Mortgage Deposit – What Can I afford?
Stepping on the property ladder is an exciting prospect, but before you start browsing window displays and your local estate agents glossy magazine, you will need a mortgage deposit, so it is essential that you examine your finances to find out:
- if you have enough income to apply for a mortgage
- how much mortgage you can apply for, and
- how much deposit you can afford
One of the easiest ways to find the answers to these questions is by employing the services of a mortgage broker who will be able to give you a clear indication of exactly how much you can afford to borrow, what your initial down payment will be, how long your mortgage will run, how much you should expect to pay each month, and perhaps most importantly of all, where you’ll get the best mortgage deal in Ireland.
The Benefits of Using a Mortgage Broker
Since the wonderful invention of the World Wide Web, we can access a wealth of information that we simply couldn’t find before, and as result, many of us are tempted to ‘go it alone’ with the help of online calculators and article reviews. But when it comes to calculating your mortgage, the biggest investment you are ever likely to make in your life, it is advisable to seek help from the professionals.
A mortgage broker or advisor will not only have the skills needed to calculate exactly how much you can afford based on your incomings (declared and undeclared), your outgoings, and your other financial commitments, but they also have special deals with mortgage lenders that you simply will not get when applying as an individual, and so they could save you money in the long run.
How Much Will You Be Able to Borrow for Your Mortgage?
The amount you can borrow for your mortgage depends on a number of factors set out by the Central Bank of Ireland. These include your income, your outgoings, and any other financial obligations that you may have.
Fortunately, lending criteria are less strict now than they were just 3 years ago, but general rules do still apply, particularly for first-time buyers. At the time of writing, first-time buyers looking to mortgage a principal residence will be able to borrow a maximum of 90% of the house value, however, they cannot apply for a mortgage that exceeds 3.5 times their gross annual income.
Lenders are allowed to exceed the 90% LTV (loan to value) limit in 5% of cases, but this is subject to special circumstances and at the lender’s discretion. First-time buyers looking to borrow more than 90% should speak to a mortgage broker, who will be more likely to secure them a deal than if they apply themselves.
So How Much Mortgage Deposit Will You Have To Pay?
Based on the above calculations as outlined by the Central Bank of Ireland, you can expect your Mortgage Deposit to be at least 10% of the house value. So, if the house you want to buy is €200,000, as a first-time buyer, you should expect to pay around €20,000 deposit.
But the rules are different for non-first-time buyers. In this instance, the maximum amount you can borrow is 80% of the house value, and therefore the deposit amount will be 20% of the LTV, resulting in a €40,000 deposit on a €200,000 property.
It is important to note that not all mortgages in Ireland are subjected to these exact limits, and lenders do have some freedom when it comes to determining how much they will lend you. Mortgage brokers have deals in place with a wide range of lenders, and so it makes sense to discuss your financials with the professionals and let them do the footwork while you set about finding your dream home.