To buy a house ? 5 top tips from a mortgage expert

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Mark Coan is a financial expert and founder of the online financial guide moneysherpa.ie. You can contact him at [email protected]

As home building finally slowly picks up and new homes begin to arrive, many are beginning to dream of owning their first home again.

Times are still tough for first-time buyers due to rising prices, rents and some of the toughest lending rules in Europe.

Don’t despair though, with the right approach, you may still be able to get your foot on the property ladder. Using a combination of grants, capital release from the family home, and the right mortgage lender, that new home could be even closer than you think.

While many are beginning to dream of buying a home for the first time, here are five tips from a mortgage expert on how to make your dream come true. Image: Getty Images

1. Who qualifies as a first buyer?

To qualify as first time buyer you cannot have had a mortgage before.

You are not considered a first-time buyer if you have taken out a mortgage in your name in Ireland or overseas.

The good news is if you’re still considered a first-time buyer if you’ve ever inherited a home or purchased outright. It is only the fact of taking out a mortgage beforehand that disqualifies you from being a first buyer.

first time buyer
A first-time buyer is someone who has never applied for a mortgage before, either in Ireland or overseas. If a couple is applying for a mortgage, both must never have had a mortgage to qualify as a first-time buyer. Photo: Shutterstock

It is important to note that if there are two people who take out a mortgage, both must never have had a mortgage to qualify as a first buyer.

2. How much can I borrow?

The amount you can borrow is set by two things. First, the Central Bank’s lending limits, and second, your mortgage lender’s credit policy.

Central Bank spending limits

central bank
The Central Bank of Ireland has some of the strictest lending limits in the world. Photo: Leah Farrell/Rollingnews.ie

The Irish Central Bank’s lending limits are some of the strictest in the world, so this is usually the biggest hurdle to overcome.

For the vast majority of first-time buyers, the maximum you can lend will be 3.5 times your gross annual household income. So, this is how it usually works:

  • Kate earns €34,000 gross per year, €24,000 base and €10,000 last year in bonuses.
  • Liam earns €30,000 gross per year, €20,000 base and €10,000 commission last year.

Their joint gross annual income is therefore €64,000 per year. The Central Bank limit of 3.5 will allow them to borrow up to a maximum of €224,000.

Lender’s credit policy

LPT local property tax revenue
Lenders will apply a second set of rules to assess whether a borrower is able to repay a mortgage.

In addition to the Central Bank limits, lenders apply a second set of rules to assess whether you will be able to repay the mortgage.

Typically, the lender looks at your income and spending history for the past 6 months to determine how much income you will have left after you cover your commitments.

The more money they think you have left, the more likely they are to lend you.

It is therefore very important to maximize the amount you have invested in the 6 months preceding the mortgage application, then to choose the lender who most generously assesses your income.

Look for a mortgage broker who has access to all lenders in the market, as some lenders are only available through a broker.

3. How much deposit do I need for a mortgage loan?

mortgage
Exactly how much is needed for a deposit on a mortgage? Photo: Shutterstock

The minimum deposit amount you must buy is also set by the Central Bank of Ireland.

The good news is that as a first-time buyer, you only need to deposit 10% of the purchase price of the property upfront. Second time buyers are required to pay 20% down payment.

That said, it still makes sense to max out your deposit if you can.

The increased deposit reduces the size of the mortgage, which can reduce the interest you’ll pay to thousands of dollars or even help you afford a property that Central Bank rules may have put out of your hands. scope.

With spiraling rents cutting into the savings you can make, this is where it can pay to be a little more creative. Which brings us to the options below.

4. What are the latest programs or other options to help you?

the Purchase assistance program allows first-time buyers to claim 10% of their property value to help pay a down payment on newly built homes.

To qualify for this scheme, your home must be valued at €500,000 or less.

The maximum you can claim is €30,000, so if your home is valued over €300,000, you can still only receive a maximum of €30,000.

You may be able to increase your deposit with a gift from friends or relatives. The usual route for first-time buyers is through their parents, commonly referred to as the “mommy and daddy’s bank.”

house money
The purchase assistance program or parents who offer you money through the release of equity could help you increase your deposits. Image: Getty Images

Your parents are unlikely to have 5,000,000 liars about the house, but they may have equity tied up in the family home that they can access to provide money for a deposit through a process. known as an equity release.

By releasing the equity in the family home, parents can gift their children up to €330,000 tax-free. This can be an attractive option for them if the children are still taking up space on the family couch or wasting thousands of dollars on rent.

5. Insider tips for first-time buyers

    1. Work with a mortgage broker who will match you with a lender who will maximize your mortgage.
    2. Reduce your expenses within 6 months of applying for the mortgage loan to obtain the largest loan.
    3. to safeguard as much as you can yourself for a deposit.
    4. Top up your deposit with the Purchase assistance program.
    5. Consider equity release as an option to further increase your deposit and purchasing power.
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