What percentage can I borrow?
Central Bank rules apply limits to mortgage lending by regulated lenders in the Irish market. They apply to Loan to Value (LTV), and Loan to Income (LTI), on both PDHs (Principal Dwelling Homes), and buy-to-let mortgages. The limits are in addition to lenders’ own credit policies, and a lender will also consider affordability when assessing mortgage applications.
What are LTI (Loan to Income) Restrictions?
LTI restrictions mean that you can only borrow up to a maximum of 3.5 times your annual gross income when applying for a mortgage for a PDH. This limit also applies to you if you’re in negative equity, but does NOT apply to housing loans for buy-to-let properties.
What are LTV (Loan to Value) Restrictions?
For first-time buyers, the LTV limit is 90%. If you’re a first-time buyer, this means you’ll need a minimum 10% deposit. Due to the amount of time that sales can take, valuations that you have carried out on houses will be valid for four months.
If you are a non first-time buyer, you are limited to 80% LTV, so you can borrow up to 80% of the value of the property, and you’ll need a 20% minimum deposit. These LTV limits don’t apply to borrowers in negative equity applying for a mortgage for a new property.
For buy-to-let mortgages, the LTV limit is 70%. This means you’ll need a minimum deposit of 30% for a property you intend to rent out. For switcher mortgages, or housing loans for restructuring mortgages in arrears, or pre-arrears, these rules do not apply.
How much can I afford to borrow?
Use budget planning tools to work out a comfortable repayment each month. Be aware that you will need to include amounts for ‘unforeseen expenses in your budget.
Commonly available mortgage calculators can indicate the cost of your monthly mortgage repayment, but many lenders will also require that you have no other outstanding loans at the time of application.
The term of your mortgage affects the amount to be repaid. The shorter the term, the higher the monthly repayments, and lower interest payment overall. The reverse is true for longer mortgage terms.
Bear in mind that you will have additional costs when buying your home, including:
- Valuation fee, used to give your lender an estimate of a property’s market value. These must be done by a professional valuer.
- Solicitors are required to look after the legal aspects of your mortgage. Each solicitor differs in how they structure their fees (flat rates, percentages, etc), so check with the solicitor regarding their professional fees before you make your choice.
- Stamp duty, which is currently charged at 1% of the value of the property up to €1,000,000 and 2% above that limit.
- Fees must be paid to the surveyor or engineer who inspects the house prior to purchase.
- And finally, many properties will not only require furnishing, but may not include white goods in the sale.