It’s not just Leo Varadkar who has been having uncomfortable discussions about the costs of childcare. If you’re looking for a house and have children, then chances are you’ve already had that enlightening discussion with the bank on the topic of childcare costs.
It’s something I’ve heard come up repeatedly in conversations with friends or in snippets overheard at the playground; having children can severely hinder your chances of getting a mortgage.
In the old days, mortgage applications were typically granted on the basis of a multiple of income – so if you earned €100,000, you could borrow possibly up to five times that, or if it was a joint income, a slightly lower multiple applied.
These days, however, it’s all about what the bank likes to call, your “repayment capacity”.
So, while you might be a top earner, you need hard evidence to show that you haven’t been frittering away your income through gambling or accumulating credit card debt or on personal loans.
Fair enough you might say, but the bank also doesn’t want to see you spending too much on childcare.
If you have two young children and live in Dublin, for example, you’re likely to be paying the guts of €2,000 a month on crèche fees – it’s more than many people spend on a mortgage, so it’s no surprise that banks are paying such close attention to this.
Banks will work out your suitability for a mortgage based on how much net disposable income you have at the end of the month.
Typically they will look for a person to have about €1,300 a month left after meeting mortgage repayments, personal loans, and so on.
This figure rises to €2,050 for a couple and, if you have children, the lender will want you to have an extra €250 a month per child in disposable income.
If that sounds high, it’s because it is. A typical repayment on a €400,000 mortgage, for example, will be about €2,026.
So, a family with two children will need to meet that, plus have an extra €2,000 for childcare costs, and still have about €2,550 left over each month.
This comes to an after-tax income of €6,576 a month – or a total joint gross income of about €120,000 a year.
And if you have credit-card bills or a car loan or other significant costs, you will need an even larger income than that.
No surprise then that mortgages are so hard to come by.
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Looking to sell your house? Beware the eager bidder who drives up the price, goes sale-agreed and then looks for a discount.
A friend, who successfully sold her house for more than the asking price, was getting a bit nervous while she waited for the contracts to be signed.
And then she got a phone call from her estate agent; the buyer was querying the survey and looking for a discount to cover the cost of repairs.
The repairs were minimal and the discount requested was significant enough to make her think twice – particularly when there had been several under-bidders.
It’s not unusual to use the survey to try and strike a deal but with more and more people bidding, and fewer and fewer properties out there, it can be a risky approach.
On the other hand, it can be a justified move by house purchasers who are in effect bidding almost blind on a house that they probably only spent 40 minutes or so looking around.
And, from the buyer’s perspective, it is one way of securing the house you desire by ensuring that you have the winning bid – but end up actually buying the property at a lower price.
