10 frequently asked first-time buyer mortgage questions
4 MIN READ
First-time buyers frequently have a lot of questions about mortgages.
Not only is getting a mortgage and buying a home one of the biggest financial decisions you’ll ever make, there’s also a lot of jargon to get your head around.
To help out, here are answers to 10 of the most common questions that first-time buyers ask.
1 Can I afford it?
The first question is can you afford to buy a home.
Some first-time buyers concentrate solely on how they will find that 10% deposit but there are other large expenses you’ll have to pay.
Things like stamp duty, legal fees, surveyor’s fees, valuation fees, local property tax, mortgage protection and home insurance.
Don’t let this put you off though.
With a bit of planning and preparation, you could be closer to buying than you think.
But do work out the total cost of buying and owning a home upfront so there are no surprises.
This article will help:
2 How much can I borrow?
You can generally borrow up to three and a half times your yearly income before tax.
This is the Central Bank’s ‘loan-to-income’ limit (LTI) which limits how large a loan you can take out based on your income.
For example, if your income is €50,000 a year before tax the maximum you can borrow is:
3.5 x €50,000 = €175,000
There are some exceptions to this rule so it’s worth checking with your mortgage specialist.
But you can’t borrow the entire cost of buying a home, first-time buyers need to provide a 10% deposit themselves.
These limits can vary depending on your circumstances.
Find out how much you can borrow:
3 How will I save up the deposit?
As a first-time buyer, you’ll generally need a deposit of at least 10% to apply for a mortgage (in addition to the other costs mentioned above).
That means finding anything from €15,000 in Sligo or Donegal to €60,000 in South County Dublin according to a June 2019 report by Daft.ie.
To do this you will need to work out a personal budget, cut your spending where you can and do some serious saving for a while.
There’s plenty of advice out there on how to cut spending each month, here are some of our tips:
And here is one couple’s experience of saving the mortgage deposit:
4 How do I increase my chances of getting my mortgage application approved?
Before sending in a mortgage application, it helps to have all your finances in order.
Lenders want to see that you have a healthy savings habit and that you will be able to afford the monthly mortgage repayments.
So you might want to think about reducing debt by paying off any existing loans and getting rid of any large credit card balances.
Lenders are required to look at your credit rating to see if you have missed any payments or failed to pay off any debts.
Here are 5 things to do before applying for a mortgage:
5 How do I avoid common first-time buyer mistakes?
First-time buyers sometimes limit themselves to considering homes that they cannot afford on their current income and outgoings.
This often goes hand-in-hand with becoming fixated on homes in a specific neighbourhood and excluding alternative locations.
We can all fall in love with places we cannot afford but try to remain open to less expensive properties and a range of different locations.
After all, you may still be able to trade up over time to your ultimate dream home.
You can read more about first-time buyer mistakes to avoid here:
6 Will my first home still be suitable in the future?
If you plan on living in your first home for some time you may want to consider if it will still meet your needs in the future.
If you plan to start a family in the next few years, for example, will your first home be suitable for children and close to good schools?
If you think you might be changing jobs in future will it still be convenient to get to work from your home?
Buying a home makes you focus on what your future might look like so it’s worth having some ‘what if’ conversations well in advance.
Future-proof your first home by asking these questions:
It might also help to hear Dan and Jenny’s experience:
7 Should I choose a fixed or variable rate mortgage?
With a fixed rate mortgage, the rate of interest that you pay to borrow your mortgage loan is fixed for between 1 year and 10 years (you decide, upfront, how long).
During this time your mortgage rate will not rise or fall and your monthly repayments will stay the same.
On the other hand, with a variable rate mortgage the rate can rise or fall.
And that means what you pay for your mortgage each month can rise or fall.
You can also choose a split mortgage where a portion is fixed and a portion is variable.
Bank of Ireland also offers a green mortgage fixed interest rate if you are buying a property that has a Building Energy Rating (BER) of A3 or better*.
Find out more about fixed, variable and green mortgage fixed interest rates here:
8 How can I fit applying for a mortgage around my daily schedule?
When you are working full-time, it can be difficult to find the time to meet a mortgage lender during the day.
At Bank of Ireland, we have a team of mortgage specialists who will come out to meet you at a convenient time – including weekends – and at a convenient place.
You can also meet them on Facetime or Skype and follow up by phone or email.
Find out more and get the contact details of your local specialist here:
9 Can my mortgage adapt if my life changes?
When you are comparing mortgages from different lenders it’s important to check the rates but it’s also helpful to check how flexible the mortgages are.
For example, can you ask for a payment break when you need it?
A break might come in handy if you start a family, have to take time to find a new job or want to travel for a while.
You might also want to be able to overpay your mortgage using a one-off lump sum or by increasing your monthly repayment amount.
Overpaying means that you can reduce the length of your mortgage by paying off the balance sooner.
Alternatively, you could use a lump sum to reduce your outstanding balance and reduce your monthly payments keeping the length of your mortgage the same.
Learn more about flexible mortgage options here:
10 How long will it take?
The answer to how long does it take to buy a home is ‘it depends’.
Buying a home means lots of viewings and often involves bidding against other buyers.
It’s unlikely that you will be successful at your first attempt and, for some, it may take time to find the home they eventually buy.
However, if you are ready to move, have all your paperwork ready, have your finances in order and have a bit of luck it can be done quickly.
Here is the experience of Niamh and Richard:
Find out more
For more information on getting mortgage ready and top tips, signup to get your First Time Buyer e-book today.
*You must draw down your new mortgage loan by 30 June 2020. At the end of the initial fixed rate period customers can choose from the normal interest rate options available to existing customers at that time. Terms and Conditions apply.)
The lender is Bank of Ireland Mortgages. Lending criteria and terms and conditions apply. A typical mortgage to buy your home of €100,000 over 20 years with 240 monthly instalments costs €615.79 per month at 4.2% variable (Annual Percentage Rate of Charge (APRC) 4.3%). APRC includes €150 valuation fee and mortgage charge of €175 paid to the Property Registration Authority. The total amount you pay is €148,114.60. We require property and life insurance. You mortgage your home to secure the loan. Maximum loan is generally 3.5 times gross annual income and 80% of the property value (90% of the property value for first-time buyers). A 1% interest rate rise would increase monthly repayments by €54.02 per month. The cost of your monthly repayments may increase – if you do not keep up your repayments you may lose your home. Available to over 18s only.
Bank of Ireland Mortgage Bank trading as Bank of Ireland Mortgages is regulated by the Central Bank of Ireland.