Buying a Home in Ireland
Part 1 of 3.
In this first of three posts in our series on buying a home in Ireland, we'll discuss the basics on getting 'mortgage ready'.
- Save for a Deposit:
In Ireland, you'll typically need at least a 10% deposit if you're a first-time buyer and more if you're a second-time or subsequent buyer.
The larger your deposit, the less you'll need to borrow, and the more favourable the mortgage terms you can secure.
Some of the most attractive rates will only be available to people with bigger deposits.
- Income and Employment:
Lenders will look for stable and regular income.
Being in permanent employment for at least six months to one year prior to applying for a mortgage is usually required.
If you are self-employed, you'll need to provide at least two to three years of accounts.
Unfortunately, if your income is earned overseas, you will find it difficult to secure a mortgage.
- Visas & Citizenship:
Banks will consider you for a mortgage if you are a EU/EEA citizen or if you are a non-EU/EEA citizen with a Stamp 1, Stamp 1G, or Stamp 4 visa.
You usually need to be living and working in Ireland for at least a year before they will consider you for a mortgage.
- Manage Your Finances and Spending:
You need to be able to demonstrate that you can manage your finances effectively.
This means avoiding overdrafts, paying bills on time, and not taking on new debts.
Constantly dipping into your overdraft is seen as a red flag for lenders so try to avoid using your overdraft at all costs.
And never, ever bounce any payments or direct debits.
Having other debt commitments will significantly reduce how much you can borrow. A modest car loan, for example, could reduce your borrowing capacity by €100,000 or more.
In addition, banks do not like to see payments to online betting firms (even if it's only a few small payments over the previous six months) so avoid online gambling altogether as this could result in your application being declined.
Lenders will examine your bank statements (including your Revolut card if you have one) for the previous six months to a year.
- Make your mortgage approval a 'No-Brainer' for the bank:
Banks want to make sure you can afford your mortgage payment (and that you could still afford it if interest rates go up or if your overtime or bonuses are reduced).
Show that you can easily afford repayments by having a paper trail of your rent payments and save as much money as possible CONSISTENTLY every month.
Being able to present a case to an underwriter that between your current rent payments and monthly savings, you can EASILY afford to pay your mortgage, will significantly improve your chances of getting mortgage approved.
- Income Multiples & how much can you borrow?
As a general rule, the banks will lend a maximum of 4 times a couple's joint GROSS annual incomes.
However, not all income is equal. Only a small percentage of bonuses, overtime and commission will be factored in to calculate what you can borrow. (How much the banks will include varies from bank to bank).
In addition, existing loan commitments (and even having kids) can reduce what you can borrow, so don't assume you'll automatically get 4 times your income.
The better news is that in 20% of cases, the banks are allowed to increase this income multiple from 4 up to a maximum of 4.5 times.
They will typically do this only in cases where it's a 'no-brainer' - so make sure you get mortgage ready and be able to prove that you are a really safe bet and the bigger deposit you have, the better.
Part 2 of 3 will be posted in the coming days on the next steps of getting mortgage ready. I hope this has helped.
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Kind Regards
Danny Coad QFA
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