Q&A with Joey Sheahan – Head of Credit, at online brokers MyMortgages.ie and author of The Mortgage Coach

Head of Credit, at online brokers MyMortgages.ie and author of The Mortgage Coach

3. My husband and I both work in civil service. We are currently earning a combined €80,000 per annum. We have managed to save €17,000, saving €1250 per month. We have never had any loans or debt. Could we get a mortgage? We’re currently based in Dublin, but realise our salaries won’t allow us to buy here. We’re hoping to buy at home in Cork. Is this possible?

Yes, you are very suitable mortgage candidates. You should be able to borrow 3.5 times your income which is €280,000, and possibly qualify for an exemption, meaning you could potentially borrow up to maybe €320,000 – €360,000. Based on your current monthly savings amount, in 1 year your savings will increase by €15,000, which means you will have €32,000. This would allow you to purchase a home for €320,000. According to the most recent report, the average house price in Cork City is €313,000. As long as your employer confirms in writing that it’s ok for you to work from Cork, then there is no issue buying a house to live in Cork if your employer is based in Dublin.

Head of Credit, at online brokers MyMortgages.ie and author of The Mortgage Coach

2. My wife has inherited a home with her 2 siblings. They have made the decision to sell it. We expect to have €200,000 cash in 6-9 months’ time. We have not been saving. She is self-employed and her salary fluctuates, but she has made a minimum of €50,000 the last 3 years. I work as an engineer in a global software company and my salary is €90,000. I also take home €30,000 pa in bonus and shares. Can we use the €200k as our deposit, and still get a mortgage, even though we haven’t been saving?

Yes, absolutely. If you guys have been paying rent,  then the monthly rental payments will serve as proof to the ban of your ability to meet monthly mortgage repayments. If you are not paying rent, then you have ample time, between now and when you receive the inheritance funds, to start saving now to be able to show the necessary savings record of  6 months.

Head of Credit, at online brokers MyMortgages.ie and author of The Mortgage Coach

1. I’m a doctor (HSE) and my husband is a journalist (employee). Our combined income is €150,000 pa. I expect to qualify as a consultant in 2.5 years. We have saved €45,000. Given the housing crisis, we’re not sure if we should keep saving, and buy when we know our permanent location in 2.5 years (as I don’t know where I’ll get an appointment yet) or should we buy now in Dublin, to get on the ‘property ladder’. What would you recommend? How much could we borrow now, and how much could we be expected to borrow in 2.5 years?

You could borrow at least 3.5 times your combined income, which would be a loan amount of €525,000. You could potentially secure an exemption, given you are both high earners, meaning we could qualify for a loan amount of maybe 4.5 times your income, which would be €675,000. However, you would need to increase your deposit, as you would need 10% of the purchase price. If you are currently renting, I would give serious consideration to buying now as the rent you will pay in Dublin over the next 2.5 years will really add up. The average monthly rent in Dublin is approximately €2,000 so if you multiply this by 30 months, it means you could pay at least €60,000. The monthly repayment on €525,000 mortgage over 35 years at an interest rate of 2.2% would be much less at €1,793. If work dictates that you have to move county down the line, then you could rent out your Dublin property and the rent should cover the mortgage repayments, subject to any tax obligations.

“It’s a once in a decade or maybe even 2 decade opportunity where a new lender enters the Irish market and reduces interest rates to this extent”

By Megan Martin, RSVP

In response to the newcomer, AIB announced today that they were introducing a new Loan-to-Value (LTV) fixed rate for mortgages with a fixed rate as low as 2.25%.

“Avant Money’s entry into the Irish market is the best news for Irish mortgage holders. We have long seen European rates well below 2% compared to closer to 3% for Irish mortgage holders, and now, for the first time since before 2008, rates below 2% are available to homeowners in Ireland,” said Joey Sheahan, Head of Credit, MyMortgages.ie and author of The Mortgage Coach.

“It’s a once in a decade or maybe even 2 decade opportunity where a new lender enters the Irish market and reduces interest rates to this extent.

Read the full article on RSVP here – https://www.rsvplive.ie/life/never-been-better-time-homeowners-22681797

Q.
Should I avail of a moratorium? Will it cost me more?

A.
I believe that the demand for moratoriums will have reduced drastically this week following the Government’s announcement of the Covid 19 Wage Subsidy Scheme where Revenue will pay 70% of employees salaries up to a limit if €410 weekly (ie €1,775 monthly) and the increase in the Covid unemployment benefit to €350 weekly (ie €1,515 monthly) from €203. Given that it’s very difficult to spend money at present, most people should be able to meet their monthly financial commitments in the short term based on the above supports.

If you have been made redundant and cannot meet your monthly repayment, contact your bank immediately and apply for a moratorium it.

If you qualify but don’t need it, then don’t rush into it.. this choice can occur where somebody has been made redundant, has a mortgage repayment of say €1,000 monthly but may have savings of say €20,000. In this instance you can use €3,000 of your savings to pay your mortgage for 3 months. The reason why some people won’t avail of the moratorium is that if they wish to borrow again in the next couple of years, availing of the moratorium may go against them in terms of being approved for a new mortgage. As it stands most banks will want you to be making full repayments for 2 years after a moratorium before they will approve a mortgage. Also.m, a borrower will pay more interest in the long term.

For example a borrower has €350,000 outstanding with 32 years remaining and a variable interest rate of 3.15%. Monthly payments are €1,447.83 monthly. If they don’t make payments for 3 months they will pay an additional €2,651 interest on the 3 months deferred payments of €4,546 over the remaining 31 years 9 months.

Read the full article by Charlie Weston in the Sunday Independent here –
https://www.independent.ie/business/personal-finance/your-questions-im-worried-stock-market-turmoil-has-hit-my-pension-should-i-be-taking-action-39120072.html

Q My job in catering has been lost as a result of the coronavirus. It’s a large company and we’re told the layoff is temporary. My mortgage is with AIB and they are offering a three-month payment holiday on the repayments. But I understand it’s another loan of sorts? Should I take it or continue to pay the mortgage out of savings? My wife is still working full time and we could afford to do this. The payments are €1,240 p.m. and we have 16 years left on the loan.

A The mortgage moratorium has been billed as a bit of a payment ‘holiday’. It is no such thing. All that will happen is the three months’ payments will be rolled up and added on to the end of your loan, extending out the term. This has the effect of rolled up interest too, so the sums should be done very carefully before you decide.

Joey Sheahan, author of The Mortgage Coach, says: “As your wife is still employed and you can afford to meet the monthly repayment, I would strongly advise to continue making it. If your wife was not working and you did not have any savings, then you may not have a choice but to avail of a payment holiday/moratorium.

“The word ‘holiday’ indicates a pleasant experience, however anyone who avails of a moratorium will ultimately pay more interest over the life of their mortgage as you are deferring repayments of €3,720 in your case. Additional interest of around €968 would be paid on €3,720 over 16 years, assuming an interest rate of say three per cent. Another factor in making a decision on this is if you are planning on applying for a new mortgage in the future (for example if you were to switch your existing mortgage or move house).

“Based on current credit policy, which each bank sets on its own, some banks may not approve your new mortgage application if you have availed of an alternative repayment arrangement (which would include a moratorium/payment holiday) within the two years prior to applying for a new mortgage.”

So, do your own sums, but also ask the bank to outline, specifically, in writing exactly what it will cost you before committing.