Joint Mortgage application advice and chances of approval

J

jpd85

Registered User
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Hi,

I'm hoping to apply to for a mortgage in 2013. Probably look for approval in September and am wondering what my chances are.

I'm 5 years in a permanent job in the IT Finance Insurance sector
Girlfriend is currently a temporary teacher since September 2012 but should be permanent in September 2013.(Or at least we won't be happy to take on a mortgage until she is.)

Salary 40k each, Total 80k
I have a potential bonus of 2.5k each year. They've never not paid it but it's not guaranteed. Does this count for anything in the application?

Our Monthly net income is 4,600.
Personal Loans of 14k total with repayments of 465 monthly.
Leaves us with 4,135 monthly.

By September we should have about 35k saved. We'll have about 18 months of regular monthly saving of 1000 per month.

I have Credit card debt of 2k and an overdraft of 1k that is usually maxed by thew end of the month as I reduce my credit card as much as possible. My plan is to have both of these cleared by the end of March and then cancel my overdraft.
This will give me 6 months statements "Living within my means" before we apply.
Will this existing debt be an issue for the application come September?

We're looking at houses around the 200k mark. This means a deposit and fees of 25k and mortgage of 180k

Mortgage repayments(BofI calculator) on 180k is 830
Quick online quote for Life Insurance was €25 so 855 in total.

So thats about 21% of monthly available Income.

Stressed by 3% brings repayments to about €1200 or 30%.

So far I'm feeling pretty confident with the big If on the permanent teachers job. Am I right or do I need a reality check?

Any info, help, guidance appreciated.
Thanks.
 
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Forgot to mention we're currently paying 650 per month in rent for the last 2 years.No issues with arrears or late payments on this level of rent throughout.
 
What interest are you paying on the "personal" loans? What interest are you getting on the savings? I used the quotes because are they joint loans or is one of you less prudent with finances?

You should probably pay off the loans a hell of a lot quicker than you currently are if possible. Also pay off the credit card in full this month and stop dipping into your overdraft, it would seem to me that you're not really managing your finances to the best of your ability - a spending diary should help you identify where you're overspending.

Overall though you should have no problem getting the loan next September providing your girlfriend is made permanent.
 
Personal loans are 7k each. Mine is a car loan and hers is credit union loan for car and college fees. No arrears or late payments on either.
Loans are about 8% savings 3%. Not sure we can pay them down faster as need to save for deposit and furnishings.

I got the overdraft of 1k interest free so used it instead of adding 1k to my car loan.
Totally accept I need to sort the credit card and more importantly making changes to manage it properly
 
You basically shouldn't have any loans outstanding when you send in your application.

It doesn't make sense to regard savings as for deposit and furnishings when you have outstanding debts - it's all just money no matter what label you put on it. The Banks will look at your net position.

There's a 5% differential between your loan interest and savings interest so that adds up to a fair amount of additional expenditure that could be put towards savings in the six months prior to your application.

If you really put your minds to it you could nearly clear your loans and credit cards (though check with the car loans that there aren't early payment penalties) in the next few months and then have a clear six months of really significant saving which allied to the rent you're currently paying out should mean you'll have no problems getting the mortage you want.
 
Just doing some quick calls I think paying off all debt would delay our purchase by about 6 months. I understand ur point that ultimately it would cost us more in interest but we might lose the opportunity of getting the house we really want if we're not ready to go. also there's the cost of rent for those 6 months which is slightly more than the interest payment on the mortgage.

Since my initial post bank of Ireland have called me back about my online application. They see our max borrowing being 270k based on what I described above. That's more than we'd need and their attitude to the loans was that a car loan is a reasonable debt to have in the future so no big gain paying it off. I can see where they're coming from on this.

Again shout if this isn't being realistic and thanks for the replies
 
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BOI quote a ridiculously high amount from the online application and don't look at the loan stuff initially. Having outstanding debt reduces the amount you can borrow by a multiple of the outstanding as well as they using the Net Disposable Income method to work out the max repayments.

As others have said, pay of the credit card and over draft today. Take money from your savings if you have to but get ride of it. Credit Card debt is a massive red flag to the mortgage underwriter and even though it is a small amount, they'll seriously weight it.
To give you an example, my CC is on a 100% direct debt but usually paid on further. A run alot of transactions through it each month however and it was flagged during my application as the ICB report shows the amount outstanding on the statement date as debt.
 
Just an update on this. We got approval for the full amount we needed are in process of closing on a house. The stressed payment on this mortgage is about €500 less than our proven repayment capacity so a fairly good proposition for the bank.

Used some savings to clear my credit card and overdraft immediately and topped the savings up over a couple of months. Didn't break the regular savings record to do this and I think this helped with the application. The banks were not bothered about my overdraft as it was authorised, I came back into black every month and there were no missed direct debits etc on my account. They called it a normal working of the account. Again the credit card history was fine as I'd always met the minimum repayments and the balance was cleared before applying.

When talking to the banks about paying down our personal loans they said there was no need as we were well within limits and it was reasonable to expect we'd always have a car loan. Again we were applying for an amount well below our "max".

Our biggest stumbling block was my girlfriend being on a temp teaching contract. AIB refused as a result of this. Bank of Ireland approved us but we did have a pretty strong letter form the school outlining their intention to make her permanent before the end of the temp contract.

What I'd say to anyone out there thinking about buying and worried about mortgage approval is go for it! Apply and see what happens. At the very least you'll know what you need to focus on to get approved. In the end ours was fairly straight forward and I've a good handle on how mortgages etc work so did all the applications myself but can definitely see the benefit of using a broker. When AIB refused the joint application I was going to use a broke to put my best foot forward on a single application but didn't need to in the end.
 
Well done on the mortgage and the best of luck with the house. Thanks for telling us how you got through the process.
 
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