Is a 5X mortgage still possible (LTV 66%) ?

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PaulHoughton

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I will be looking for a mortgage in the next few months of 500K. I have joint income with my wife of 113K and assets of 250K. Is this a runner any more? Or is the era of 5X mortgages gone as suggested in this recent Irish Times article?
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If you're young enough to stretch your mortgage out over 25 or 30 years and have no other major debts, you should be fine based on the figures you post.
 
What are your assets? Liquid assets or property?

I think that would influence a banks desicion.

5x joint income for a loan of half a million. You must be mad...in my opinion.
 
assets are land, valued by the revenue at 350K in January 2008. I have knocked off 100k to be realistic. Why is it mad to borrow 500k? I am 37.
 
Based on the figures you've given I think the proposition is affordable. Rough figures suggest you've got €6,500 per month take home pay. €500,000 over 28 years at 5.75% would be €2,997 per month before tax relief. Even if interest rates go up by a full 2% to 7.75%, the repayment would be €3,648 before tax relief, leaving you almost €3,000 per month to live on. Obviously, a lot depends on the security of your jobs, but such concerns apply equally to almost anyone considering borrowing money.

P.S. - Before anyone else jumps in, I'm a broker and therefore have a huge vested interest in talking up the market, or something like that.;)
 
Where are you getting the 4.75% ? To my knowledge there is no lender in this country currently offering this rate.

If you adjust to a rate in the real world, and allow for a 2% rise it might be a bit more sobering.
 
LDFerguson said:
Based on the figures you've given I think the proposition is affordable. Rough figures suggest you've got €6,500 per month take home pay. €500,000 over 28 years at 5.75% would be €2,997 per month before tax relief.
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So thats 46% of net income going on a Mortgage!! Do it over a more sensible 20 years (costing you much less in the long run) and that would move to over 50% of your net income!!

I thinks that's a lot of your net income going on a mortgage.
 
Another thought.

LTV you state is 66%, so if you are borrowing €500k you must be look at buying a house for €750k.

I assume you are selling the land so your asset/missing 250k will actually be cash from the proceeds?
 
Mr DT said:
So thats 46% of net income going on a Mortgage!! Do it over a more sensible 20 years (costing you much less in the long run) and that would move to over 50% of your net income!!

I thinks that's a lot of your net income going on a mortgage.
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Or do like many people and start overpaying your mortgage every time you get a salary increase, in order to repay your mortgage early without restricting yourself to a 20 year term from the outset.
 
Thanks for the calculations. I should really have done this already.

Well my idea is to build a 500k house on the land. The land is in a high value area, and I want to live there as it is close to where my parents and my wife's parents live. If I sell the land to buy a house elsewhere, I will be liable for stamp duty on the purchase.

My wife has a medium grade permanent govt job paying 49K. My job is in my own computer company and has been providing a steady income for the past 12 years. I could set my income higher as I am paid by my company that makes a profit. I haven't counted my share of the company assets as mine. So I would expect our incomes to rise in future years.

7.75% would be a high interest rate but it's hardly poverty to live on 3K net a month.

So, is the author of the above article wrong to say that "...banks are now returning to their old policies of 80 per cent mortgages of a maximum of three to four times income" ? I read this and thought, maybe I won't qualify for the amount I want any more...
 
LDFerguson said:
Or do like many people and start overpaying your mortgage every time you get a salary increase, in order to repay your mortgage early without restricting yourself to a 20 year term from the outset.
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That rubbish and you know it. "Oh i've just had a 5% salary increase darling. Should we over pay the mortgage or use it to pay for living expenses that have just happened to go up by ...er...ah...5%..mmm"

And in harder times large salary increase are less likely aren't they?

46%-50% of your net salary on a mortgage can't be sound advise can it?
 
PaulHoughton said:
So, is the author of the above article wrong to say that "...banks are now returning to their old policies of 80 per cent mortgages of a maximum of three to four times income" ? I read this and thought, maybe I won't qualify for the amount I want any more...
Click to expand...

To be honest you sound in a much better position than most and i wouldn't be at all suprised if you would get the loan.

But i would consider 46-50% of your salary on debt is a lot, personally. It depends whats important in life for you. I would prefer to spend my money on 3-4 holidays a year and family..........:).
 
To answer your final question Paul:
Is the author wrong to say that banks are returning to 80% loan to value loans?
Not wrong exactly but if he had written
"only one bank has introduced a policy limiting first time buyers to an 80% mortgage", it wouldn't really have had the same effect and you might not have even posed the original question!
 
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