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Make More Cents with Liam Croke

Friday, 23 October 2009

In our first week back we did an item with Liam talking about - 5 ways to get a mortgage in the current climate - Liam was a wealth of information and his advise helped many of our viewers.

Liam Croke: Money Expert
Liam has worked in the financial services industry for the past 21 years and seen by many as an expert in the field of personal finance. He is a qualified financial and mortgage advisor.

In the past he has held senior management positions with two well known financial institutions along with one of the "top 5" accountancy practices in Ireland.
Liam gives his advice and wisdom on a daily basis to those who are just starting out to high net worth individuals. He currently works for a financial services company based in Limerick.

He is frequently asked to contribute and comment in all areas relating to personal finance on both national and local radio stations. You will have heard him for example recently on RTE's "The Mooney Show" and on Newstalk's "The Right Hook."
Liam was invited to make a presentation to the Joint Oireachtas Committee on Social & Family Affairs on trends and levels of personal debt in Ireland. He made his presentation to the committee on the 24th June 2009.

Liam is author of 4 personal finance books:
. The best selling "The Mortgage Maze Explained" published by Currach Press in 2006.
.The best selling book "Your Money Your Life - Managing your finances in today's Ireland" published in 2007.
. "I'm Broke! A teenagers guide to Money" - Published by Crabtree and distributed in the UK & USA in 2009
. "Stash or Splash" which is being released in Ireland and the UK in September of this year.

. Liam previously wrote a weekly personal finance column for The Sunday World entitled "Mr. Cash - How to Save it, Spend it, Earn it" and has also written articles for the Sunday Business Post, the Evening Echo, the Sunday Independent, the Irish Sun, Prudence Magazine to mention just a few.

The moral of today's stories is really to make sure you are dealing with knowledgeable people who you have confidence in, who you trust and who explains the process to you in a very easy to understand manner and not to give up and not to accept their word for it - ask for the reasons in writing, find out who they made applications to, find out what was said on the proposal etc.etc.


The mortgage market has been transformed over the past 12 months and it seems much more difficult than it has ever been to get a mortgage, or is it? No longer are multiples of 6, 7 or even 8 times your income allowed and the days of the 100% mortgages are long gone and will probably never return and in my opinion that is not a bad thing at all.

Although the market has changed substantially since the onset of the credit crunch it is still possible to get a mortgage, but only if you do your homework first. You have got to prepare well in advance and knowing what lenders are now looking for from borrowers will only increase your chances of being successful with not just one lender but with them all.

So, what do you need to do?

1. Know what you can afford!

You may be able to qualify for more than you thought possible in today's mortgage market. The majority of people make the mistake of finding out first from the bank they do their day to day banking with how much they qualify for. They then automatically assume that this is will be the same with all other lenders.

2. Know how much you need!

With house prices falling rapidly over the past 2 years, banks are now understandably nervous when it comes to the amount they are prepared to advance with some cutting back to 80% of the purchase price having previously offered up to 95%.

Some lenders are still offering up to 92% so, the minimum you can expect to contribute to the purchase will be 8%. If you were purchasing a property costing €250,000 then your contribution will need to be €20,000.

So, you are going to need €20,000 as your contribution but don't forget about legal fees and the fit out of a property and some banks will ask you how you plan to fund these? They don't want you to borrow this money and you know what? They are right!

3.Know your credit history

In today's market where banks lending criteria has become much stricter the importance of having a good credit history has never been so important. A lender will do a credit check on you with the Irish Credit Bureau to see if you have a history of repaying your current and previous loans on time. If you have missed or were late with one repayment then you can forget about it!

Banks have enough problems with arrears on existing customers and do not want to add to it and if they consider you a high risk then they will just not take you on.

Before you make an application with any lender do a credit check on yourself and make sure that what is recorded on the bureau is correct. Often people are refused because of a "poor repayment history" and they have no idea what this means so be prepared and get a check done on yourself and include a copy of it when you make that application.

Banks will also "forensically" go through your banks statements for the previous 6 months and if they see anything like unpaid fees, referral fees or late payment fees on your account they will not like it one bit and if there is a pattern of this happening on your account they will refuse your application no matter how much you are earning. Manage your accounts well and make sure that you repay on time all of the time!

4. Banks want to see that you have what they refer to as "repayment capacity"

This simply means that you have to clearly demonstrate to them that you can afford the monthly repayments based on the amount you are borrowing.

How can you show this?

If you are looking to borrow €230,000 the bank is likely to "stress test" this amount at somewhere between 5 and 6% depending on your lender. So, if this figure amounts to lets say €1,160 per month they are going to want to see clearly that you have this amount in your account as it stands at the end of each month.

If you have nothing left in your account at the end of each month then how you are going to be able to make repayments of €1,160 each month? That is what lenders will be asking themselves and if there is no evidence that you can, then you won't get the loan. Some lenders will however take into account what rent you are currently repaying as a means of showing "repayment capacity."

So, again this comes down to planning and preparing well in advance and knowing what a lender is looking for. There is no point in making an application if you cannot show this repayment capacity to a lender but you now know what you have to do so rather than making an application and being turned down you should operate your accounts for say 3 to 6 months that clearly does show a repayment ability and that way your loan will be successful.

5. Know your lender

Before selecting a lender it is so important that you do your research on their history (are they a lender that consistently offers attractive rates) and their reputation (customer service good? Are they helpful with people who are in mortgage difficulty for example)

When you are looking for a mortgage never ever take the first one you have been offered. Some say its like finding a girlfriend or boyfriend - the first one you try might seem quite nice, but if hadn't kept looking, you'd be sorry now.

Look there are good deals and bad deals and until you do your research you won't know which is which. What you have got to try is match the bank with your needs taking into account, - rate, how much they are willing to lend you, service, flexibility, reputation and so on.

Some mortgage lenders will offer incentives to try and get your business but don't let them be an influence in who you place your business with, just let them be an added bonus but not the reason you chose one lender over the other.

The bottom line.
Being upfront is your strength and it means no one will be disappointed especially you! Tell your lender or financial advisor exactly what your financial situation is.

Never lie about your credit history, the chances are the mortgage lender will find out anyway which will significantly reduce the chances of you getting a mortgage. Honesty is the best policy, address the issues you may have and provide evidence to support your suitability.