Mortgages During These Unprecedented Times

Getting a mortgage can be stressful at the best of times. Add a pandemic and things really heat up. Whether you are applying for a mortgage or have signed contracts for your new home, here are some of the current complications to watch out for.

If you are looking for mortgage approval, you have loan approval and are looking for your dream home or you have a loan offer and want to sign contracts, the bank wants to know the following:

Have you been affected by Covid-19 financially?

If you say ‘No’, they are looking for your April/May payslip to prove that you are not getting the Government wage subsidy. If you say ‘Yes’, then some lenders are withdrawing loan offers and approvals in principle until such time as you are back in full-time employment.

Some lenders are withdrawing loan offers in full and other lenders are giving some help. However, it is still inconsistent. They are taking the view that this is a temporary situation and you will be back at work at the same pay level as you were before. They want to see those recent payslips before they will proceed.

At Cleere Mortgages, we have access to all the lenders so we can match a lender with your needs.

Brian Hayes, CEO of BPFI (Banking and Payments Federation Ireland), stated recently “that there is no doubt that the period ahead is going to be challenging for the mortgage market and the housing market as a whole, given the changing conditions in the economy and its direct impact on incomes and employment.”

He further commented, “The change in individuals’ financial and employment circumstances will have an impact on mortgage approvals, with banks taking a pragmatic and responsible assessment of all applications from both a borrower and lender perspective.”

“Taking out a mortgage is a major undertaking for borrowers, and no lender wants to see a borrower under distress or difficulty, especially in these highly uncertain times,” he added.

There are some terrible and distressing stories out there for buyers who have paid deposits on houses, who now have been affected by the pandemic precautions and are in receipt of the Covid payment. Some lenders have now pulled their loan offers and clients are now facing losing their dream homes. Hopefully their solicitor will be able to explain the position to the lenders and these clients will get their dream home eventually.

It is hard to say if house prices will fall, as the hard data from sales is not available yet. Some buyers are holding off to see if prices will fall, while some sellers are holding off putting their home on the market until they feel the time is right.

Exemptions

If you were due to receive a mortgage exemption or were hoping to get one, don’t bank on it now. Under the Central Bank mortgage-lending rules, the maximum a person can borrow is 3½ times their income. Lenders are permitted to give mortgages of no more than 80 per cent of the value of a property, rising to 90 per cent for a first-time buyer.

However, lenders also have the discretion to breach the rules for 20 per cent of its mortgage book, as long as they are comfortable that a would-be borrower has the capacity to repay the loan in the agreed time frame. Some lenders have already started restricting exemptions as a result of the Covid-19 crisis. It is very hard to see when and if these will be lifted in the near future.

We at Cleere Mortgages have been busy with queries and new applicants. If your financial situation is unchanged by the pandemic and you want to get the wheels in motion to buy, the banks/lenders are open for business. We are also open for business and we are happy to help in any way possible.

 

We can be contacted as follows:

E: info@cleerelife.ie

E: gearoid@cleerelife.ie

P: 086  3852041 Carmel (Mortgage Consultant)

P  086  4114985 Gearoid (Financial Advisor)

P  056  7721854 Office

 

 

Is Income Protection worth paying for?

With so much doom and gloom in the air, many people are considering worst-case scenarios and wondering how they would cope if they lost their job, or whether they can afford to fall ill in the current environment.

Income protection insurance – which provides a replacement income if you’re unable to work due to sickness or disability – is one of the product lines we are seeing the most interest in currently, and is something every worker should have as part of their financial portfolio.

But is this necessarily the best time to be splashing out on expensive insurance products when everyone else is tightening their belts?

 

At the moment people are tending to look at their finances and see ways they can actually save money.

Serious Illness

Serious illness cover can be a financial help if you fall ill and have no other cover in place, but only if your interpretation of what constitutes a “serious” illness matches the exact definition in your policy.

Most serious illness policies will not cover you for many of the most common illnesses that prevent people from working. These include stress-related illnesses and back injuries, for example.

It’s also advisable to shop around before choosing a provider. Although serious illness cover has become more expensive over the last three or four years, savings can still be made.

I would advise people not to be swayed by price alone. The level of cover and service provided should also be factored in.

It’s important to review your situation on an ongoing basis to make sure that the product still matches your circumstances.

Income Protection

Income protection insurance is another alternative worth considering. Premiums for this type of product are sometimes cheaper than for serious illness policies, but they also qualify for tax relief at the individual’s highest rate.

Income protection provides you with an alternative income if you’re unable to work because of sickness or disability until you are able to return to work or you reach retirement age. The maximum benefit is usually 75% of your salary, less any other payments you’re entitled to when out of work, such as social welfare entitlements and sick pay.

The first benefit payment is made once a set period of either 4, 8, 13, 26 or 52 weeks – known as a “deferred period” – is over.

As with serious illness cover, the need for income protection insurance depends entirely on your personal circumstances. If you are self-employed, for example, your income could stop immediately if you become seriously ill, as you wouldn’t be entitled to social welfare disability benefits or sick pay from an employer. In those circumstances, this type of policy could provide an invaluable financial safety net.

If, on the other hand, you work in the public sector you may be entitled to full pay for six months and half-pay for a further six months. You could also be eligible for State benefits, and an ill-health retirement pension, which means that you take early retirement with a pension if you become permanently unable to do your job. In such situations, you would have to weigh up whether it’s worth paying for extra protection.

If taking out income protection insurance, consumers should take care to select the appropriate level of income required, and review this every few years. Otherwise, they could find that they are under- or over-insured.

For example, if an individual is earning €25,000 at the time they become sick, their replacement salary will be based on this amount, even if they have insured themselves for €50,000.

In my own opinion, I think Income Protection is a must as it will pay you a sum monthly up to a selected age such as 50, 55, 60 or 65. I think its ideal to hold Income protection as part of your protection plan while also holding a small amount of Serious Illness.

The tax relief on the Income Protection is a great incentive also, which allows you to claim tax relief at your marginal rate.

If you speak to anyone who has claimed on Income Protection, I am sure it has made their financial life easier.

Apart from all of these pros, cons and pitfalls, consumers must also realise that neither critical illness protection nor income protection insurance will protect them if they are made redundant. So if you haven’t done so yet, it’s time to start building up a sizeable nest egg to tide you over in case your worst-case scenario becomes a reality.