First Time Buyers’ Mortgage
A first time buyer is defined as a borrower to whom no housing loan has ever before been advanced.
Where the borrower under a housing loan is more than one person and one or more of those
persons has previously been advanced a housing loan, none of those persons is a first-time buyer. (Central Bank of Ireland).
A First Time Buyer – Let’s Get You Mortgage Ready!
Many people are starting to get into the housing market for the first time despite the current pandemic. However, banks are very strict in their lending practices. Therefore, knowledge of the mortgage application process is essential. The wise thing to do would be to start working with a mortgage advisor at least six months before you submit your application.
1. Where Do You Start?
The first thing you need to do is figure out how much you can borrow. The general rule-of-thumb is that you can borrow up to 3.5 times your gross annual income, or the combined gross annual income of a couple. You can use the handy Mortgage123 calculator below.
Start Today! Fill out the Mortgage123 Online Application Form and see where you stand! A mortgage advisor will assess your situation free of charge and get back to you today!
2. How Much Of A Deposit Will You Need? 10%, 5% or less…
As a first-time buyer, you are required to pay a deposit of at least 10% of the property value. For example, if you are looking to buy a house worth €220,000, you will need to pay a deposit of €22,000 (10%).
But a 10% deposit is not always the case…
Help to Buy scheme is available to first time buyers in Ireland since 2014. What does this mean? It means you can possibly get a mortgage with close to no deposit.
Check out our new blog post on the Help to Buy Scheme for important changes that are valid until December 31st 2021 Help to Buy Scheme 2020: Important Changes
3. Do You Go For A Fixed Or Variable Interest Rate?
Nobody wants to get caught up in another tracker mortgage scandal so know your facts when it comes to your mortgage interest rate. With a fixed rate, you have the safety of knowing exactly what your mortgage repayments will be for a certain period of time, (e.g. 10 years), but with a variable rate mortgage your repayments fluctuate with the economy, usually going up during a boom in and down during a recession.
Your mortgage advisor would be able to guide you on what suits you best. You can have a quick glance at the mortgage rates available to Irish customers here.
4. How Does it Work in Practice: First Time Buyer Example
Brian and Aoife are looking to buy their first home in South County Dublin. Their combined gross yearly income is €80,000 so the maximum loan / mortgage they can get from a bank is €280,000. The value of the house they want to buy is €210,000 so they need a deposit of €21,000 (10%) + €2,100 (1% stamp duty) + an average of €4,000 (to cover engineer, valuation, legal, insurance fees). They choose a 25-year term mortgage at a 3% variable rate, so their monthly mortgage repayments are €995.84 p.m. They will also need to be able to show a further 2% stress repayment capacity, i.e. €1,227.64 p.m..
Note the following:
~ In order to get a mortgage you have to provide proof that you can repay it, so you’ll need to provide proof of long term employment. Casual employment and job seeker allowances are not accepted as proof of employment, while contract workers need to provide proof of three rolling contacts If you are in receipt of bonuses or commission income, lenders will calculate an average over a period of time.
~ You need to eat, sleep and have fun once the mortgage is paid, so don’t over extend yourself.
~ Coupled with the cost of the house, there are other fees that need to be taken into consideration such as government stamp duty (1% of the properties value), valuation fees, engineers reports, etc. A good mortgage advisor will be able to provide you with a full, up to date list.
Why Do You Need a Mortgage Advisor?
Firstly, It will not cost you anything! Who Can You Turn To For Advice / Support?
The process can be daunting so it makes sense to find a mortgage broker / advisor that can take the pressure off. A good advisor will simplify the process, gather all your information, advise you on ways to save for a deposit, know whether you should opt for a 25 or 35 year term, and most importantly, they’ll shop around for the best possible mortgage deal for you. It doesn’t cost you a € to chat with an advisor because their fees are covered by the mortgage lenders.
The advisor will do the following:
- Assess your chances of getting a mortgage
- Recommend measures to secure mortgage approval
- Fill out your application and make sure you have everything in place
- Get a quote from each bank for you and recommend the best
- Calculate the additional tax and legal expenses involved in the purchase
- Make sure all runs smoothly and stress-free for you
First Time Buyer Tips
That being said, here are some key wisdom’s for First Time Buyers:
- You should ideally get a Mortgage Advisor to check your application before you submit it. If you get a refusal from one bank, this just might affect your chances of getting approval from another bank.
- Do you have a deposit saved up? If not, talk to a Mortgage Advisor who can advise you on the best way to secure a deposit.
- Your mortgage repayments can be up to 40% of your net income.
- Have you budgeted for buying related costs such as valuation, legal fees and mortgage protection?