Getting approved for a mortgage can seem like an impossible task, especially for first-time buyers who just want to get a foot on the ladder. There is a seemingly never-ending maze of rules and regulations to wade through, as well as challenges posed by inflation, the housing crisis and the fact that we are in a sellers’ market, to name just a few. The good news is that there are mortgage exceptions that can help ease the burden for some borrowers, provided they meet certain criteria.
In this article, we will discuss the two main types of mortgage exceptions available, including an overview of the eligibility criteria to help you figure out if you can get an exception.
What are mortgage exceptions?
In 2015, the Central Bank of Ireland introduced several new rules that were designed to prevent over-lending and ensure that financial institutions lend sensibly.
However, these rules are not set in stone — when a mortgage proceeds outside of these guidelines, it is known as a mortgage exception or a mortgage exemption.
Exceptions are not available to everyone, but lenders are allowed to lend a certain amount above these limits in any one calendar year.
Loan to income (LTI) exception
The rules of the Central Bank state that buyers can borrow up to 3.5 times their income, which is known as the loan to income limit.
Due to the steady increase in house prices over the past few years, many people are unable to borrow enough to meet the current asking prices.
However, you may be eligible to borrow up to 4.5 times your gross income — this is known as a loan to income exception. In any one calendar year, only 1 in 5 mortgages given out to first-time buyers can be at a higher rate.
Loan to value (LTV) exception
The second exception to the Central Bank’s rules is known as a loan to value (LTV) exception, and this refers to the percentage of the property’s value that you can borrow and how much of a deposit you’ll need to pay upfront.
Generally speaking, first-time buyers must provide a minimum deposit of 10% upfront.
Second and subsequent buyers must have a minimum deposit of 20%, but this can be reduced to 10% with an LTV exception.
Can I get a mortgage exception?
Getting a mortgage exception isn’t easy. It depends on a combination of factors, including your creditworthiness, your repayment capacity, the strength of your mortgage application and whether the lender has reached their limit yet.
To help you determine if you may be eligible for one, here is an overview of the criteria you will be assessed on.
Your repayment capacity
First and foremost, lenders will want to see that you can afford the repayments (including ‘stressed’ repayments, which can result from mortgage rate increases).
For about six months before you apply for a mortgage, aim to save around 1.3 times the repayment amount each month (you can include your rent amount in this).
This will demonstrate to the lender that you are capable of saving the required amount and keeping up with repayments.
Your overall financial situation
The lender will take your overall financial health into account when considering your application. Things like regularly going into overdraft or spending money on gambling sites will hurt your chances of getting approved.
Mortgage exceptions and your credit history
In order to be eligible for a mortgage exception, you should be able to demonstrate a clean credit history for at least five years before submitting your application.
To check your credit history we recommend you order your Central Credit Register Report (CCR Report) before applying for a mortgage.
How much net disposable income do you have?
The lender will want to assess how much you are spending on bills, overdrafts, childcare costs, credit cards, etc. and how much you have left over after paying taxes.
Generally speaking, they will want to see that you are spending no more than 40-50% of your disposable income on your debts.
Your employment situation
You are more likely to be approved if you have been in the same job for at least a year and are no longer in a probation period.
Self-employed people will need to submit at least two years of accounts with their application depending on the lender.
Your impartial mortgage advisor
Navigating the mortgage market can be tricky, especially in these challenging times. At Symmetry Financial, we pride ourselves on being a source of authority and impartial advice on mortgages.
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