Buying for the first time? It goes without saying, getting the details right at the beginning is vital, after all, this is likely to be the most expensive purchase you’ll ever make. Yikes.
But with so much banking jargon and phrases that leave us dazed and confused, we thought we'd debunk the myths and mystery around getting started on this complicated process. We chatted to Financial Advisor, Tara Wylie for some no-fuss advice.
Before you even think about agreeing on a mortgage, you need to know these do's and don'ts:
- Don’t accept the first mortgage offered to you by your bank. Most customers go to their own main bank out of some false sense of loyalty or expectation and don't check out what else may be available. Shop around to make sure you get the best rate on offer. Many lenders are offering lower fixed rates, legal fee contributions or free valuations at the moment.
- Do use an independent mortgage broker to check out the best mortgage deals. This can save you time and effort searching the market for a good offer. Be the best and get ahead of the rest!
- Don’t overstretch yourself. Use the handy mortgage calculators available online or on myhome.ie to see what your mortgage repayments would be. Make sure you feel comfortable with repayments now and what they may be in the future if interest rates rise.
- Do put down a deposit if you can. The majority of lenders don’t tend to like customers who are overly dependent on parental gifts and bring little or no savings to the table. If you’ve got a deposit, even if it's small, you’ll get a much better response from the banks.
Under new CBI rules since February, FTB's (First Time Buyers) are required to have a 10 per cent deposit in place up to the first €220k of the purchase price and 20 per cent of the balance of the purchase price.
For example:
A purchase price of €280k for a FTB will require a deposit of €22k for the first €220k, and €12k for the remaining €60k of the purchase price – so €34k in total plus costs.
If you're a couple buying and only ONE of you is a FTB – you are BOTH classed as second-time buyers for lending purposes and a 20 per cent deposit will be required.
Based on the same example above – this would increase your deposit to €56k in total plus costs.
- Do ask if there is an exemption available. If you need to go 'outside' of the boxes for a particular property (especially in Dublin), check with the lenders to see if you qualify for an exemption.
Exemptions
LTI exemption (loan to income), would be an exemption outside of strict 3.5 x income, subject to you meeting lenders qualifying criteria to do this.
LTV exemption (loan to value), would be an exemption to reduce the amount of deposit required, so the same €280k purchase price used in example above
could qualify for only a 10 per cent DEPOSIT, thereby reducing costs to €28k for actual deposit plus costs.
These exemptions are 'built into' lenders' calculators at the time of house-hunter approval and cannot be manipulated externally by branch staff. So, the computer will either say yes or no with built-in measures already assessing the outcome of the decision embedded in the calculator.
It is NOT possible to qualify for an exemption for BOTH of the above.
Extra costs to budget for when buying a home
On top of the initial property purchase price, you must remember to take into account some extra costs. Make sure you don’t get surprised by these when buying your first home.
- Solicitor’s fees: These can vary, so shop around. Not every solicitor who quotes for a conveyance will do them regularly. Many solicitors will specialise or also facilitate circuit or county court and not be spending the majority of their time on conveyancing.
Local searches, Land Registry, Bankruptcy searches; these are all usually at a set price and regular charges which appear with ALL solicitors.
Stamp Duty is the standard 1 per cent up to a million euro – whether you are a first-time buyer or not.
- Mortgage lender’s valuation. These can vary, depending on bank and location and are usually between €130 - €250 (inc VAT). Some lenders are offering free valuations to tempt potential buyers.
- Engineers Report. A voluntary report – usually recommended by solicitors if your new home is older than ten years or doesn’t have a homebond or Premier Guarantee. This is voluntary and for “your eyes only”, unless you purchase a property of 99yrs or older, in which case, this report is mandatory and the lender will want a copy also.
- Buildings Insurance. You can’t get a mortgage without it with 99 per cent of lenders.
- Life cover. This is also mandatory, and you can’t get a mortgage without it. It can be referred to as Mortgage Protection or Decreasing Term Assurance and covers the amount of mortgage and term to protect the “lender” in the event of your death, by clearing any residual mortgage outstanding
- Removal costs. One way of saving money is to do the move yourself, so persuade strong mates with vans to lend a hand.
Tara Wylie is a Qualified Financial Advisor and Director of New Star Financial Management Ltd in Mullingar and Dublin, which is a member of the nationwide Trusted Advisor Group.
