Get mortgage ready: the 10 questions you need to know
Answers to a bank's most-frequently asked questions on mortgages
Under Central Bank rules introduced in February 2015, first-time buyers can borrow up to 90 per cent of the value of a property up to €220,000 and 80 per cent of any value of the property above that sum
1. What does a bank look for in a mortgage application?
The bank is keen to see that you can afford to take on a mortgage and still have enough money left each month to enjoy your new home
Here are some of the things the bank will take into consideration as part of your application:
It is useful to set up a regular savings account to save your deposit. This has the added benefit of showing your ability to save money each month.
Your day-to-day finances
Make sure you manage your accounts so that you don’t go over your credit limit – banks like to see that you have been managing your finances effectively for a period of time before you apply for your mortgage.
Your other borrowings
It’s a good idea to pay down credit cards and personal loans, if you have any, as much as possible, as additional borrowing could affect the amount you can borrow for your mortgage.
You will need to show how you can cover additional costs such as stamp duty, legal fees and any additional expenses that might be required to make your new property habitable.
2. How can I estimate how much I can borrow?
Online mortgage calculators are a great way to get an indication of how much you could borrow, the deposit you need and what the monthly repayments would be.
3. If I rent will the bank take the rental payments I have made into account?
Yes, the bank will take into account the monthly rental payments you have made – it demonstrates your ability to support this level of monthly repayments. You should arrange to pay your rent through your bank account – even if you are living at home and making a contribution to the household. This is the best way to demonstrate regular rent payments over a period.
4. How much of a deposit does a first-time buyer have to put down?
Under Central Bank rules introduced in February 2015, first-time buyers can borrow up to 90 per cent of the value of a property up to €220,000 and 80 per cent of any value of the property above that sum. This means that they will need to have saved at least 10 per cent of the purchase price up to €220,000, and 20 per cent of any value over that.
Both parties to the mortgage must be first-time buyers for the mortgage to be considered for these advantages.
5. What other costs should I factor in and what will each of these typically cost?
Valuation: Before you draw down your mortgage, the property will need to be independently valued by a professional valuer – you should expect to pay a fee of between €150 and €250 plus VAT, but this can vary.
Legal fees: You will need to pay legal fees to your own solicitor. As part of your own arrangement you need to agree with him or her whether this is a flat fee or a percentage of the purchase price.
Stamp Duty: Stamp duty will also apply to the purchase. The current rates are 1 per cent of the purchase price up to €1,000,000 and 2 per cent of any value over that.
Insurance/assurance: You will also need life cover and home (buildings) insurance – the costs of these can vary depending on your requirements and circumstances. Life and buildings cover will need to be in place before you draw down your mortgage.
6. Can I apply for a mortgage if I don’t already have a property lined up?
Yes, a number of banks provides “House-Hunter mortgage approval in principle” which means you can apply for your mortgage before you have found a suitable property. This approval in principle lasts for six months and allows you to house hunt with confidence.
7. How long a mortgage term can I apply for?
Mortgages of up to 35 years are available to first-time buyers. Terms of up to 30 years are available to those trading up or down. Irrespective of whether you’re a first-time buyer or a mover your mortgage term must not go past age 70.
8. Do you have to be a customer of a bank in order to apply for a mortgage?
No. You can apply to a bank for a mortgage even if you’re not an existing customer. You will need to provide ID documents for all parties to the mortgage – generally a valid passport or driving licence, and a utility bill (less than six months old) to confirm current permanent address.
9. What documents do I need to present to the bank to apply for a mortgage as a first-time buyer?
Most lenders look for information about your income, employment, living costs and existing loan repayments to help them decide whether you can afford to repay a loan.
If you are a PAYE employee, you will typically need to provide:
Your most recent P60 (original)
Your last three months’ payslips
The last six months bank account statements (if your personal account is not with that bank).
If you are self-employed: Your last two years’ certified/audited accounts – The last six months business bank account statements (if business account is not with that bank).
You may also be required to provide identification documents and confirmation of your address. This is usually a current valid passport or driving licence and recent utility bill.
If your application is approved in principle, the following are examples of documents that you will also be asked to provide:
PAYE applicants: a Certificate of Income (a standard form provided by the bank for completion by your employer).
Self-employed: your accountant’s or auditor’s written confirmation that your personal/business tax affairs (PAYE/ PRSI/VAT) are up to date, and your management figures for the current trading year.
10. If I’m self-employed, how does the process work?
The application process is the same if you’re self-employed except, instead of a salary, additional documents required include your last two years’ certified/audited accounts, your accountant’s or auditor’s written confirmation that your personal/business tax affairs (PAYE/ PRSI/VAT) are up to date, and your management figures for the current trading year.