is easily affordable to us as we have a good combined income. Even if one of us was to lose our job in the morning the other could still cover the mortgage repayments no problem.

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Just to return to the original poster's question: You say that you can easily afford repayments etc. That's good. However, the bank go by certain criteria which is sensible given that they don't know you. One of these is presumably that you are both in brand new jobs. While you are still in your probationary period, you are not considered a good risk. If you leave it for 6 months or so until you are out of the probationaly period and (presumably) still in the same job, you will most likely get a different response. The 100% motrgage carries a higher risk for the bank, so they are likely to have stricter criteria.

In my view, and to answer your rhetorical question no, I don't think they are idiots, I think that you are in a hurry to buy a house and that you are frustrated by the delay. That's unfortunate, but does not make the banks' behaviour unreasonable in this instance.

ClubMan said:

........the borrower is still meeting the repayments then surely the lender doesn't care?

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That's right, but the bank has to take into account (from the outset) that this might not always be the case, i.e. there is a risk that the borrower will default when the value of the property is less than the amount outstanding on the mortgage.