Martina Hennessy of our mortgage partners doddl.ie outlines three of her main pieces of advice for a first time buyer...
1. How much can I borrow?
In general, the first thing borrowers want to know is what their budget is and how much they can borrow.
How much you can borrow is based on a number of factors including income, deposit, existing loans or commitments, repayment capacity and whether they may qualify for an LTI exception.
Standard Central Bank lending rules are that you can borrow 4 times your allowable income as a first time buyer. Things to be aware of –
- Lenders all differ in terms of the rules they apply to lending – in particular if you have variable income or where you have existing loans or commitments. This can have a significant impact on your mortgage eligibility and how much you can borrow.
- Exceptions to Central Bank lending rules can apply to bring you from 4x lending to up to 4.75x allowable income. Exceptions are granted on a case by case basis where a bank has capacity to allow the exception.
- Proven repayment ability – regardless of how much you earn you will only ever be approved for a mortgage if you show that you can prove to repay the mortgage. As a general rule of thumb, for every €100,000 you borrow you need to show repayment capacity of minimum €450 per month. As such borrowing €400,000, repayment capacity needs to be proven at €1,800 per month. Repayment capacity can be proven via rent, consistent monthly savings or loans that are discontinuing.
2. How much money do I actually need to buy?
Not just the deposit: Help to Buy/First Home Scheme eligibility, stamp duty, solicitor, valuation, survey and other buying costs.
All purchasers need a minimum 10% deposit. For first time buyers this can be supplemented by the help to buy if you are purchasing a new build home for €500,000 or less. Help to buy is a rebate of the tax you have paid over the last 4 years and is max 10% of the purchase price of a home capped at €30,000.
It is also important to be aware that transaction costs apply when purchasing a home, stamp duty is 1% (purchase price €450,000, stamp duty €4,500), legal fees budget c. €2,200, survey and valuation fees budget €600 plus local property tax and management fees may apply.
We would always caution that you need to allow for 12% of the purchase price of a property by way of deposit when purchasing a home.
Deposit funds can be made up of savings, help to buy or a gift.
3. What is the ‘best’ mortgage on the market?
There are over 10 mortgage lenders in the Irish market, each offering different rates, terms and criteria. What may be the ‘best’ mortgage for one applicant may not be for another, the important thing is to match your key criteria, whether that’s mortgage level (an exception etc), with rate and flexible terms. Offers such as 2% cashback offers can also be really attractive to a first time buyer.
The lowest rate on the market is 3%, there are Green rates, high value mortgage rates and loan to value rates.
The ‘best’ mortgage for you will depend on your needs and an assessment of what lender offers the best combination of mortgage level and rate.
At doddl we work with all major lenders and our role is to ensure you get the best mortgage for your personal circumstances.
You don’t need to know everything about mortgages because we do and we work for you from enquiry to keys!
Get in touch with our expert team at www.doddl.ie
