My husband and I have been trying to acquire a mortgage since late 2019. Covid hit and our application stalled. We eventually had a letter of offer from Bank of Ireland in October 2020 but they pulled it in April (just as we were about to drawdown) as I work in the hospitality sector.
We were told the application went on so long that they had to withdraw it and when I got back to work to reapply and they would contact us end of May. Never heard a word since from them, despite several attempts from our side.
I returned to work in June and recently received a pay rise. My husband has worked through the entire pandemic and has also recently received a pay rise.
We have been saving the same amount every month since October 2019. We contacted a broker and they said that, since my employer is on the EWSS, we should wait until he is off it.
However, we have already found a property, and paid a €30,000 deposit. The purchase price is €300,000. We are looking for €170,000 mortgage, as I have sold a property which will fund the rest of the property price. We earn €60,000 per year between us.
Will banks consider all this even though my employer is still on EWSS?
Or is it possible to pay half the purchase price now and when ready to apply for mortgage to pay the 2nd half then? Will banks accept this when applying for a mortgage of a house already half paid?
Ms J.K., email
With the economy reopening as restrictions are lifted and everyone feeling upbeat on the back of the very successful vaccination campaign, it can be easy to forget that many people are still being held in the grip of Covid.
Even where they are working, more than 350,000 are, like you, still in receipt of the Employment Wage Subsidy Scheme (EWSS). These are not people who have chosen to claim welfare support but people affected by their employers' decision to do so.
These are workers at companies whose 2021 turnover will be 30 per cent or more down on the 2019 figure. Given the prohibition on indoor dining and non-essential travel until last month, this will include many businesses in the hospitality and travel/tourism sectors of the economy.
The numbers are falling but they are still high.
The concern for lenders, of course, is that those businesses continuing to use EWSS and other schemes are seen as most likely to be at risk of failure.
This is a pretty simplistic approach. The hospitality sector is only a couple of weeks into some kind of normal so it is understandable that companies in this area will take longer to step away from EWSS.
The bad news from your point of view is that it does seem as though banks are very reluctant to take on mortgage business from people on the EWSS. They may say otherwise but banks will tell you one thing; the reality when you take them at their word can be quite different.
The annoying thing for you is that in October 2020, seven months into the pandemic, Bank of Ireland was happy to approve a loan.
I have to say it has all the hallmarks of going through the process without the bank having had any real intent to actually sanction drawdown unless your employer had emerged from EWSS.
You say Bank of Ireland told you your application had gone on for so long that they had to withdraw it. Their own website says otherwise. It states: “Our mortgage offers last for six months. This can generally be extended without difficulty if your circumstances haven’t changed.”
Your circumstances hadn’t changed but their view did.
I’m conscious that you have already spoken to a mortgage broker but it might be worth pursuing that avenue again. They are more familiar in dealing with lenders and know how to press the right buttons.
In your favour, although your company is still in the EWSS scheme, your boss has raised your pay. That, in itself, gives some insight that the business is optimistic about the future. If they were barely surviving, pay rises would not be on the agenda.
Also, you have been saving steadily even since the loan rejection so that reflects in your favour. So too does the fact that you are only looking for a loan to cover less than 57 per cent of the property value and that on a loan-to-income basis, the mortgage you seek is just 2.8 times your household income, well within the 3.5 times max allowed under the Central Bank rules.
That wriggle room should go a long way to offset a bank’s wariness over the EWSS issue.
Look at it this way. You have found the house you want to buy; you even have a deposit on it. You have nothing to lose by applying and letting a broker present the best case for you. If you are turned down, you are no worse off than you are currently.
On your idea of buying half the home now and the balance later when your work situation is more to the liking of the banks, I can’t imagine that will work. It would require the approval of the other party – the homeowner or developer and I just can’t see why they would agree.
I cannot see any issue from the bank’s point of view in a mortgage on a half-bought house but I cannot see it getting that far.
The Government’s proposed shared equity scheme will likely only see them take a 20 per cent stake in homes and that is only if you can’t meet the required mortgage on the basis of Central Bank rules. Your €170,000 mortgage is well within the Central Bank lending limits, given your household income of €60,000, so that wouldn’t help.
So try going through a broker again. If that fails, I’m not sure there is anything you can do except wait until your employer exits the EWSS scheme. The issue is that prices are likely to have risen further by then and, of course, this property you have set your eyes on will almost certainly have been sold elsewhere.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email email@example.com. This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into