When giving you a mortgage, lenders use different criteria to decide how much they are willing to lend you and they must follow specific Central Bank of Ireland rules when doing this.
The Central Bank of Ireland’s rules applies limits to the amount that lenders in the Irish market can lend to mortgage applicants. These limits apply loan-to-income (LTI) ratios and the loan-to-value (LTV) ratios for both principle dwelling homes and buy-to-let properties and are in addition to the lenders’ individual credit policies and conditions. For example, a lender may have a limit to the percentage of your take home pay that can be used for mortgage repayments.
Loan to income limits
A limit of 3.5 times your gross annual income applies to applications for a mortgage for a principal dwelling home. This limit also applies to those in negative equity applying for a mortgage for a new property, but not those borrowing for a buy-to-let property.
Lenders have a certain amount of discretion when it comes to mortgage applications. For first-time buyers, 20% of the value of mortgages a lender approves can be above this limit and for second and subsequent buyers 10% of the value of those mortgages can be above this limit.
Loan-to-value limits
LTV limits mean you need to have a deposit of a certain amount before you can get a mortgage. There are different limits in place depending on what category of buyer you are.
- First-time buyers need to have a 10% deposit
- Second and subsequent buyers need to have a 20% deposit
- Buy-to-let buyers need to have a 30% deposit
Lenders have a limited amount of discretion when it comes to these limits and in a calendar year can make exceptions for:
- 5% of the value of mortgages for first-time buyers
- 20% of the value of mortgages to second and subsequent buyers
- 10% of the value of buy-to-let mortgages
These rules don’t apply to switcher mortgages and housing loans for restructuring mortgages that are in arrears and pre-arrears.