BOI mortgage refusal

Hi,
Our mortgage application has just been refused by BOI. The mortgage request was for 375k (with k out of that deposit). We already have a mortgage with BOI for the last 10 years and about 110k left on it. The house is still 20-30K in positive equity but we don’t want to sell it due to the current climate. We have a long term rental contract (2 years) that will cover the mortgage. All our accounts are with BOI.Both myself and my partner are in full time employment with a very reputable financial company. My partner works for the company over 12 years and was previously a BOI employee. Between the 2 of us we earn around 80k + quarterly bonuses and yearly commissions (we are still getting them). Last year alone we’ve earned over 100K and we have no children. We only have a small loan that we took out for our wedding – 8k outstanding. We have an excellent track record – never missed a payment on the mortgage or the loan. All our bills are on direct debit and credit card is cleared every month. We have 40k in savings –but under my mother’s name – just in case something happened to us or we got tempted to spend it. We thought this to be a good idea at the time and we kept giving her cash whenever we had it to spear. Even if we were not to rent the current property – after paying this mortgage and the new mortgage we would still have over 4k left per month before any bonuses which is more than most families would earn.The 2 mortgage advisers in the bank told us prior to our application that we can get up to 425K without any issues. Today we got refused on the basis that is too much risk and that they have no proof of the savings being ours.
None of this makes any sense. Where can we go from here? Can anyone please advise on this?

You have no record of savings. I would say that as much as you say you are paid well, you have no savings to show to reflect this in a history of savings. This is a big thing with the banks now. The thing with your mother makes no sense to me and it is meaningless to the bank if it's not in your name. If it's your money, then put it in your name and try again with a letter from your mother to explain. Not only that, it make no sense to be paying for an 8k loan if you have savings. On paper the bank see's a loan and no savings so you have done yourself no favours there.
Pay off your loan, repatriate your savings. Thats a lot to borrow in the current climate for someone who in theory has no savings. Must be a big house! Did the bank blank refuse you or did they offer a lower amount.? After our experience going through the ringer with BOI ourselves I would be surprised if you did get it on what you say.

You are on a salary of €100k but you want to increase your borrowings to €485k.

You are lucky that the bank stopped you from buying another property.

The right strategy for you is to sell your house and when it is sold, to buy another house. But don't buy until you sell.

The house is still 20-30K in positive equity but we don’t want to sell it due to the current climate.

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If you think that this is not the correct climate to sell in, then it must be the right climate to buy in. If house prices rise, as you expect them to do, then your stake of €375k will rise also. If you buy while you keep your old house and house prices fall, you could be wiped out because your stake in the housing market would be €485k

If I understand your figures correctly


You need only borrow around €300k to buy a €375k house.

This is still a high level of borrowings for someone on €100k, so don't go any higher.

Brendan

Thank you guys for your replies.
Our savings are in a AnPost long term saving bonds ( mother’s choice) and will only mature in 4 years time. We always thought of savings as money for a rainy day and never thought that will have to use them to prove ourselves. We already had a mortgage that didn’t requested any of this. I understand the times are now different but the banks should look at the big picture when labelling something as high risk. We have a platinum credit card with a massive limit but it’s hardly use. We spent the last few years travelling 4-5 times a year. We thought we’ll do this before we’ll settle into a larger mortgage. Now we’ve decided it’s time to start a family – hence the larger mortgage for the bigger house.
We’ve decided to reapply in 6 months time at the advice of a reputable broker.
We are still going ahead with renting our current property since we don’t want to miss out on the tenants. They are friends of ours and we know for a fact that they will rent for a minimum of 3-5 years due to circumstances.
We will rent ourselves for 6months.
In the mean time we’ve cleared the loan and transfer all the remaining savings under our name. We’ve set up a direct debit for 2k per month into the savings account while paying 1k rent per month. We’ve also forecasted for our social life to include a 2 weeks holiday abroad. If this doesn’t prove our abilities I don’t know what does.
We also offered my parents as garantors - they have no mortgage ( never had) and their house is still worth over 500K.
I don't know of many famillies around us earning as much as we do ... and if this is the case, who is getting mortgages?

Lots of couples have a joint income of 100k.

You are planning a family. Have you allowed for either a big drop in joint income if you stop working or creche fees of nearly a thousand per month per child?

It's probably a good idea to sit back for 6 months. You need to get your savings into your own name. Clearance of other loans is a good start. (youv'e cleard your existing mortgage!!) 375K is a fairly hefty mortgage in the current climate. Have you assessed whether you can meet repayments on this over 25 years?
You state earnings of over 100K. that could be 110K or 200K, so it's difficult to comment on net income. However, please note that only sustainable permanent earnings are used in HL assessment. bonusses/overtime are heavily discounted. Most banks use a stressed rate of 5% in calculating ability to meet loan repayments.
No harm in testing the water with other Banks, if you feel that you can comfortably meet the income tests. Note:- banks will allow for living expenses of circ 20K pa for a couple in any repayment assessment.

Although you don't use it you should (well I would) probably reduce the credit card limit as a bank may view a high limit as potential borrowings. Also, I'd drop the notion of parents going guarantor. Nor would I tell the bank that I wanted a bigger house because I wanted to have kids.

michaelm said:

Although you don't use it you should (well I would) probably reduce the credit card limit as a bank may view a high limit as potential borrowings. Also, I'd drop the notion of parents going guarantor. Nor would I tell the bank that I wanted a bigger house because I wanted to have kids.

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Why is that? Is that a general point, or just in this case?

I think it's a bad idea (for the guarantor) in general.

michaelm said:

I think it's a bad idea (for the guarantor) in general.

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Ah right, fair enough.

michaelm said:

Although you don't use it you should (well I would) probably reduce the credit card limit as a bank may view a high limit as potential borrowings. Also, I'd drop the notion of parents going guarantor. Nor would I tell the bank that I wanted a bigger house because I wanted to have kids.

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No worries. These issues are not relevant to loan assessors! Yes, forget about parents guarantee, but credit card limit and having kids are not factors.

Aligra said:

The 2 mortgage advisers in the bank told us prior to our application that we can get up to 425K without any issues. Today we got refused on the basis that is too much risk and that they have no proof of the savings being ours.

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In the real world a reasonable mortgage risk stops at about 2.5 or say 3 times the annual salary level, so about 300K in your case. Given you already have 110K outstanding, I'd say you're a long way off being a reasonable risk...

We had spent savings of just over 40k (saved over the previous 8 years when my wife was not working) getting planning, design, capital gains tax etc and all the other bits on our site to the stage ready for build.

Have 20k of savings, no credit card debt, no car loans, no missed payments, a house in UK with £120k of equity with 5yr leased tennant that covers the mortgage by 100%, ie pays the mortgage and still has the mortgage amount over.

House valued by their valuers that we had to pay for at 980k.

Looking to borrow 330k with basic earnings of 120K + guaranteed overtime and refused.

They just do not want to lend.