A finance expert has explained how people can get a mortgage without having any savings - and you’d be surprised how many prospective buyers it applies to in Ireland.
Lots of people will tell you that applying for a mortgage is an absolute minefield, and the preparation that goes into it can be daunting.
However, Finance Expert and Founder of Money Sherpa, Mark Coan, says it’s actually not as complicated as most people think.
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Having all your ducks in a row is imperative before approaching your lender, but with a few quick tricks, you can mark any red flags and sort them beforehand to up your chances of approval.
The most important thing to be able to show the bank is that you’re going to be able to pay them back with no hiccups over the term of your agreed mortgage.
Couples spend years cutting back and putting aside savings to show this, but Mr Coan said thanks to the rising cost of rent, in most cases, indicating you can flawlessly pay your rent each month could be enough for approval.
He explained this while chatting with IrelandAM on Thursday morning about his top tips on what you need to prepare for a successful application.
“It’s really tough out there in the housing market at the moment, so the first thing I would say is that if you are looking at getting a property then get your mortgage sorted as early as possible,” he said.
“It’s not actually as complicated as people might think. The really important thing is if the bank is going to lend you €200,000 or €300,000, the thing that they are concerned about is whether are they going to get their money back.
“So, the real thing that you have to do is to prove that you’re good for the money and really there are two steps to prove that”.
Step One
“The first is that you’ve got to have evidence that you have been putting aside regularly, for six months before you apply, to show that if there was a mortgage you’d be able to pay it.
“So you’re saving each month, about the amount you would be paying for the mortgage, in your bank account”.
He went on to say that there is good news if you’re renting: “That counts,” he said.
“Because obviously if you’re paying rent then it’s really hard to save”.
When asked if the banks would look for rent and savings to prove you can pay the mortgage, Mr Coan said: “For most people, the rent will be enough, because unfortunately, we’ve got this situation where the rents are actually higher than the mortgage payments.
“So, that is probably enough evidence, but you do need to check what your mortgage is going to be, because if you’re trading up to a lot bigger, then you might have a jump.
“But, in theory, you could get a mortgage with no savings”.
Step Two
“The second thing that I really encourage people to do is, check out if they’ve got any skeletons in their cupboard.
“Is there anything around credit cards or loans?”
However, he said this is simple enough to investigate before approaching the banks.
Explaining what to do, he advised people to “apply to the Central Credits Register, and just check if there are any red flags.
“What you don’t want to do, is apply and find these red flags - whether they’re yours or your partner’s.
“This can actually kill your mortgage stone-dead. So if you’ve got something outstanding, and it may be something like; you went off travelling when you were 18 or 19 and you left a credit card unpaid, you know a nominal amount, then it will be at least two years before you can apply for a mortgage.
“So, get that sorted straight away”.
He did stipulate that: “Once you clear it, depending on the lender it’s two years before they will lend you money, but with other lenders, it can be up to five years.
“So the one thing I would say to people is just to check and make sure that when you’re applying, you and your partner are sorted in that respect”.
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