First-time buyers Ireland: Embarking on the journey of homeownership is a momentous milestone, but unfortunately the property market in this country continues to present many challenges to your cohort, making the process of financial planning all the more important.
If you are a first-time buyer looking to land your dream property, this article will guide you through the essential steps, from understanding your eligibility to securing a mortgage.
Understanding first-time buyer status
First things first – what classifies a first-time buyer?
Criteria for being a first-time buyer
To be classed as a first-time buyer, there are specific criteria you must meet. Primarily, you must not have previously taken out a mortgage, either domestically or internationally. This status provides certain advantages, including access to various government support schemes aimed at making homeownership more attainable, which we will discuss in further detail later in the article.
Impact of previous property ownership on status
If you have inherited a property or purchased one outright without a mortgage, you may still qualify as a first-time buyer. Additionally, individuals who have gone through separation, divorce or bankruptcy since their previous property purchase may also regain this status.
It is crucial to note, however, that both parties on a joint mortgage must meet these criteria to benefit fully from first-time buyer incentives.
Determining borrowing capacity as a first-time buyer in Ireland
One of the most important things to establish as a first-time buyer is the sum of money you are eligible to borrow. To work this out, there are several factors to be aware of.
Central Bank lending limits
The Irish Central Bank imposes stringent lending limits to ensure responsible borrowing. Typically, first-time buyers can borrow up to four times their gross annual household income. Mortgage exemptions, allowing up to 4.5 times the income, are available but reserved for approximately 20% of applicants who demonstrate the lowest financial risk (Bank of Ireland allows up to 4.7 in certain circumstances).
Lender-specific credit policies
Beyond Central Bank regulations, each mortgage lender applies its own credit policies. These can vary significantly, impacting your borrowing capacity.
Some lenders may exclude bonuses and commissions from income calculations, while others might enhance loan offers for public sector employees. Understanding these variations is essential for maximising your borrowing potential.
The role of income and outgoings in mortgage approval
Lenders scrutinise your income and expenditure patterns over a certain period (usually a minimum of six months) to assess your repayment capabilities. With this in mind, building a consistent saving habit and ensuring prudent management of outgoings will enhance your appeal to lenders.
By minimising unnecessary expenses and bolstering your savings, you improve your chances of securing a favourable mortgage offer.
Saving for a deposit
Every penny counts when it comes to saving for that all-important deposit.
Minimum deposit requirements
In Ireland, first-time buyers are required to provide a minimum deposit of 10% of the property’s purchase price plus costs including stamp duty (1% purchase price) and legal fees (circa €2,000). While this may seem daunting, starting early and setting realistic saving goals can make this requirement more manageable.
Strategies for maximising your deposit
Maximising your deposit involves disciplined saving and leveraging all available resources. This can be achieved by:
- Creating a budget to track your income and expenses
- Cutting non-essential costs to boost your savings
- Considering high-interest savings accounts to grow your funds more efficiently
- Exploring government-backed savings schemes
The latter can make a huge difference to first-time buyers hoping to take those initial steps onto the property ladder.
Government schemes to boost your deposit
The government support schemes that are available in Ireland can significantly bolster your deposit. These schemes are designed to alleviate the financial burden and make homeownership more accessible. It is therefore integral to familiarise yourself with the various options available to assess your eligibility.
Help to Buy scheme
The Help to Buy scheme provides a tax refund of up to 10% of the purchase price of a newly built home, capped at €30,000. To qualify, you must have paid sufficient tax in the four years preceding your purchase. This scheme can substantially increase your deposit, bringing homeownership within reach.
First Home Scheme
The First Home Scheme allows first-time buyers to secure up to 30% of the property’s value in exchange for a share in the home. This initiative helps bridge the gap between savings and the necessary deposit, especially in high-demand areas.
Insider tips for success
There are three surefire ways to maximise your chances of success as a first-time buyer:
1. Manage your finances before applying
In the months leading up to your mortgage application, prioritise financial stability. Reduce your outgoings, maintain a robust savings pattern, and avoid taking on new debts. This financial discipline demonstrates to lenders that you are a low-risk borrower.
2. Familiarise yourself with the available support schemes
Thoroughly research and utilise all available government support schemes. Combining the Help to Buy scheme, the First Home Scheme can significantly boost your deposit, making your dream of homeownership more achievable – but not every support scheme is available in every set of circumstances.
3. Choose the right mortgage broker
A knowledgeable mortgage broker can be instrumental in navigating the complexities of the mortgage market. They can match you with lenders that align with your financial profile and maximise your borrowing potential.
It’s important to seek a broker with access to a wide range of lenders to ensure the best possible outcome.
First-Time Buyers Ireland: Start your home-buying journey today with our help
Embarking on the home-buying journey requires meticulous financial preparation. By understanding your eligibility, maximising your deposit and leveraging available support schemes, you can confidently step into the role of “homeowner”.
For personalised mortgage advice and expert guidance, our team of mortgage specialists at Symmetry Financial Management should not be overlooked. Our professional insights will guide you through every aspect of the process, ensuring no hidden costs derail your plans. Contact us today for a consultation and take one step closer to owning your dream home.
