Buying or building your new home can be an exciting but somewhat overwhelming time. It is in fact, one of the most important financial decisions you will ever make. As such, you are bound to have lots of questions.
Become mortgage ready
When getting a mortgage, the first time buyer Central Bank lending criteria is as follows:
- Max borrowings is 4 times gross earned basic income by applicant(s)
- Max borrowings is 90% of the house purchase price
You will need to adhere to both of the above criteria for your mortgage application.
You cannot automatically apply to borrow 4 times your income(s). These are max lend Central Bank guidelines and it’s the lower of the two that will dictate.
Example 1
If the earned income is €50,000 the max borrowings would be €200,000. However, if the house purchase price is €180,000 then the max borrowings based on the loan-to-value criteria is €162,000. In this example, the max borrowings is the lower figure of €162,000.
Example 2
If the earned income is €50,000 the max borrowings would be €200,000. If the house being purchased is €300,000 the max borrowings as per loan-to-value guidelines would be €270,000. Max borrowings here would be €200,000 as this is the lower of the two figures.
Repayment capacity
Along with abiding by the Central Bank guidelines above we need to be able to prove that the applicants can afford the new monthly mortgage commitment
We can use the following to demonstrate repayment capacity, all need to be evident on bank statements. We need to show 6 months of repayment capacity to the lender.
Rent
Pay through standing order and ensure to have a narrative EG “rent”
Consistent savings
Save via standing order, same amount weekly / monthly and minimum or no withdrawals. Loan commitment where the loan will be repaid in full prior to the mortgage being drawn down. One off expenditure EG wedding / education costs.
Hints & tips
Contact SYS Mortgages 6 to 12 months in advance of your mortgage application. We will help you to get mortgage ready and will build a financial plan with you.
Have your rent / savings easily identifiable on your bank statements.
Avoid regular gambling and carry out a credit search at www.centralcreditregister.ie.
If there has been any issues with your credit status be upfront and tell your broker.
Operate your bank accounts in a good manner – ie no unpaid fees, no referral fees, no late payment or missed payment fees. Maintain your overdraft within it’s limits.
There’s no issue in having a credit card but ensure the outstanding balance isn’t increasing on an ongoing basis.
You will need to be in consistent long term employment when applying for a mortgage. Changing employment before progressing a mortgage application could cause a delay with your application but this is on a case by case basis – check with your broker and ask for their advice.
Ensure you are comfortable with the proposed repayment amount before you commit to a mortgage. Remember that along with the mortgage repayment you will also need to pay for mortgage life cover, house insurance and local property tax on a monthly basis.
If you are purchasing a new home or building your own home visit the Help to Buy section on www.revenue.ie . Here you can ascertain how much you would qualify for through the scheme. It is specifically for first time buyers who are buying / building a new home.
Fees associated with a mortgage
- 10% deposit as a minimum – not technically a fee but you still need to demonstrate that you have those funds
- Solicitor fees
- Broker fees
- Valuation fee(s)
- Stamp duty (1% of purchase price up to €1m)
- Engineers fees – generally not an obligation but he / she would verify if house is structurally sound before you progress with the purchase.
If you need any more information please give Helen a call on 067 57059 / or email helen@sysmortgages.ie
