It’s almost a year since we experienced our first lockdown in Ireland and Covid 19 is still causing headaches for people trying to secure a mortgage. However it’s not all doom and gloom. There have been some positives on the mortgage front.
Saving for a Deposit
The lockdowns we’ve experienced as a result of COVID 19 have meant that for those still on full wages, it’s been an opportunity to save more than they usually would. In general people’s spending has been severely curtailed as a result of the pandemic. This obviously hasn’t been the case for people who have lost their jobs, or people who have had to rely on government supports. For those looking to trade up, the opportunity to have additional savings has been very useful as this category of people require at least 20% deposit to buy again. For first time buyers the additional savings has meant that many have built up their deposit a lot quicker than they had estimated. For some it also means that they have a bigger disposable budget.
Are mortgage lenders considering applications from prospective homebuyers on Government supports?
People were understandably up in arms last year when the banks announced that they would not be considering applications from potential homebuyers who were in receipt of State supports such as the TWSS (temporary Wage subsidy scheme) now the EWSS (employment wage subsidy scheme) and the PUP payment ( pandemic unemployment payment).
Unfortunately little has changed for these groups of people. With regard to the PUP payment, it’s an automatic “No”. Income cannot be assessed and banks would need to see the return of a few months of consistent income earnings to consider the applicant.
Can someone who is self-employed and in receipt of the PUP payment qualify for a mortgage?
In general if you are drawing the PUP payment and are self employed you will be required to provide a six month record of trading so the lender can ensure that you are back to pre covid levels.
When it comes to the EWSS it is not so clear cut. There is no “one size fits all” rule on this. It’s assessed on a case by case basis and individual circumstances.
The lenders would be trying to ascertain whether the company is in a position to continue trading in the current climate and how secure the applicant’s job is within that company. Could the applicants be facing a salary reduction? Would a salary reduction impact on the applicant’s ability to keep up with mortgage payments?
My EWSS payment is not printed on my payslip. Does this mean that I will be able to get a mortgage?
Unlike the TWSS which was listed on payslips, the EWSS is not. However you are obliged to disclose that you are in receipt of it during the application process. Either way, Revenue has a list which is available to anyone which discloses all of the companies in receipt of the EWSS should lenders decide to check. The TWSS is not available to anyone earning over €76,000 a year so although your company may have some staff on the scheme, if you are earning over that threshold you may still qualify for a mortgage.
My employer has come off the EWSS scheme. Can I apply for a mortgage straight away?
Yes you should apply straight away. There are other factors which may affect your application such as the affect the pandemic has had on your industry. At the moment lenders are sceptical about giving mortgage approval to applicants who are in the tourism/hospitality sector as these areas has been severely impacted by Covid.
One very important thing to note is that if you are in the process of applying for a mortgage that the lender will check your income at various points throughout the process- for initial approval in principle, before completion and when you draw down.
We took a three month mortgage payment break during the Pandemic. Will we be able to trade up? Will we be able to switch our mortgage?
At the start of the pandemic many homeowners found themselves in a position where they couldn’t make their mortgage payments. To support their customers the banks introduced a three month payment break. This was in turn extended by an additional 3 months. Unfortunately some could not restart their payments after this term and came to agreements with their lenders. For those who revert to paying their mortgages, many are concerned that this may impact their ability to ever switch provider or trade up.
These mortgage breaks however have not been recorded on homeowners credit records, so will not impact on future plans the homeowner may have.
Will my bonus be taken into account when applying for a mortgage?
Lenders will take bonuses into account if you can prove that you have been receiving them for the past 3 years. The banks generally allow up to about 50% to be taken into account when calculating how much you can borrow.
I have been on government supports (PUP TWSS or EWSS). Can I switch my mortgage?
There is no doubt that having been in receipt of a government payment will make it trickier to switch. This is due to the fact that switching is pretty much like taking out a new mortgage. You need to go through the full application. However just because you cannot switch to a new provider, you still have the opportunity to switch to a better rate with the lender you are with.
For information on our mortgage services please see our mortgage broker page.
If you have any other queries in relation to mortgage approval, we’d love to hear from you
Rob O’Neill – CEO Citywide Financial
086 2293032
(01) 513 8710