Advice for first-time house buyers in Ireland

At last, we have signs of house prices stabilising, with various relief schemes and relaxed lending rules also improving affordability.

On the rental market, many who want to own their own home have been trapped into paying spiralling rent for years now, on account of well-documented supply and affordability concerns.

Homeownership is still a tricky proposition, requiring careful planning. But, for people looking to get on the housing ladder, the pipe- dream may now be gradually shifting into dream home territory.

For over a decade, low and middle-income earners have had so little hope of home-ownership, that fewer are aware of how to effectively prepare for a mortgage application.

Realistically, buying a home is the biggest financial transaction most people will undertake in their lives; so, the best advice is to work with a broker. Their experience will help pre-empt obstacles, make the best lending case possible, and ensure an affordable mortgage.

Speak Sooner with a Mortgage Broker

Initial mortgage assessments are often free, (they are with Mortgage Navigators!), and planning 12-18 months ahead of when you want to buy allows time to get your financials picture in order, and to address any potential red flags, so you get approval when you need it.

Mortgage approvals stay valid for up to 12 months, allowing time for house-hunting

Check Avenues for the 10% Deposit

With rents so expensive, it is hard to save for a deposit. You cannot borrow for a house deposit, but a family gift is perfectly acceptable, in more ways than one!

See if you qualify for the ‘Help to Buy’ HTB scheme, which allows decent tax reliefs for first-time buyers, and review the FHS, ‘First Home Scheme’ too, a type of equity share of up to 30% with your lender, or 20% if already availing of HTB.

Apart from the deposit, factor in costs like solicitors’ fees (€2,000-2,500), valuation fees up to €250, and a structural engineers report or potential drains tests, in subsidence areas.

Demonstrated Repayment Ability (DRA)

This is where an application is most likely to fail. The ability to meet the required mortgage repayment must be demonstrated for at least six months preceding a mortgage application.

Rent payment records, by standing order or direct debit, are ideal. If you’re paying in cash, have a rent book and indication of ATM withdrawals at the same time every month.

Show that you are leaving salary savings in your account, as well as annual bonuses or other occasional income.

If you have paid off a term loan (a once-off loan, not a car loan), this can be helpful for DRA.

Net Disposable Income (NDI)

Loans, including high credit card balances, reduce monthly NDI and can indicate that an applicant may not be able to afford both loans and a mortgage. This needs to be discussed. Sometimes, it is best to use savings to pay-off loans, ahead of a mortgage application!

CCR – Central Credit Register (Credit Check)

Run a CCR, prior to application. It is free and quick and ensures there are no surprises; especially if you have recently relocated to Ireland, in which case you will need a credit check from the country you are relocating from.

Experience the Mortgage Repayment

Proving ability to pay, DRA, is one thing, but build in a comfort factor when looking at borrowings. Plan to have at least €300-600 every month for a comfortable lifestyle, treats or emergencies. In the current interest rates environment, borrowers need to be able to sustain a rate hike too. Remember, a mortgage is a long-term commitment.

Property Value

Choose a location that is right for you, now and potentially in the future, and affordable. If the right house needs work, lenders will allow borrowings for renovation, assuming the property value is going to increase post work.

Prepare Paperwork

As well as proving salaries and income, expenditure, savings, and loan repayments need to be accounted for. A broker will specify exactly what is required.

Mortgage protection is also needed, so securing a quote and checking if a medical evaluation is required, should be done early too, as this can slow down the mortgage drawdown process.