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By Evil Cloaked User (Mon Feb 20, 2006 at 02:10:12 AM EST) (all tags)
I just rang up the bank to arrange a meeting with a mortgage adviser.

Current state of play - I pay €335 per month in rent, and save €300 per month in various accounts. This still leaves a decent chunk of change in the back account. Unfortunately, €254 of that savings is going into my SSIA and that won't mature until April 2007, leaving quite an amount of money tied up.

I do however, have an offer from a friend to basically match what the SSIA will reach on maturity and just give it to me now.

I also plan to rent out the property to MDB and possibly another person, depending on whether I can find/afford a 2 bed or a 3 bed. Taking worst case scenario and only having one tenant at €300 per month, that still puts me at €935 per month when we take my current savings rate, the rent I pay, and the €300 rent I would receive in (tax free) rent. Which is €11,200 per annum, which multiplied by 35 years (hell, I'm only 26 - pretty sure that's not an unreasonably long term for the mortgage) comes out at €392,700.

Seeing as how that sounds like quite a decent amount of money, I presume there's no way in hell that the banks make calculations based on anything even remotely approaching that method.

I've been self employed for all of 10.5 months now, and my track record during that time shows an increase in my income of about 50% over what I made as a salaried employee. How conservative are banks when dealing with the self-employed? According to at least one banking website, to avail of a 100% mortgage, one must be 3 years employed. Presumably with the same company.

If I do decide to do this, then ideally, I'd like it done before the lease on the current place runs out in August. Given that OHM is almost certainly moving out then, and given that the letting agency doesn't do short term leases, leaving it any later will mean I might as well leave it a year. And somehow, based on the horror stories I've heard about the time it takes to buy, I suspect I'm being overly optimistic.

Anyway, enough stream of consciousness - I've got a compiler to compile.

PS - no pedantry about the poll and age ranges - you know what I mean.
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Am I a grown-up yet? | 25 comments (25 topical, 0 hidden) | Trackback
mortgage calc by Merekat (2.00 / 0) #1 Mon Feb 20, 2006 at 02:18:58 AM EST
The banks calculate what they'll give you based on disposible income. And they'll try to get you in for more than you ought by assuming you don't do any spending that isn't bills etc. and even suggest spreading it over 40 years.

Allow approx 3 months, probably more and see if you can get your landlord to agree to month-by-month or even quarterly renewal.

They probably won't talk to you until you've been 12 months self employed, but ask. Talking to a non-tied broker is a good idea. We used Mortgage Insight. They don't charge for advice coz they want to hook you in later.

Does rental income enter into it? by Evil Cloaked User (2.00 / 0) #4 Mon Feb 20, 2006 at 02:32:48 AM EST
Especially given the whole rent-a-room tax break thing, it would seem logical, but banks aren't famed for logic.

[ Parent ]
Not sure by Merekat (2.00 / 0) #7 Mon Feb 20, 2006 at 03:47:27 AM EST
That would qualify as an as-a-broker question.

Also, don't forget your 'hidden' costs - stamp duty, insurance, valuation, survey, solicitor (inclusive or with extra expenses) and when they fall due. E.g. even if your mortgage is 92%, the deposit paid still has to be 10% so you have to have that money nominally available between when you put the deposit down and draw down the mortgage.

[ Parent ]
Times change. Interest rates fluctuate by Dr H0ffm4n (2.00 / 0) #23 Mon Feb 20, 2006 at 07:42:10 AM EST
I'd factor that in too, and not go the maximum you could afford if everything stayed peachie.

In UKia you can self-certify which means even if you are self-employed, you don't have to provide any proof of income at all, just make a promise that you can afford the repayments. Competition for your business, means being self-employed simply isn't seen as a disadvantage in a mortgage buyer's market any more.

[ Parent ]
In UKia by Vulch (2.00 / 0) #9 Mon Feb 20, 2006 at 04:14:39 AM EST

It generally doesn't on the grounds you might not be able to find a lodger, they might move out at any time, etc. Though with some of the crooks that claim to be mortgage advisers they might.

Check any mortgage offers and insurance policies for lodger based exclusions carefully too...

[ Parent ]
In the US by debacle (2.00 / 0) #13 Mon Feb 20, 2006 at 06:12:38 AM EST
You can declare unrented property as a hardship on your taxes, so while you can't discount it, you might recoup something from that.

Usually they count it, but only at 65-70% of what you think you'll be getting.


[ Parent ]
In UKia by Vulch (2.00 / 0) #21 Mon Feb 20, 2006 at 07:19:15 AM EST

Unoccupied property generally avoids council tax, but the best you can do on your principle residence is a 25% discount for a sole occupant.

If you rent out a room in your principle residence you don't pay any income tax on the rent up to a respectable sum, and you don't pay Capital Gains Tax when you sell. A house you own purely to rent out can be liable for income tax on the net after expenses, and also is liable to CGT when you sell. Ireland usually follows the same sort of regime so I suspect it's not that different over there.

[ Parent ]
I bought a flat... by Idempotent (2.00 / 0) #2 Mon Feb 20, 2006 at 02:26:56 AM EST seven weeks.

It was hell.

OT by Evil Cloaked User (4.00 / 1) #3 Mon Feb 20, 2006 at 02:30:53 AM EST
Regarding the thing with the stuff, I'm waiting on the guy with the price.

[ Parent ]
The Baboon Shits at Midnight by Idempotent (2.00 / 0) #8 Mon Feb 20, 2006 at 03:47:32 AM EST

[ Parent ]
I'm envious of your cost of living. by ObviousTroll (2.00 / 0) #5 Mon Feb 20, 2006 at 03:32:24 AM EST
When SWHTL and I were saving up for a house, our monthly rent was $1000 USD, she wasn't working (because (cost of day care) == (take home pay)) and we were barely saving scraps.

If it weren't for my fabulous 6 weeks of active military duty, we'd probably still be renting.

As it is, we bought a cheap $100k row home and the damn thing appreciated by 150% over ten years1.

1only to lose 2/3rds of that gain this past fall.

Cost of living. by Evil Cloaked User (2.00 / 0) #6 Mon Feb 20, 2006 at 03:35:42 AM EST
I'm single, with no dependents, and I don't own a car. Which is handy. On the downside, the Irish property market is pretty damned insane at the moment.

[ Parent ]
My brother's just had his house valued. by ambrosen (2.00 / 0) #12 Mon Feb 20, 2006 at 05:33:29 AM EST
It's worth approximately 400% of what they paid for it 4 years ago.

Mind you, the Luas has opened up nearby, but that's about it.

[ Parent ]
USAA loan? by joh3n (2.00 / 0) #11 Mon Feb 20, 2006 at 05:09:04 AM EST


[ Parent ]
Special program for vets by ObviousTroll (2.00 / 0) #24 Mon Feb 20, 2006 at 08:24:44 AM EST
It let me get the house with 5% down. The only time in my life I ever made use of my status as an imaginary-veteran.

[ Parent ]
Can't answer for UK by ad hoc (2.00 / 0) #10 Mon Feb 20, 2006 at 04:57:24 AM EST
but I found it fairly difficult. They really don't like independent workers. I guess they're afraid of, well, I'm not sure what they're afraid of. It certainly can't be job security. I'm way more secure than anyone I know with a salaried job. It was tougher in my case because I don't take a regular salary. I take one or two checks per year, and they want to see your last two (or four) pay stubs. Well, two pay stubs takes me back a year, not two months. They also wanted to see the company books, which I didn't see as relevant.

What it came down to is that they only one who would talk to me is the largest bank in the US, I think: Citibank. No one else would even return my calls. I guess I don't "conform" to the mold required to be able to resell the mortgage, and CitiMorgtage doesn't resell theirs, so they're not concerned with that.
Would you rather battle Klingons or trolls?

Citibank is the largest bank in the US? by debacle (2.00 / 0) #14 Mon Feb 20, 2006 at 06:15:23 AM EST
Strangely, I don't find that surprizing. They take on like 50% of all federally insured student loans.

I wonder if it's a cause/effect sort of deal.


[ Parent ]
I think so by ad hoc (4.00 / 1) #15 Mon Feb 20, 2006 at 06:17:41 AM EST
but I won't swear to it. I think BankAmerica is 2d  and MorganChase is 3d.
Would you rather battle Klingons or trolls?
[ Parent ]
Ah! I was right! by ad hoc (4.00 / 1) #16 Mon Feb 20, 2006 at 06:18:18 AM EST
In answer to the diary title by Evil Cloaked User (2.00 / 0) #17 Mon Feb 20, 2006 at 06:43:08 AM EST
No, apparently not.

From the way mister bank man was talking, it seemed all about the only figure of merit was annual gross pay - cost of living didn't seem to get a look in. Which is a shame given how low mine is.

In order to get a loan on the order of a usable amount, I need to find me 26% pay increase. What's more, the two acceptable forms of proof for this are (a) one's last P60 in the case of a salaried employee or (b) 3 years worth of audited accounts in the case of a self-employed person.

Another year of pissing money away on rent it is then.

nyeh by Merekat (2.00 / 0) #18 Mon Feb 20, 2006 at 06:45:16 AM EST
Save like crazy to reduce the amount of capital you'll ultimately have to pay in revenge. Hah! Take that, bankers! Less interest from me!

Not that they care when you look at it in context, but hey, it makes me feel better.

[ Parent ]
What a curious notion by Evil Cloaked User (2.00 / 0) #19 Mon Feb 20, 2006 at 06:58:20 AM EST
Inverse Retail Therapy.

[ Parent ]
memories by Merekat (2.00 / 0) #22 Mon Feb 20, 2006 at 07:24:22 AM EST
I'd try another broker. Ours definitely asked about our incoming and outgoing when deciding how much they'd offer. Though I think the self-employed will be an issue for longer.

And if you are a member of the IEI, I think they do discounts in return for your funny handshake.

[ Parent ]
Talk to a professional body by andymurd (2.00 / 0) #20 Mon Feb 20, 2006 at 07:12:02 AM EST
In the UK people like the IEEE, BCS or PCA often have deals with mortgage lenders that can be a lot more flexible than you will find on the high street.

You can also consider mortgages from other Eurozone countries which may well have different acceptance criteria.

Coincidence! by Dr Thrustgood (2.00 / 0) #25 Mon Feb 20, 2006 at 09:05:03 AM EST
About to take the plunge myself... I hope.

Have now been self-employed for nearly six months - well, with a bit either side - and have suddenly found enough cash for that all-important 10% what with my sole share in previous company now having been bought.

Shall have to see quite what in London I can afford...

Am I a grown-up yet? | 25 comments (25 topical, 0 hidden) | Trackback