How to buy your dream home and obey the new rules
Published 26/04/2015 | 02:30
First-time buyers determined to get the mortgage they need for their dream home under the new Central Bank rules should concentrate on getting their deposit together, according to Ken Murray of AEMA.
"By doing that, you won't exceed the loan-to-value ratio limit (which restricts the percentage of the property price you can borrow) - and so you'll fit within the loan-to-income ratio exemption allowance," said Mr Murray. This should therefore allow you to borrow a mortgage of more than three-and-a-half times your salary - which is what you would be bound by if you didn't qualify for the exemption.
"You'll have a better chance of maximising the mortgage you qualify for as a result," said Mr Murray.
So how do you get that deposit together? Save as much as you can and be sure to save into an account which pays better-than-average interest. Some of the accounts which do so include Nationwide UK Ireland's Regular Saver (4pc interest a year), and KBC's Regular Saver (3.5pc interest).
You will find it easier to hit your savings target if you cut back on spending and boost your income. Consider moving back in with parents if renting, doing more overtime, and selling any shares you may have.
A cash gift from your parents can also help.
Be wary of borrowing for a deposit from a credit union or elsewhere - as your lender won't approve of this and will usually find out when it checks your credit rating.
You could cut the amount you need to save by sitting on the fence and waiting to see if prices fall further. Last January, house prices fell for the first time in 10 months, and prices continued to fall in February. Official house price figures for March are due out this Tuesday.
However, any further slump in prices could prompt sellers to take their properties off the market. So supply could get even tighter.
While waiting, be sure your mortgage approval doesn't run out - if you got it before the new rules kicked in.
Sunday Indo Business