Mortgages for returning emigrants: How to apply
Buying a property in Ireland from abroad can be complex and costly. Here’s how to get a mortgage
“Where do we live if we go home? We fall into the rental trap, which is very hard to get out of”
Sean (35) moved to the Middle East when the boom turned to bust and he was laid off from his job in construction. It was always just a temporary move, which is why buying a house in Ireland is now a priority for him and his wife, just like it is for many other Irish emigrants with their eyes fixed on home.
“We want to move home eventually and have somewhere to live when we do – not with our parents or renting,” he says. “If we go home and get jobs, we will have to wait at least a year to get a mortgage, meaning a lot of burned money on rent.”
The bank they applied to last year wanted a single applicant to earn more than €100,000, or a joint application to earn more than €150,000
However, despite generous pay packages, which means that the couple “could easily afford our local expenses and pay a mortgage at home”, it has been far from easy to secure one.
They ran into limits of how much of their income would qualify; the bank they applied to last year wanted a single applicant to earn more than €100,000, or a joint application to earn more than €150,000. But while Sean qualified for the former, his wife’s income didn’t take them over the €150,000 mark, which means they now have to apply on his income alone, which will reduce the amount they can borrow.
The other issue is the deposit. They were told they need a down payment of 30 per cent of the purchase price – some banks requested as much as 50 per cent – which means a €90,000 lump sum on a €300,000 house.
“To get to this level of saving takes a lot of time,” Sean says. Since they last applied six or eight months ago, house prices have also increased significantly.
“We are looking at the same house for €345,000, meaning more saving required to get to the 30 per cent (€103,500),” he says. If the couple were living at home and buying a new property, they would need as little as €17,250 with the help-to-buy scheme, which they are not eligible for as overseas residents.
“It’s a very unfair situation,” he says, adding that he would like to see “a fair deal for Irish citizens living away from home.”
“The Government is running advertisements to ‘bring the talent back’, and that’s all well and good from an employment point of view, but where do we live if we go home? We fall into the rental trap, which is very hard to get out of.”
Applying from overseas
It’s always been difficult to buy a property in Ireland if you’re living abroad; but since the introduction of a new EU rule last year restricting lending in foreign currencies, it has become even trickier. The mortgage credit directive requires lenders to monitor exchange-rate fluctuations on foreign currency mortgages, meaning most banks won’t even consider lending to people who don’t earn their income in euro.
But there is some positive news; some banks, including AIB and Bank of Ireland, have not entirely ruled out lending to expats living in non-euro-zone countries such as the UK, Australia and Canada. And if you do live in a euro-zone country, such as France or Germany, you should find it that bit more straightforward.
So just how might you get that loan?
Who will banks lend to?
Banks have always imposed stricter lending criteria when giving mortgages to those living abroad, but they did lend to nonresidents, regardless of where they lived. Since the directive, some have ruled out lending to people living outside the euro zone entirely.
Permanent TSB, for example, says it will only accept applicants who earn their income in euro, while KBC Bank says that because of the directive, the bank “is not in a position to provide mortgages to individuals residing outside of the euro zone, or those who earn their income in a non-euro currency”.
AIB won’t lend when an applicant is dependent on more than one non-euro income
More positive, perhaps, is Ulster Bank, which will consider applications “on a case-by-case basis”, while AIB will entertain applications from “nonresidents living anywhere in the world subject to normal lending criteria”.
It applies a key caveat, however: it won’t lend when an applicant is dependent on more than one non-euro income. In theory, this rules out a couple who are both working and living in countries such as New Zealand and the US who want to apply as joint applicants.
Potentially the best of the bunch is Bank of Ireland, which offers foreign-currency loans with a “special set of conditions” added to the offer letter, “designed to help the applicant limit the exchange-rate risk to which they are exposed by borrowing a mortgage loan in euro”.
Those living abroad in another euro-zone country such as Italy or the Netherlands will be able to apply for a nonresident mortgage with all the main banks – but should prepare for the process to be more complicated, more expensive and restricted to candidates with the cleanest financial histories and the heftiest down payments in their accounts.
How much of a deposit do you need?
If you can get past the first hurdle of either (a) earning in euro; or (b) your bank agreeing to make a foreign-currency loan, you can then move on to other criteria. Firstly, you will probably need to save more than someone living in Ireland. While it may not seem fair, lenders treat nonresident applicants the same way they treat investors.
Permanent TSB and AIB require applicants to have a down payment of 30 per cent, or a loan to value (LTV) of 70 per cent of the price of the property, while Bank of Ireland says it may apply a lower LTV or shorter term to foreign residents.
A lower LTV of 70 per cent means someone looking to buy a property worth €300,000 will need a deposit of 30 per cent, or almost €100,000 saved – a tall order for any potential buyer. Just a few years ago the bank used to impose an LTV of 40 per cent for international applicants, so the situation has eased somewhat.
This contrasts sharply with first-time buyers already living in Ireland, who now need to save only 10 per cent of the purchase price, thanks to changes in last year’s Central Bank rules. Trader-uppers need only save 20 per cent, so it is a heftier burden that banks are requiring of those living abroad.
With gains in property prices showing no signs of slowing down, the amount needed for a deposit may continue to rise.
Do you have to be Irish?
While cross-border lending took off to some extent before the crash, with banks in France or Spain, for example, willing to lend to Irish investors buying properties in those countries, it’s a different world now.
This means banks are loathe to lend to nonresidents to begin with, and where they do, they are likely to restrict it to those with strong connections to Ireland.
PTSB will only offer nonresident buy-to-let loans to British and Irish citizens who are resident in a euro-zone country – although you don’t have to have an Irish bank account or be an existing customer of the bank.
Other banks are less restrictive; Bank of Ireland says “all nonresident mortgage applications are considered [regardless of nationality] and each one is assessed on a case-by-case basis”.
You need a strong income
For Irish residents, an income multiple of 3½ times typically applies under the Central Bank’s lending rules; for nonresidents, banks won’t even look at you unless you can provide evidence of a strong income flow.
Permanent TSB looks for an income of “at least” €75,000 – although that applies for both single and joint applications. Bank of Ireland also generally looks for a minimum income of €75,000 for sole applicants, but wants €125,000 for joint applications.
AIB doesn’t look for a minimum income; its applications are “based on the banks affordability model and Central Bank guidelines”.
Your mortgage will cost more
Banks typically treat nonresidents as investors, whether or not you’re going to keep the property vacant or rent it out. This means you will pay more to service your loan than someone who lives in the property.
If you’re ready to move home and live in the property, you might be able to switch to a cheaper home-loan rate
Ulster Bank charges a rate of 4.95 per cent on a buy-to-let mortgage variable rate. On a €160,000 mortgage over 30 years, this comes to €854 a month. But the cheapest home-loan rate now available in the Irish market is about 2.9 per cent – a difference of almost €200 a month.
If you’re ready to move home and live in the property, you might be able to switch to a cheaper home-loan rate. AIB says it will revert to standard rates – which are cheaper – once you are living in the property. “In certain instances where the applicant is returning in the very near future, the bank may offer home-loan rates,” the bank adds.
PTSB says that even if you move back and start living in the property, “nonresident buy-to-let loan rates still apply”.
Broker or a bank?
There are two possible routes for everyone considering a mortgage: going directly to the bank or opting for a broker. Which to choose?
If you already have a strong relationship with a particular bank, and are happy with their offering, then going directly to them may make the most sense.
Remember that brokers don’t deal with all the banks: Bank of Ireland does not currently operate in the broker market
If you’re not sure which bank you might succeed with, the advice of a good broker can be invaluable. They will work with several lenders, which can cut down significantly on the paperwork needed, and will understand what requirements, in terms of income levels and size of a deposit, the various banks are looking for. They can also give you a good steer on your chances of getting a mortgage.
Remember that brokers don’t deal with all the banks: Bank of Ireland – with its potentially attractive cashback of up to 3 per cent on the value of the mortgage – does not currently operate in the broker market. Some brokers also impose their own charges, on top of the commission they will be paid by the banks.
Should I just wait until I get home?
If it’s proving too difficult to get a mortgage while living abroad, the other option is to wait until you move home. The upsides may mean you end up making a better purchase, as you will have a better idea of the market; the downside is you will typically have to wait at least a year before the banks will consider you.
Banks want to see you in a permanent position before lending to you, which means that if you start working on a contract basis, it will be difficult – perhaps impossible – to secure a mortgage. And even if you do secure a permanent job, you will have to wait until your probationary period is over before a bank will lend.
AIB, for example, requires you to get a salary certificate completed and stamped by your employer “confirming permanency” as part of its application process.
This article is the first in an Irish Times Abroad series on “Finding a home at home”, which will continue online next week on irishtimes.com/abroad. We’ll be examining what the market is like to rent or buy houses and apartments around the country, with special advice for those looking from abroad. The series will also feature readers’ stories and feedback about home hunting, while still overseas or since returning.
If you would like to share your experience of applying for a mortgage from overseas, or buying a home or renting in Ireland on your return, email firstname.lastname@example.org.
How did you go about it? Was it easy or difficult? What advice would you have for others? Please include some background information about you, your emigration journey, your reasons for deciding to move back, and a photograph of you (outside or inside your new home, if you’ve had success!). A selection will be published online next week. Thank you.