First Time Buyers
If 2020 is the year that you’re going to take the plunge and buy your first home, then read on. Knowing these facts will save you time, money and sanity!
Where Do You Start?
The first thing you need to do is figure out how much you can borrow. In 2020, the general rule-of-thumb is that you can borrow up to 3.5 times your gross annual income, or the combined gross annual income of a couple.
How Much Of A Deposit Will You Need?
As a first-time buyer you are required to pay a deposit of at least 10% of the property value. For example, if you are looking to buy a house worth €220,000, you will need to pay a deposit of €22,000 (10%).
Who Can You Turn To For Advice / Support?
The process can be daunting so it makes sense to find a mortgage broker / advisor that can take the pressure off. A good advisor will simplify the process, gather all your information, advise you on ways to save for a deposit, know whether you should opt for a 25 or 35 year term, and most importantly, they’ll shop around for the best possible mortgage deal for you. It doesn’t cost you a € to chat with an advisor because their fees are covered by the mortgage lenders.
Do You Go For A Fixed Or Variable Interest Rate?
Nobody wants to get caught up in another tracker mortgage scandal so know your facts when it comes to your mortgage interest rate. With a fixed rate, you have the safety of knowing exactly what your mortgage repayments will be for a certain period of time, (e.g. 10 years), but with a variable rate mortgage your repayments fluctuate with the economy, usually going up during a boom in and down during a recession. Your mortgage advisor would be able to guide you on what suits you best.
Note the following:
~ In order to get a mortgage you have to provide proof that you can repay it, so you’ll need to provide proof of long term employment. Casual employment and job seeker allowances are not accepted as proof of employment, while contract workers need to provide proof of three rolling contacts If you are in receipt of bonuses or commission income, lenders will calculate an average over a period of time.
~ You need to eat, sleep and have fun once the mortgage is paid, so don’t over extend yourself.
~ Coupled with the cost of the house, there are other fees that need to be taken into consideration such as government stamp duty (1% of the properties value), valuation fees, engineers reports, etc. A good mortgage advisor will be able to provide you with a full, up to date list.
Brian and Aoife are looking to buy their first home in South County Dublin. Their combined gross yearly income is €80,000 so the maximum loan / mortgage they can get from a bank is €280,000. The value of the house they want to buy is €210,000 so they need a deposit of €21,000 (10%) + €2,100 (1% stamp duty) + an average of €4,000 (to cover engineer, valuation, legal, insurance fees). They choose a 25-year term mortgage at a 3% variable rate, so their monthly mortgage repayments are €995.84 p.m. They will also need to be able to show a further 2% stress repayment capacity, i.e. €1,227.64 p.m.