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6 Things You Need To Know Before Applying For A Mortgage
Since the onset of the COVID-19 pandemic, house prices in Ireland have continued to soar. In spite of this, more first-time buyers than ever are finding their feet on the property ladder.
Figures from August 2021 show that close to 4,572 mortgages were approved during that month alone – an 18% increase on the same month in 2020. What’s more, first-time buyers made up the majority, accounting for 53.8% of the total figure.
While mortgage approval rates have increased in this timeframe, so too have the price of properties, with residential prices rising by 10.9% over the course of this 12-month period.
However, it would seem that this significant hike in housing costs is failing to deter eager first-time buyers, with many crediting excess savings and decreased spending during the pandemic for placing them in a better financial position. Add to this the fact that in nearly every part of the country (Dublin 4 and Dublin 6 aside), it is now more expensive to pay rent than to make mortgage repayments on a three-bedroom home, and you can see why the attraction to become a homeowner remains so strong.
With higher approval rates and perhaps a substantial nest egg at your disposal – paired with the crippling cost of renting a home – now could indeed be the right time for first-time buyers to take those initial steps towards the property ladder.
To ensure you have all your ducks in a row ahead of this life-changing event, let’s explore the six things you need to know before applying for a mortgage.
1. How much you can afford – and how much you’re likely to get
The two most important nuggets of information you should have to hand before applying for a mortgage are firstly, what you can practically afford to pay back, and secondly, how much you will realistically be approved for. The latter can be calculated by researching the Central Bank’s rules regarding mortgage loans.
Current rules dictate that first-time buyers need a deposit of 10% of the value of their desired property, while the amount they will be eligible to borrow equates to 3.5 times their annual income – or combined income, in the case of a joint mortgage. These stipulations will give you a guide as to the approximate amount you should be able to borrow, helping you to manage your expectations and browse in a more strategic way.
2. Your current debts could cause some problems
Whether a sizeable loan or those monthly repayments on the car you needed, existing debts can affect the amount you will be eligible to borrow. Before considering the mortgage process, it is advisable to understand how these debts may impact your ability to borrow as much as possible.
Missed or late repayments will show up on your Central Credit Register (CCR) report and can go against your mortgage application.
Another top tip for reducing debt in the run-up to a mortgage application is to regularly clear credit cards that you find yourself using consistently for day to day purchases instead of only repaying the minimum amounts.
3. There are certain initiatives you may be eligible for
There are certain government initiatives in place that provide first-time buyers with financial help to secure the home of their dreams.
A mortgage exemption is one such scheme – although these may be in short supply at this point in 2021, given the staggering number of loans approved already this year. An exemption increases the lending cap from 3.5 to 4.5 times the salary of the applicant, which can considerably increase a person’s scope when house hunting. However, only 20% of mortgages given to first-time buyers annually are subject to exemption rules, while a person’s eligibility can also be dictated by their ability to repay a larger mortgage.
Similarly, first-time buyers looking to purchase a new build can benefit greatly from the Help to Buy scheme. The initiative enables those eligible to save up to 10% (or a maximum of €30,000) on the purchase price of a newly built house or apartment, by way of a tax rebate. The scheme was recently extended until 31st of December 2022, meaning many more first-time buyers are likely to avail of this helpful saving for some time to come.
4. Your accounts should be in order
When applying for a mortgage, you will need to show at least six months’ worth of current account statements. This means you will need to be sensible about any transactions you make during this period by avoiding frivolous purchases, reducing overdrafts and ensuring that there is no evidence of payments to betting accounts or other gambling websites.
Regular payments into a savings account will also largely stand in your favour, as will evidence of loans being paid in full, showcasing your ability to meet repayments.
5. Your eligibility may be affected by the pandemic
While the vast majority of restrictions have been lifted, the effects of the pandemic are lingering. This is particularly evident when it comes to mortgage applicants, whose eligibility might be affected due to circumstances beyond their control.
In the case of individuals employed by a business benefitting from the EWSS scheme, they will find it extremely difficult to receive approval in principle. Similarly, those that lost their jobs during the pandemic and have since moved on to a new position will have to wait a little longer to act on their home-owning ambitions, with most lenders requiring a minimum of 6 months employment, and that you have completed your probationary period.
Self-employed applicants hit hard during COVID will also suffer the consequences, with most mortgage providers taking their past two, or even three, years of company accounts into consideration when calculating their loan entitlements.
6. Getting expert help will make the process a whole lot easier
With so many rules, regulations and requirements, navigating the world of mortgages can be a daunting task for first-time buyers. This is why seeking expert help from professionals will not only simplify and potentially speed up the process, but it will give you peace of mind that you’re securing the best mortgage for your individual circumstances.
With an experienced team of mortgage advisors on hand to help you take this huge step, Symmetry Financial Management is uniquely placed to provide clear, simple and concise advice that will enable you to make a fully informed decision on the mortgage that’s right for you.
Allow Symmetry Financial Management to guide you through the journey from start to finish. Get in touch today to book a no-obligation consultation.
If you’d like a free, no-obligation consultation for your mortgage, pension or financial needs, get in touch here, call us on 01 6831673 or email us directly on info@symmetryfinancial.ie.
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