Will I Qualify for a mortgage?
Our business is arranging mortgages. We hope we can look after you.
Short Example of First time buyer mortgage.
►You spot a new house for sale for €260,000 and wonder can you afford it.
►You calculate that the highest level of mortgage facilities you can get is 90% of the purchase price i.e. €234,000. Purchase price €260,000 multiplied by 90% = €234,000
►Therefore you need a cash deposit equal to the difference i.e €26,000, plus money for stamp duty and legal fees (approximately €2,600 for stamp duty and €2,000 for legal fees), in total €4,600. So between the deposit and these extra costs you will need to have saved €30,400.
►But if buying or building a new house, you could well be entitled to a help to buy rebate of 5% of the purchase price €260,000 *5% = €13,000. If you qualify for this rebate, this would mean you will need less cash, in fact the requirement is now reduced to €17,400
►But you also need mortgage approval. As the normal maximum mortgage approval is 3.5 times gross income, your income will need to be €66,850 to qualify i.e. (€234,000 / 3.5 = €66,857 per year.
►You will also need to demonstrate that you can afford the mortgage payments to get this level of mortgage.
► Assume the mortgage is over 30 years; the typical repayments will be €970 per month.
► Lenders then look to see from your savings records and rental records that you can afford these repayments, plus they will want to see if you could afford the mortgage if rates rise in the future.
►So could you afford the repayments if they increased by €250 per month to €1,220 per month?
►If you can and your income is considered secure then you are well on the way to approval and your first home.
The key principles of mortgage approval are as follows:
- Your income should be secure .
- You can provide evidence of affordability from recent rent and savings patterns that you can afford repayments
- You have an adequate cash deposit
- You have a good credit history, well managed finances and typically no loans or credit card debt.
1. What is the maximum mortgage limit.
- Central Bank rules place a limit of 3.5 times your normal gross income as your maximum mortgage.
- Exemptions above 3.5 times gross income are very difficult to secure at present.
2. How much of a deposit do you need?
- First time buyers 10% ( Help to buy scheme available to qualifying applicants to fund 5% for new house or apartment purchases or self builds)
- Second time buyers 20% of the purchase price
- Some lenders are comfortable to have the deposit requirement provided by way of a gift, but as a general rule lenders preference is to see a steady savings pattern contributing to 5% of the purchase price- some tolerance for larger gifts is evident with long rental history
- Deposit exemptions are available at present so that second time buyers with strong incomes are not restricted to a minimum 20% deposit. Each case is assessed on its own merits.
3. Can you afford the repayments?
- The most important matter to consider is your comfort level with the proposed repayments. Rates will change during the mortgage term. The price you want to pay for a house should be driven by your feeling for affordability.
- As your advisers we need to clearly demonstrate in our lender recommendations that you can afford your mortgage payments even if rates increase by 2%
- The longer the period over which you can demonstrate ability to repay - the better, but it should be minimum six months and preferably longer.
4. Is your income secure?
- You need to be in secure employment. Being on a permanent contract is a requirement with most lenders but we are pleased to advise that some lenders will consider contractors where their is evidence of contractual work for over one year on a continuous basis and prospects for further continuous contract work into the future are strong.
- Lenders take a prudent approach. Employees should be employed for at least twelve months and have completed your probationary period.
- The sector in which you work should have long term prospects as should the organisation for which you work.
- The more skills and qualifications that are relevant in today's world - the better.
5. Can you demonstrate good financial management?
- Good regular savings record
- Minimum of personal debt and credit cards cleared monthly
- Prudent spending habits
- If you have taken out loans in the past - there should be no missed payments
- No online gambling
- Try and keep it simple- not too many bank accounts - savings simple to follow