First time buyer guide to getting a mortgage - AM Financial
Start at the start please
AM Financial is a mortgage broker based in Malahide but serving all of North Dublin. AM Financial provides mortgage advice to clients in Skerries, Rush, Marino, Fairview, Castleknock, Sutton, Santry, Raheny, Howth, Drumcondra, Donabate, Clontarf, Beaumount and Kinsealy, Swords, Portmarnock and Malahide. You can contact us here
It is daunting for all first time buyers but we can help you every step of the way. It sometimes feels like you won't get there - but you will !
We give you some of the basics here and a selection of our hot tips at the end of this blog.
I mean, right at the start. What is a mortgage?
A mortgage is a loan used to buy a home. The house becomes security for the loan. A lender gives you money to buy, build or renovate a home and you agree to pay it back over a number of years, typically 25 to 30 years.
So I should go to my bank for this?
You certainly can. But for financial outlays this size, it pays to shop around. The cost differences can be huge between different lenders. The days of going to the bank that holds your current account are long gone.
And the beauty of coming to an experienced mortgage broker, like AM Financial is that we will shop around for you. It is a more confusing now with some banks packing up and leaving Ireland. But AM Financial has access to all the mortgage lenders in the broker market. As well as giving you mortgage advice every step of the way, we will find the best mortgage deal for you.
What should we do first - get our mortgage or get our house?
Excellent question ! When you apply for a mortgage through us, we will find the most competitive and suitable lender. At the end of the application process, we will get you an Approval in Principle from the lender. This is not a loan yet. But it shows you how much you can borrow based on the information you have given.
Having an approval in principle will mean that you are treated in priority by estate agents when viewing property. They know you are a serious buyer.
When you gone sale agreed on the home you wanted, the last step is to turn the Approval in Principle into a mortgage loan.
How much money do we need to bring to the table?
For those of us old enough to remember the lending practices in the pre-2008 financial crash years, we can recall mortgages given with no need for deposit. But the lending environment has changed completely now.
Central Bank rules govern how much can be borrowed (in relation to your income, generally capped at a 3.5 multiple of your income) and how much deposit must be brought to the table. The good news for first time buyers is that the rules are more lenient. However, a deposit of 10% of the property value will be required. The maximum your mortgage loan can be is 90% of the cost of your new home.
And what about those tips you promised us?
Show a record of putting something away regularly. Lenders look primarily at your income and the deposit you bring to the table as per the Central Bank guidelines. However, they also look for evidence that you can manage a regular mortgage payment.
Nobody likes paying rents in Ireland currently. However, evidence that you have been paying this for six months or a year is powerful evidence that you will be able to support a mortgage payment. Mortgage payments are generally a lot lower than rental payments for AM Financial clients.
If you are not paying rent (lucky you!) and perhaps living with your parents, set up a regular monthly transfer to your savings account.
First time buyers always ask us whether mortgage lenders look unfavourably on gifts from mum & dad. Not at all ! If you're lucky enough to be in receipt of such a gift, bring it to the table and it goes towards your deposit. Lenders will generally ask that it is documented in a gift letter - outlining that the money is a gift and that no repayment will be sought.
What about the mortgage protection policy?
In almost all situations, you will need a mortgage protection policy to go with your mortgage. A mortgage protection policy is designed to pay your mortgage loan off in full in the event of your death. In the past, lenders often pushed borrowers towards their own mortgage protection policies - which often were not the cheapest and best in the market. An important tip here is to shop around.
AM Financial has access to all the large insurers in this market - Zurich, Aviva, New Ireland, Irish Life and Royal London. We will get you the best quote and save you money.
Any more tips?
Pay down debt! Start with the most expensive. Credit card loans. Bank loans, Credit Union Loans. Do this for so many reasons. It demonstrates good financial management. But also because debt will eat into what you can borrow for your mortgage.
And one last tip for good luck?
As well as your 10% deposit, buying a new home can be an expensive business. Other demands for your cash upfront include 1% stamp duty, legal fees (€2,500 to €5,000), survey costs, new furniture and moving costs.
Some of the lenders offer cash-back mortgages to assist with this cash flow. Often these lenders charge higher rates so the borrower will pay more in the long-term. However, a savvy approach may be to refinance these mortgages a few years down the line to mitigate these costs. The topic is nuanced and dealt with more here.
Ok, how do I start?
AM Financial is an experienced mortgage broker. Contact us here. We will be in your corner. We will get the best deal for you and give you the best mortgage advice along the way.