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How Much Can I Borrow To Buy A Home?
Purchasing your home can be very exciting but it can also be overwhelming – there are many factors to consider such as how much you can borrow, what rate you can get, and how to move forward with your mortgage.
This article is designed to help you outline how much you can borrow whether you are a first time buyer or a second or subsequent buyer.
How Much Can I Borrow?
Lenders calculate the amount that you are eligible to borrow in a few different ways. Some may start by looking at what percentage of your income each month will be paid towards the mortgage, while others may start with your annual salary instead.
The Central Bank regulations prevent a lender from allowing you to take out a loan that is greater than 3.5 times your gross yearly income relative to the mortgage on the house you will be living in. This constraint does not apply, however, in a buy-to-let mortgage.
Rule of Thumb: 3.5 Times Your Annual Income
For example, if you are earning €65,000 each year in gross income, the maximum amount that you can borrow is €227,500 and can be calculated as follows:
€65,000 x 3.5 = €227,500
It is important to note that this limit will also be subject to other lending criteria and affordability checks, such as loan to value requirements. First-time homebuyers can borrow up to 90% of the total value of the home, which means you must provide the remaining 10% as a deposit.
Repeat buyers, however, can only borrow up to 80% of the home value and are required to source a 20% deposit. Continuing with the example from above, the borrower was eligible to borrow up to €227,500. If the value of the home is €250,000, they are limited to a loan of €225,000 – this means they must have a deposit of €25,000.
Many lenders have online calculators that can help you determine how much you are eligible to borrow and what you can afford per month, but a simple rule of thumb for calculating this is the debt-to-income ratio or the 28/36 rule.
28/36 Rule of Thumb
This rule states you should not spend more than 28% of your gross monthly income on housing, and your total debt repayments should not exceed 36%.
Using this rule, if you make €3,000 per month you should not spend more than €840 on mortgage repayments, and your total debt should not exceed €1,080. Surpassing these numbers will not prevent you from getting a mortgage, but rather gives a guide as to what you can comfortably afford.
Find Out How Much You Can Borrow
As a mortgage broker in Ireland with a reputation for delivering exceptional personal service, our goal to ensure first time buyers, second and subsequent buyers and investors have all the answers & assistance they need when buying their home. To find out how much you can borrow, arrange a no-obligation consultation with one of our team at a time that suits you. Just email us at info@symmetryfinancial.ie or call us now on 01 6831673. We’re here to help.
Please note: On most mortgages, we don’t charge a fee as we collect our fee from whichever bank you choose and the bank pays us once your mortgage is issued. However, for mortgages under €150,000 we may charge a small fee.
How To Get A Mortgage – A Step By Step Guide
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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