A mortgage is a long-term loan that allows you to buy property. Getting a mortgage has always been difficult, but with the increasingly high cost of housing it has become particularly challenging. However, by planning ahead and making some life changes, you can start working towards buying a home.
Of course, saving for a mortgage might not be something that interests you now, or ever. If you choose to rent or live with family, that is completely fine, no matter what those around you decide to do.
What you need to get a mortgage
Before you apply for a mortgage, there are some things that you need to consider.
Start saving money
When they look at your bank statements, lenders will want to see evidence that you have been saving money. You will need to show that the amount you save monthly, together with your rent, would cover the monthly mortgage cost.
Once you pay for rent, food, transport and other essentials each month, you might find that you don’t have much left to save. However, there are some things that you may be able to do in order to increase your monthly savings. First, take a look at what you’re spending your money on. If you are regularly spending on non-essentials such as takeaways, weekly nights out or unused subscriptions, consider where you could cut back.
If you have the time, perhaps you can also consider taking on some additional hours at work or doing some freelance jobs. If you do decide to do this, make sure that you continue to take care of yourself.
Saving money each month might still prove challenging, even if you are only spending money on essentials. Some people make the decision to move back in with their family when saving for their first home. This won’t be possible for everyone, but if you think this could be an option for you, consider speaking with your family about it.
Get your deposit together
You must have a house deposit saved before you can get a mortgage. The minimum amount you must save is 10% of the price of the house. However, if you are able to save more than that, you can do so.
If you receive money as a gift, it is ok to put this towards a deposit. However, you must still be able to show ability to make mortgage repayments through your rent and savings history.
It is also a good idea to save for any additional expenses related to getting a house such as solicitors fees, mortgage life insurance and property tax due from the January after your purchase.
Speak with a mortgage advisor
In order to make sure you are taking all of the necessary steps before applying for a mortgage, and to find out about the options available to you, it is a good idea to speak with a mortgage advisor. They will be able to speak with you about your situation, tell you what documents you need to gether and help you to get on the right path. Make sure you research the advisor before arranging a meeting and find out whether they charge any fees for the advice that they offer. Most banks will offer a mortgage advice service. There are also independent mortgage advisors, or brokers, who will deal with several mortgage providers.
Usually, the first consultation is free, so this is a good chance to ask as many questions as you can about the process, and be clear about what fees they charge, if any. Some advisors will waive the fee if a previous client refers you to them, so ask around if anyone you know has worked with someone and if they have a referral process.
Have a secure income
Before offering mortgage approval, a lender will check to see if you have a secure income. This gives them confidence that you will be able to afford your mortgage repayments in future. Many lenders will prefer you to have a permanent work contract and for you to be employed for at least twelve months and have completed your probationary period.
If you are on a fixed-term contract, it’s still possible to get a mortgage. Lenders who work with people on fixed-term contracts will usually look for evidence that you have had contractual work for the last three years on a continuous basis. They will also try to determine how likely it is that you will stay on in your current position, or find more work somewhere else, once your current contract ends. The more skills that you have and the more job possibilities in your chosen field of work, the more likely it is that they will consider your application.
Clean up your bank accounts
When you apply for a mortgage, a lender will ask to see your bank and credit card statements from the previous six months at minimum. They do this to check that you are able to manage your money responsibly. If you plan to apply for a mortgage in future, it is a good idea to start cleaning up your finances now, and be aware that there will be someone looking at your statements and asking questions about your transactions.
Pay off any outstanding debts where possible. Otherwise, if you are paying off loans, do your best to keep up with the payments. Avoiding activities such as online gambling can help you to save and may make it easier to receive approval for a mortgage. If you’re having trouble quitting gambling, there are support services available.
In all, if you can show that you are putting money aside for rent and savings each month and that you don’t have any unpaid direct debits or standing orders, you are on the right track. It is important that the rent and savings transactions can be seen on your bank account statements. A mortgage advisor will be able to offer additional advice based on your personal circumstances.
Find out about your credit history
A lender will ask to see evidence that you have good credit history. Your credit history is information about any loans you have including credit cards, overdrafts and personal contract plans. All of this information is contained within your personal credit report.
If you are applying for a mortgage, it is a good idea to check your credit report beforehand. It can help you spot any mistakes or any missed payments you were not aware of.
You can check out your own credit history by applying to the Central Credit Register.
There are several supports available for first-time buyers.
Help To Buy incentive
The Help To Buy (HTB) incentive helps first-time buyers of new homes to buy a house or apartment. It also applies to self-built homes. It provides tax refunds of up to €30,000, or 10% of the purchase price of a property, whichever is less. The incentive only applies to properties costing €500,000 or less.
In order to apply for the HTB incentive, you must:
- Be a first-time buyer
- Buy or build a new property between 19 July 2016 and 31 December 2021
- Live in the property as your main home for five years after you buy or build it
- Take out a mortgage of at least 70% of the purchase price of the property
- Be tax compliant
- Have paid the same amount in either income tax or Deposit Interest Retention Tax (a type of tax on interest earned on bank accounts) or both, in the four years before you apply
- If you are buying or building with someone else, you will only qualify if neither of you has previously bought or built a property
If you are interested in getting a mortgage and want to know how much you are likely to get one for, you can use one of the simple bank calculators.
Rebuilding Ireland Home Loan
The Rebuilding Ireland Home Loan is a government-backed mortgage for first-time buyers. Loans are offered at reduced interest rates and you can use them to buy new and second-hand properties, or to build a home. The rates are fixed for the full term of the mortgage, so you have the same repayments for the lifetime of the loan.
Need more information?
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