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new home

Applying for a mortgage, but haven't a clue? We asked the banks where to begin

Do I need to cut up the credit card? I have no savings? Here’s answers to some of the common questions.

IF SOMEONE TOLD you a few years ago that you would be contemplating buying a house, you probably would have laughed in their face.

Either you had no money, no job or it looked like the banks were simply closed to mortgages.

Fast forward to today, be it good or bad, the property market is heating up again.

However, during years of recession, you never contemplated getting on the property ladder, but now you’re not so sure.

There’s one problem. You haven’t a clue where to begin.

We asked two of Ireland’s largest banks Allied Irish Banks (AIB) and Bank of Ireland (BOI) some of the most commonly asked questions.

What is expected of someone in terms of a deposit?

shutterstock_124037797 Shutterstock / B.Stefanov Shutterstock / B.Stefanov / B.Stefanov

Previous to the new rules, applicants to AIB needed a minimum 8% deposit for mortgages up to €400,00.00 and a 15% deposit for mortgages over €400,000.00.

Bank of Ireland customers could borrow up to 90% of the property value which means it was typically at least 10% of the purchase price – for example that’s €17,500 on a €175,000 property.

However, new mortgage lending rules are soon to come into effect, so best take a look at these. Here’s what you can get for €220,000.

What about job stability, do I have to be in a job for a certain time period?

AIB: Employment status has evolved over recent years and our criteria reflects this changing environment:

  • For permanent employees, an applicant should have served their probation period and have been made permanent before we can consider an application.
  • If an applicant is on contract employment we would expect them to be in employment for a minimum of 12 months or be in their second contract with the same employer.

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BOI: There are a number of factors that can influence the amount you can borrow, but each application is given careful consideration taking all of the applicants’ circumstances into consideration. Factors taken into consideration include:

  •        Level of regular dependable income
  •        History of regular savings and/or rent paid
  •        Financial track record and commitments
  •        Deposit saved
  •        The cost or type of property you want to buy.

How long do you have to have lived in Ireland?

AIB: There is no limit as to how long an applicant is resident in Ireland before they can apply for a mortgage.

BOI: In general applicants should be resident in Ireland but we will also consider applications from expatriates who have definite plans to move back to Ireland.

shutterstock_169969049 Shutterstock / Mikkel Bigandt Shutterstock / Mikkel Bigandt / Mikkel Bigandt

What about if you have just returned from abroad, do you have to wait until you apply?

Both banks said that there is no limit as to how long an applicant must be back in Ireland, but generally applicants should be resident in Ireland. The key issue is your employment and the requirements that are set out in the above answers.

Applications from expatriates who have definite plans to move back to Ireland may also be considered.

shutterstock_16177060 Shutterstock / Cheryl Casey Shutterstock / Cheryl Casey / Cheryl Casey

What’s the story with my credit score and how does that impact on getting a mortgage. Can I improve on it if it is low?

AIB Bank explains that a credit history is a reflection of an applicant’s previous repayment record and ability to manage their repayments. In a situation of a previous poor credit history AIB said it would need to review the reasons and their recent track record.

If their circumstances haven’t changed it would suggest there may be difficulty in taking on further commitments, said the bank, adding if the issue is historic or an applicant’s circumstances have improved the bank may consider an application.

Bank of Ireland said it is keen to see that mortgage applicants can afford to take on a mortgage and still have enough money left each month to enjoy their new home – even if rates increase.

They advised people to do their sums.

Do your calculations and have a good understanding of what you can afford, how much you can put into the sale and how you will repay your mortgage. Mortgage calculators can help you work out how much you can borrow and how much you can afford to repay.

You should be able to demonstrate through your bank account that you can take on your mortgage repayments.Make sure any rent you pay goes through your bank account rather than pay your landlord or flatmate in cash.

If you are living at home and making a contribution to the household, set this payment up as a standing order.

shutterstock_124029445 Shutterstock / Brian A Jackson Shutterstock / Brian A Jackson / Brian A Jackson

Do I need to have savings?

This is pretty important. Bank of Ireland said it’s really important to show that you have saved regularly over 9 to 12 months – it demonstrates that you are serious about getting a mortgage and also shows (along with any rent you’re paying) what you can afford in mortgage repayments

I have a loan already, will this matter?

It’s a good idea to pay down credit cards and personal loans as much as possible as additional borrowing could affect the amount you can borrow for your mortgage.

You will need to show how you can cover additional costs such as stamp duty, legal fees and any additional expenses that might be required to make your new property habitable.

shutterstock_169942937 Shutterstock / Sergey Nivens Shutterstock / Sergey Nivens / Sergey Nivens

How closely do I have to watch your spending – Paddy Power accounts, shopping sprees etc. Is it time to give up 

The assessment of an application is based on repayment capacity and an applicant’s personal spending is not an issue once there is sufficient disposable income to fund the proposed mortgage repayments, said AIB.

The bank will look for evidence that a customer has proven their ability to live on the disposable income that will be available. This is done by requesting evidence that an applicant has being saving, paying rent or a mix of both to the tune of the proposed repayments for a minimum of six months.

Read: Only 395 houses available to first-time buyers in Dublin>

Read: Irish people easily have the worst mortgage debts in the eurozone>

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