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06th Apr 2014

What You Need To Know About… Getting A Mortgage

A place of your own.

You’ve finally got there. You’re financially secure, feel like you’re ready to put down roots and want to take the step of buying your own home. Trouble is, you don’t know where to start.

Well, worry not, because we’ve together a simple guide to getting on the property ladder without losing your mind in a pile of paperwork.

Step One: Start saving for a deposit

Realistically, your preparations for buying a home need to begin long before you are ready to sign on the dotted line. You will generally need to have ten per cent of the cost of the property before any bank will give you a mortgage so start putting that cash away early! One of the main things that banks look out for when evaluating customers is a good savings record so work out what you can afford to pay each month and set up a standing order to your savings account.

Don’t forget to plan for any furnishings, legal costs, life insurance, stamp duty and other costs that you will also need to cover. If you can show that you’ll reliably be able to make your repayments, you’re halfway there.

Step Two: Get your paperwork in order

If you are a PAYE worker, this is a little more straightforward and the bank will need proof of employment, approximately three months of payslips and six to twelve months of bank statements. They will want to see that there is money coming into your account on a regular basis and you can live within your means. They will also look at your track record of paying loans and credit cards so make sure to get these in order, as constantly being overdrawn or having a bad credit rating will work against you.

If you are self-employed, they will need at least two years of certified/audited accounts, written confirmation from an accountant or auditor that your personal/business tax affairs (PAYE/PRSI/VAT) are up-to-date and management figures for current trading year.

Step Three: Shop around

You can get mortgage approval in principle before you start house hunting so make sure to try a few different banks to see who is offering the best deal. Make an appointment with one of each bank’s mortgage advisers to discuss your application. The National Consumer Association has a handy mortgage calculator on their site, which is a good place to start, and you can choose to either go through a broker or directly to the financial institution itself.

There are several different types of mortgage but most buyers will opt for an annuity mortgage. Also known as a repayment mortgage, your lender works out the amount you need to repay each month to clear your mortgage by the end of an agreed term. Your monthly repayment is made up of two parts: an interest payment on the loan and a capital repayment (paid off the balance).

In the early years, most of your repayments will go toward paying off interest on your mortgage. But as your mortgage reduces, the interest part of the repayment goes down. So as time goes on, more of your monthly repayments go toward paying off the capital. You can usually choose either a variable rate or fixed rate annuity mortgage or in some cases a mixture of both (known as a split rate).

Different lenders use different ways to calculate interest on your mortgage. It can be calculated daily, monthly, or quarterly. Generally, the more often the interest on your mortgage is calculated, the less you will pay in interest. And the lower the APR, the less costly the mortgage should be.


Step Four: Start viewing

Congratulations, you’ve received agreement in principle and are now ready to start looking for your perfect home.

Try property websites, auctioneers and estate agents and make sure to view plenty properties before making the final decision. While it may be easy to fall for a beautiful property, practical considerations also have to come into play, such as upkeep, proximity to work and schools, public transport and energy efficiency (BER). If the property was sold since 1 January 2010, you should be able to check out the details surrounding the sale here. Other things to consider are the availability of amenities such as internet and natural gas and the situation regarding planning permission if you decided to extend in the future.

Once you’ve decided on a house, it’s vital to have a survey carried out as the vendor is not obliged to reveal any defects of the property. You can find a list of chartered surveyors here.

Next, you can put in a formal offer if the property is for sale by private treaty or attend an auction is the house is being sold in this manner. See here for details surrounding the auction process.

If your offer is accepted, you may be required to pay a deposit to the estate agent and your mortgage provider will give you formal mortgage approval. You will need to have mortgage protection insurance and home insurance before you sign a contract and pay a deposit (less any booking fee).

For more information, click here.