Not all banks will offer you the same mortgage level making it so important to get market based advice from a broker to understand how much you can borrow.
If you go to one bank they will tell you how much they will lend to you and at what rate but they wont tell you how much the bank on the other corner will lend or that they have a better rate, at doddl we will. We work with all major lenders so can advise on mortgage levels and best rates.
Why do banks differ?
All banks work under a framework of loan to income lending set out under Central Bank macroprudential rules – what this means is that first time buyers can borrow up to 4 times ‘allowable’ income, for a second and subsequent buyer this multiple is 3.5 times income.
The key word is ‘allowable’ income and each bank has different criteria to assess how much income they will take into account, in particular when it comes to variable income.
Here’s an example …..
Taking a recent example of a couple who came to doddl to seek approval and who have now made their application and successfully received approval.
Their aim was to be in a position to purchase a new build home for c. €450,000. They were availing of the help to buy and also had built up savings.
These applicants had quite significant variable income which for one of the applicants was shift allowance, overtime and the other it was bonus income.
The amount that they could borrow across the lenders ranged from €300,000 to €378,000. This is a huge gap and the difference was due to credit policy and the assessment of the applicants variable income.
Can variable income be taken into account towards my mortgage?
Variable income is allowable for mortgage purposes if it is proven over multiple periods and if it is deemed sustainable.
The level of variable income taken can vary by lender. Some lenders will restrict variable income to 50% of the average variable income others will go right up to 100% of average variable income proven over two years. This again can have a very large impact on the income that is allowable for income multiple purposes.
So the lenders that needed to see variable income for three years would only lend based on a flat gross basic income and disregarded variable income completely resulting in a €300,000 mortgage level being achievable when income was taken at 4 times lending as per standard Central Bank rules.
The lender that took a two year average on variable income and 100% of this variable income into account approved the clients for €378,000 as a mortgage level.
Some other lenders were hitting a mortgage level of €339,000 by taking 50% of the variable income into account.
As such approvals range between €300,000 and €378,000 mortgage level depending on lender as the level of variable income they take into account varies.
If you want to understand what your borrow capacity is then we can help.
Get started by providing some basic information and your advisor will contact you within 24 hours. Contact doddl today!
