Before you start looking at properties, start applying to lenders to try to get ‘approval in principle’. This means you will know whether you will get mortgage approval and will give you an idea of the amount you can borrow. It may also be an advantage to have this when it comes to making an offer on a property as sellers are more likely to accept an offer if they know you have mortgage approval.
Lenders and advisers
You can apply for a mortgage by:
- Applying directly to a lender such as a bank or credit union or local authority and dealing with them and looking after the application process yourself.
- Using a mortgage brokerwho will deal with lenders on your behalf and advise you during the process. At the beginning it is important to ask the broker for their ‘Terms of Business’, what they charge and how many lenders they represent.
Documents you may need
You will need certain documents when you apply for a mortgage and you should keep a copy of anything you give to a lender or broker.
- Proof of ID, proof of address and proof of your Personal Public Service Number (PPSN)
- Proof of income: latest EDS / P60, payslips, certified accounts, 3 years Chapter 4’s and 3 years Form 11’s from revenue if self-employed
- Evidence of how you manage your money such as current and loan account statements for the last three to 12 months, depending on the lender
When you’re applying
- Don’t be tempted by introductory offers such as cashback or free legal expenses. These can be rewarding in the short-term but that particular mortgage could end up costing you more over the life of the loan if it has a higher interest rate.
What do lenders base their decision on?
- Income – lenders will look at your annual income and some may take bonuses and overtime into account. Some may factor in rental income if you plan to rent out a room.
- Age – what age you are now, what age you will be when you retire and/or when the mortgage ends.
- Outstanding loans – if you have other loans or a high credit card balance this may reduce the amount you can borrow or may affect your ability to get a mortgage.
- Employment status – a lender will look at whether you are in permanent employment or on probation. If you work on contract they may require you to be employed for at least 12 months with the same employer or be on a second contract with the same employer.
- Residential status – are you a resident in Ireland or a returning emigrant.
- Outgoings – lenders will take your other financial commitments, such as childcare, into consideration.
- Money management – lenders will look at your bank statements and assess things like ability to meet direct debits and standing orders, if you are using an overdraft facility on a regular basis, if there is evidence of excessive use of online gambling etc.
- Savings – this shows that you have saved enough for your deposit and have the ability to save a set amount of money on a regular basis.
- Credit history – this shows your track record of paying other loans in the past. A poor credit historycan prevent you from getting a mortgage.
- Property value – the purchase price of the home you want to buy (if you have one in mind) and the value of your current home, if you plan to sell and buy a new home.
- Amount you wish to borrow – this is the amount you apply for and is the difference between the purchase price of the property and the deposit you have saved.
- Guarantor – someone acting as guarantor and agreeing to repay the loan if you can’t.
- Number of applicants – are you borrowing by yourself or with someone else.
Once your application is approved
- Lenders give ‘approval in principal’ which is a statement of how much they are prepared to lend you but a ‘letter of offer’ is what you will receive when your mortgage has been fully approved.
- Mortgage approval is only valid for a certain period of time, which typically ranges from six to 12 months, depending on your lender. You must draw the mortgage down before the expiry date. If you don’t, you usually need to apply again and your circumstances or the lenders criteria could change in that time.
- The interest rate on the mortgage will be set only on the day the money is drawn down so it could be different to the rate shown on your mortgage approval.
- Shop around for your mortgage protectionand home insurance when you are applying for a mortgage. Remember that you don’t have to buy these from your mortgage provider even though they may offer them. There could be savings to be made by shopping around and looking for better value elsewhere.
First Time Buyers’ Relief and Help to Buy incentive
Relief on the tax on savings used to buy or build a home was introduced for first time buyers in 2015. If you bought or built your first home between 14 October 2014 and 31 December 2017 and the property is your principal private residence you may be able to avail of a refund of Deposit Interest Retention Tax (DIRT). Visit Revenue’s website to see what other criteria you must meet and how to apply.
Likewise you may be able to use the Help to Buy incentive to help you with the deposit for a newly built home or a once-off self-build. This scheme provides a refund of income tax and DIRT paid over the previous four years for people who have bought or self-built a new residential property between 19 July 2016 and 31 December 2021 up to certain limits and within certain criteria.
You cannot apply for a refund of DIRT under both schemes.
In accordance with the provisions of the Consumer Credit Act 1995, the following are for your attention:
Warning: Your home is at risk if you do not keep up payments on a mortgage or any other loan secured on it. The payment rates on this housing loan may be adjusted by the lender from time to time.
Note: The above notice in respect of adjustments to repayment rates will not apply during any period when the loan is at a fixed rate.
In accordance with the provision of the Consumer Protection Code (CPC) 2012 the following are for your attention:
Warning: If you do not keep up your repayments you may lose your home.
Warning: If you do not meet the repayments on your loan, your account will go into arrears. This may affect your credit rating which may limit your ability to access credit in the future.
The following warning applies in the case of variable rate loans:
Warning: The cost of your monthly repayments may increase.
The following warning applies in the case of fixed rate loans:
Warning: You may have to pay charges if you pay off a fixed rate loan early.
The following warning applies in the case of debt consolidation loans:
Warning: This new loan may take longer to pay off than your previous loan. This means that you may pay more than if you paid over a shorter term