My partner and I sealed the deal on our first home in the first week of March. We put down the booking deposit and contacted the bank. We had to get some additional bank statements, etc because our mortgage had been agreed in principle at the end of last July, more than six months previously.
This information was given to the bank within a few days. Covid-19 struck and now we are at a standstill and we don’t know what to do. Both of us work in the public service. I am off work, my partner is at work. We are both still getting paid with no change in income.
I spoke to the staff member at the bank dealing with our mortgage application more than a week ago. He said the application had not been sent to head office yet and, if it was, they would start looking for additional information regarding income during the crisis.
My question is are the banks lending during this time? And if they are, what should we do next to get the ball rolling? It has been six weeks since the sale was agreed and we are worried the sale will fall through.
Ms TM, email
I’m not sure what to say to this. You have had your mortgage approved in principle, you’ve found your new home and now you want the bank to finalise the mortgage process. You’re both employed in the public service so you have the advantage of having secure salaries. Just what is your liaison officer at the bank worried about?
If you are not copper-plated in these uncertain times, then no one is. My colleague Joanne Hunt is writing on this very subject today and all the banks have been quite clear that they are lending.
Yes, they might be a little more wary and certainly they might have additional questions. But, quite apart from anything else, these uncertain times are likely to continue for much of the rest of the year. The banks themselves have acknowledged this by agreeing to extend payment holidays for those in distress as a result of lowered incomes during the Covid crisis to six months. That takes us to autumn.
Just what is your bank executive waiting for? Things are not going to be getting better in a week or two.
From your point of view, what can go wrong? Given your secure employment and salary position, the only issues I can see are Central Bank rules and valuations.
The Central Bank rules states that, as a first-time buyer, you can borrow 3.5 times your income up to 90 per cent of the value of the property. That remains the case.
However, banks are allowed grant exemptions for up to 20 per cent of their loan book. In the current climate, most banks say they are not granting such exemptions at this time. So if your mortgage was relying on such an exemption, that could be an issue.
As for valuations, this appears to be a classic Irish case of everything operating as normal, except it isn’t. Regardless of what you have agreed to pay for your new home, the bank will get a professional valuer to value the property. They will lend you the 90 per cent maximum based on this figure. If this is lower than the purchase price, it will be up to you to find the difference.
Banks and valuers say there is no change in valuations as a result of Covid-19, although valuers are putting a caveat on their valuations to note the lack of a normal property market at present.
Of course, inherently cautious banks could be hesitating on this. They say not but the experience of some borrowers suggest there might be an issue here.
The Bankers and Payments Federation of Ireland, which represents the lenders, say they are open for business, although they do say that it is taking longer than usual to get valuations carried out as getting access to properties is more difficult under current rules.
That aside, they say there should not be an issue as long as you can confirm your employment and income status.
One thing is certain: if your bank liaison doesn’t even submit your application for final approval, nothing will happen.
Call the bank, insist the application is processed and request a timeline for when you can expect to hear. If you don’t hear bank within a short period – a week – I suggest, chase it up. And if they won’t send it on, move further up the chain of seniority.
Feel free to come back to me if you find yourself getting nowhere.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into.
