Getting Mortgage Ready as a First Time Buyer

Buying your first home can be a very daunting yet exciting experience. It may very well be the biggest transaction you ever make in your life, so you need to be certain when making this huge financial decision. If you’re a first time buyer, there are some things that you need to consider. We have broken down what you need to know to get yourself mortgage ready!

How Much of a Deposit Will I Need?

The biggest step of getting a mortgage is saving for a deposit. As a first time buyer, you will need a minimum of 10% of the cost of the house you are seeking to buy in most cases. So, for example, if the house is worth €300,000 then you will need at least €30,000 as a deposit.

Saving for a house deposit is one of the hardest things many first time buyers will have to do. You will need to set up a budget for yourself to ensure you can save enough money. It is essential to show the bank that you can save to show them that you can pay back the mortgage once approved. You can save for your deposit in your bank account, credit union, or post office, as long as the bank can get clear statements to see where you saved. If you have the deposit amount already, your rent can be used as proof of affordability to repay the mortgage.

How Much Can I Afford?

You can typically borrow 3.5 x your annual salary, or if you’re buying with your partner, it would be 3.5 x your combined salary. To keep things simple, let’s just say a couple has a combined salary of €100,000. They can borrow €350,000 from a mortgage lender in most cases. There are sometimes exemptions for first time buyers where the borrowing capacity can increase to 4.5 x your salary.

So, the total cost of your house would be what you borrow + the deposit amount you are paying. Banks usually lend up to 90% of the value of the house for first time buyers. You would then need to pay the remaining 10% of the value of the house as a deposit. A typical example would be if you wanted a house for €300,000, you may be able to borrow around €270,000 and then pay the remaining €30,000 as a deposit.

Finding the Best Mortgage Rate

The most important part of the mortgage process is finding the best rate available to you. As a Mortgage Advisor, we have access to all the best rates and will make sure you get the best deal possible. Finding the best interest rate can save you thousands of euros in the long run. If you go directly to a bank, they will only offer you their rates exclusively.

You can of course shop around for the best rates yourself, but a Mortgage Advisor can take you through the entire process from start to finish to help you get on the property ladder for the best rate possible.

What Else to Consider?

The government’s Help-to-Buy scheme helps first-time buyers with their deposit. The incentive provides a refund on Deposit Interest Retention Tax (DIRT) as well as Income Tax that you have paid in Ireland for the previous 4 years. You must live in the property for 5 years after you have bought it and the total value of the property must be €500,000 or less.

Once you get mortgage approval in principle, make sure to contact a solicitor straight away to move things along. You can then start house hunting! You will also need to get the house you want to be valued. Be aware of fees such as stamp duty, insurance, solicitor fees, valuation fee, etc. Also, don’t forget the fact that you will most likely spend a lot of money on furniture in the house when you move in. So, make sure you plan ahead for these expenses.

The lender will usually want to see at least your last 6 months of statements, so make sure your accounts are as clean as possible. They want to see that you have been saving your money and that you aren’t spending wildly. Ditch online betting if this is something you do regularly.

So, if you want assistance to get mortgage ready, please book a complimentary chat or call us on 025-30588. Our mortgage specialist will be with you every step of the way.