Securing a mortgage is the vital element now in buying a house
Published 26/01/2012 | 05:00
Q: I see house prices are continuing to drop. We are considering buying a house. Can you tell me how possible is it to get a mortgage and what do you need to do to convince the lender?
A: House prices have fallen by half, but getting a mortgage is a huge hurdle as banks are more interested in shrinking their loan books than taking on new borrowers.
However, there are some hopeful signs. AIB insists it is approving three out of four mortgage applications, with Bank of Ireland setting aside €500m to lend to first-time buyers.
Permanent TSB recently cut the home loan rate it offers new buyers.
The good news is banks will lend, but will impose strict criteria and they will require a lot of paper work.
The bank will need evidence that you saved for a deposit -- of at least 10pc -- and did not just borrow it.
You will need to show the bank statements and have these to include as part of your application.
Do your own budget, Liz Hughes of the Association of Chartered Certified Accountants advises.
Get a bank statement for a month, see how much you spend and on what and compare this to your income.
Make sure you can meet the mortgage payments.
You will also need to get your salary certificates in order and make sure these are consistent with your tax records and include all of your income.
And make sure your salary certificates from your employer agree with your P60.
Q: To claim a refund on medical expenses from the Revenue Commissioners using Med 1 you need to enclose a P60 in your application. But if one of the spouses, in a situation where a couple are jointly assessed, has lost their job and is on Jobseekers' Benefit, do you need a letter/statement from the Department of Social Protection in the application?
A: In a case where an individual became unemployed during the year, the individual's P45 (which would show their pay and tax to the date of cessation) should be submitted and the claimant should also state the type of social welfare being claimed and the date the payment commenced.
Q: We currently have a tracker mortgage but are considering moving to rent another property as it's closer to our kids' school. There were reports recently that if we leave our property the tracker mortgage contract we have could be cancelled with the bank. Is this the case?
A: If you leave your home and rent it out you switch from being a residential mortgage holder, in the eyes of the bank, to being a commercial borrower. In this case the lender may argue that you are breaking the terms of your original mortgage contract.
Check the terms and conditions of your contract to see if the lender makes any mention of this.
It depends on the lender -- some are enforcing this, others are not, as they are content just to get paid at the moment.
Q: The company I worked for has closed. I have been paying into a company pension scheme for years. Is all that money gone?
A: The money paid into the pension scheme is yours and, by law, it must be ringfenced separately from the company's finances.
Gamin Gilmore of Power Lynch & Associates advises that you check with the trustees of the pension fund, or the insurance broker working with the trustees, about the status of the fund and your contributions.
If you cannot get information you can contact the Irish Brokers' Association, the Central Bank, the Irish Pensions Board or the Pensions Ombudsman for help.
Q: My current account with TSB had a balance of €65. The account is only used for bills. I had been on holiday and forgot to top it up and a €70 direct debit request from Sky was due.
Permanent TSB paid the €70 direct debit and charged a €4.44 referral fee.
The direct debit was "returned" and I was charged a €10 returned direct debit charge.
I would have expected either the payment is refused, or that it is made and I am charged and have to pay the unauthorised overdraft interest. The two charges here don't make sense to me.
A: When contacted, Permanent TSB said every bank does the same thing.
All these charges are approved by the Central Bank and spelt out in a bank's terms and conditions.
Permanent TSB said the explanation is that the referral fee engages the branch to undertake what is essentially a credit decision on behalf of the customer -- should the bank let the overdraft limit be exceeded?
So the branch has to look at the file of the customer in question and make a credit decision and a fee is charged for that. Permanent TSB charges €4.44; others charge €5.15 and so on.
If the decision is to let the overdraft be exceeded, then that is the end of the matter.
If the bank declines the decision then it has to unwind the direct debit payment and the charge for that is €10. Other banks have higher charges for this.