The Irish Times asked GE Money and brokers for Start Mortgages how much, if anything, the following hypothetical applicants could borrow and what interest rate they would be charged.
• A 30-year-old male works in sales on contract and earns a guaranteed salary of €35,000 as well as non-guaranteed bonuses averaging at €2,100 a year.
Four years ago, his car was repossessed after he defaulted on a €15,000 hire purchase deal.
His credit history also shows that in 2003, he went into arrears on another personal loan. However, he subsequently paid this off. He has no current borrowings.He is a first-time buyer looking for a mortgage.
According to Mortgagecabin.com, broker for Start Mortgages, the maximum amount that this person can borrow is €171,450. He would be charged a variable interest rate of 5.55 per cent.
This means that, spread over a 30-year term, the repayments (less mortgage interest tax relief) would be €912 a month.
If he opts for a one-year fixed-rate option at a rate of 5.85 per cent, the maximum amount he can borrow is €165,973, resulting in monthly repayments of €945.
GE Money said that it would not be able to approve the mortgage on the facts presented.
"GE takes considerable care when underwriting first-time buyers due to both their inexperience and the considerable mortgage amounts they need to raise to get onto the property ladder. We would be nervous about a contract sales person with arrears," a spokesperson said.
• A couple aged 35 have a combined annual income of €105,000 from their jobs as a recruitment consultant and an IT manager. When they first bought their home, they spent thousands on their credit card to buy furniture, then found they couldn't pay it off. Two years ago, their bank agreed to convert the credit card debt of €10,000 into a personal loan. Last year, the couple went into arrears on the new loan repayments and eventually the bank threatened legal proceedings.
They have now caught up with those repayments, but have built up debts of €8,000 on a second credit card. They also have a car loan with an outstanding balance of €4,000.
The couple are five years into their mortgage, which has an outstanding balance of €200,000 and 20 years left on the term. They are two payments in arrears.
They are hoping to refinance, consolidating their credit card and car loan debt and borrowing a further €40,000 to build an extension to their property.
Mortgagecabin.com assumes that the joint applicants still owe €8,000 on their original personal loan and are four payments in arrears. They thus require a new loan of €260,000 on their property, which it assumes is worth €325,000.
The new repayments less mortgage interest relief will be €1,425 a month over 30 years and they will be charged interest at a rate of 6 per cent. A one-year fixed rate of 6.3 per cent is also available.
Assuming a higher property value of €400,000 (and thus lower loan-to-value), GE Money says the couple would be approved for the loan at a variable rate of 5.5 per cent.
