Ten top tips on how to secure a mortgage
EIGHT years ago, mortgage lending hit a peak of €40bn. Things have changed since.
The value of mortgages dished out last year came to €2.5bn but there are signs of recovery in the mortgage market – and if you are a wealthy first-time buyer or well-heeled trader-upper, you have a good chance of getting a loan.
Furthermore, most lenders are offering 'track-mover' mortgages now, where you can trade up and carry your tracker mortgage with you – albeit under a more expensive interest rate. If you already own your own home, this could be just the carrot you need to trade up.
Here are 10 things you should know before applying for a mortgage.
* The security and nature of your job is of huge significance to a lender.
With the exception of one lender, you must be permanently employed for at least 12 months to get mortgage approval. If you are on contract, you must have a 12-month contract and show that you have three years' continual employment with the employer you are contracting for.
* You must be able to show you could have afforded the repayments for the mortgage you are seeking had you taken that loan out over the last 12 months.
And the bank wants to know that you would have been able to afford those repayments were the interest rate 2 per cent higher than it is today. So, if you want to borrow €250,000 over a 30-year term, you must have saved, paid rent or paid loans equal to €1,600 per month for the last 12 months.
* If paying rent, use direct debit or a standing order. Lenders do not recognise cash payments to your landlord.
If living with your parents, set up a direct debit or standing order to your parents' account. Lenders do not recognise cash payments to your parents.
* Don't try to hide credit union loans from your prospective lender. Over 200 credit unions are registered with the Irish Credit Bureau (ICB), and lenders will check its records.
* Credit cards show your pattern of spending on a monthly basis. So lenders will want to see three or six months' worth of credit card statements. If you withdraw cash with your credit card, lenders will disapprove. If your credit limit is disproportionate to your salary, lenders will query it.
* Lenders will review your current account statements for six months. If you are always overdrawn, it'll be tough to get a loan.
* Your choice of lender will determine how long you have to repay a loan. Ulster will lend to age 65; AIB will lend to age 66; KBC lends to age 68; and Bank of Ireland and Permanent TSB lend to age 70.
* When you take out a mortgage, you must buy mortgage protection insurance to cover the mortgage repayments should you (or your partner if it is a joint mortgage) die before the loan is paid off. Do not accept the policy offered by the bank, as this is unlikely to be the best value one available.
* Like all professional fees, solicitors' fees vary greatly from one to another. Make a few calls and compare. Do not just go to the solicitor that your parents used.
* A surveyor's report will usually cost around €400 and it is well worth it when you are spending hundreds of thousands on a property.
Michael Dowling is spokesman for the Independent Mortgage Advisers' Federation
Sunday Indo Business