Thursday 25 May 2017

Q&A: What changes will mean for house buyers

People who are classed as first-time buyers will now be able get mortgage approval with a deposit of 10pc. GETTY
People who are classed as first-time buyers will now be able get mortgage approval with a deposit of 10pc. GETTY
Charlie Weston

Charlie Weston

What is the change to the deposit rules for first-time buyers?

People who are classed as first-time buyers will now be able get mortgage approval with a deposit of 10pc. This applies to any amount they borrow. This of course assumes they meet other criteria set by the bank to ensure they can manage the mortgage repayments. Banks will be able to issue 5pc of first-time mortgages outside this rule, known as the loan-to-value ceiling. The changes take effect from the start of next January.

 

What were they before?

At the moment new borrowers can be approved for a mortgage with a deposit of 10pc for borrowings up to €220,000. They need a 20pc deposit for all amounts over that. This means that a first-time buyer purchasing a home for €300,000 will qualify for mortgage approval with a deposit of €30,000.

Up to now the buyer needed a deposit of €38,000.At the moment banks can exempt 15pc of the value of mortgages issued to the loan-to-value ceiling. This is at the bank's discretion.

 

Is there a change to the income rules, for any borrower?

No. All borrowers will continue to be restricted to borrowing only three-and-a-half times their income.

 

What about second-time buyers?

Second-time buyers will have to have a deposit of 20pc of the value of the property they are moving to, and that has not changed. Some 20pc of the value of mortgages issued to movers can be exempted from the deposit rule. This is up from 15pc.

 

What about the negative equity generation?

Borrowers in negative equity will continue to be exempt from deposit rules.

Irish Independent

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