We have seen disruptors in the telecommunications, in online shopping and in the hospitality industry. Now, I am happy to say, we have a couple of disruptors in the Mortgage Lending Market.
What does this?
Basically, it means we have 2 new lenders to compete with the high street lenders. This brings more competition to the marketplace which can only be good for customers. It also means they bring a different view and in cases access to high lending.
What is different about them?
Variable Incomes
Whilst all lenders in Ireland have to adhere to the Central Bank Mortgage lending guidelines, they do have freedom to view individual circumstances differently.
This is where these 2 new lenders differ to the traditional providers.
For Example:
Commission payments, normally this is not guaranteed and therefore, in most cases, would not be taking into account for lending purposes. There are circumstances where a percentage of the commisson can be allowed.
The new lender, ICS & Finance Ireland will take commission income into account once it is evident over a number of years.
Other variable incomes can now also be taken into account for lending purposes once there is evidence over a period of time.
Incomes like:
- Overtime
- Allowances
- Second Jobs/ Part time work
Sterling Incomes:
This is area for confusion for lots of people. Especially for our friends living in or working in Northern Ireland who want to buy a home and live in the Rep. of Ireland. This is very prevalent for people around the boarder areas of Derry and Tyrone wanting to move to Donegal, where property prices are cheaper.
Firstly, can I stress that Mortgage lending is available, contrary to some information being given.
Whilst lending is available there are a couple of issues for those earning Sterling to be aware of, these apply whether you currently live in the Rep. of Ireland and working in Northern Ireland or the UK or those living in Northern Ireland and wanting to move to Rep. of Ireland
If you earn in Sterling there are 2 main challenges, these are
- There are a limited number of lenders willing to lend. Not all lenders are in the market for you.
- The lenders that will lend will allow an exchange rate but will also reduce your Sterling income by 20%. As, in the first instance the amount of lending you qualify for is based on your income, the reduction of 20% does have a major effect on the amount of lending available. Where you have 2 people earning in Sterling this can, in some case, push them out of getting lending all together.
Thankfully, I am delighted to say that ICS are taking a different view, again a disruptor. They will not deduce the sterling income at all if you are buying your family home. Meaning the amount, you can borrow would be allot higher.
Example 1: Single Applicant
John is earning £30,000. In the first instance when calculating the amount of lending John would qualify the lenders use 3.5 times income.
With his income being reduced by 20%, he would qualify for a mortgage of €101,740. This is the amount of lending available to John from traditional high street lenders.
This is the amount of lending available to John from ICS.
Without his income being reduced he would qualify for lending of €122,100.
As you see, the difference in the lending amount available to John is €20,360. Which could make all the difference.
Example 2: Joint Applicant both earning in Sterling
A couple; John is earning £25,000 and Mary is earning £35,000
With their incomes being reduced by 20%, they would qualify for a mortgage of €203,400. This is the amount of lending available to them from traditional high street lenders.
This is the amount of lending available to them from ICS.
Without their incomes being reduced they would qualify for lending of €244,200.
So, they would qualify for an extra €40,800, a big difference.
The message is always speck with a Broker, who knows the lending criteria of the different lenders and who can shop around to find you the best available option for you
Warning: In the examples above we used a simple income multiple of 3.5 times and an exchange rate of 0.86% to work out the amount of available lending. Other lending terms, conditions and criteria apply.
Civil & Public Servants
Another disruption one of these new lenders have brought to the marketplace is how they view Civil/ Public Servants income.
All lenders use your income to calculate the amount of lending available to you.
ICS will calculate the lending figure for Civil/ Public servants based on 2 points up on your pay scale.
ICS Mortgages is a 150-year-old brand that was originally established to service the needs of the Public Sector. So, they are going back to their roots.
They are offering slightly different lending guidelines for this sector due to the security of their employment and potential future earnings. The basic income for Public Sector employees will be considered to be two points up their current Pay Scale.
With regard to Variable income the following will apply
- Overtime: Up to 100% of regular overtime earned may be factored into our assessment if the employer confirms it is regular on their salary certificate
- Allowances: 100% of contractual allowances will be factored in if the employer confirms it is guaranteed and is evident on the most recent Employment Detail Summary and on target income for current tax year
And
- They will consider employees who are promoted within the Civil Service on a one year ‘probationary’ period.
- New entrants to the Civil/ Public service who are subject to any probationary period will be reviewed on a case by case basis. An applicant’s previous employment history is required to establish their experience and suitability for their new position.
- Only one applicant needs to be a public sector employee to apply for this competitive mortgage proposition.
- Their rates will be the same for Public sector and non-public sector applications
Example 2: Joint Applicant both earning in Sterling
A couple; John is earning £25,000 and Mary is earning £35,000
With their incomes being reduced by 20%, they would qualify for a mortgage of €203,400. This is the amount of lending available to them from traditional high street lenders.
This is the amount of lending available to them from ICS.
Without their incomes being reduced they would qualify for lending of €244,200.
So, they would qualify for an extra €40,800, a big difference.
The message is always speck with a Broker, who knows the lending criteria of the different lenders and who can shop around to find you the best available option for you
Warning: In the example above we used a simple income multiple of 3.5 times to work out the amount of available lending. A higher lending amount may be available if Helen qualified for an exemption. Other lending terms, conditions and criteria apply.
Conclusion:
As you can see lending criteria differs between lenders, the amount of lending available can differ greatly between lenders, so, it is important to speak an advisor/broker who knows the market place and who has access to a number of lenders, as well as some that are not on the high street.
Take Action
Our advice is, if you are thinking of applying for a mortgage, or looking at your existing mortgage, get advice, this will be one of the biggest decisions you will make in your lifetime.
Asking for help and advice is first place to start
