Friday 28 April 2017

How to finance your mortgage

Sarah Ridge, manager at KBC's Grand Canal Hub
Sarah Ridge, manager at KBC's Grand Canal Hub

From how long it takes to save for a deposit to what rate to choose, Sarah Ridge, Manager at KBC's Grand Canal Hub, tells us what you should know

Saving for a deposit

"Many first time buyers typically spend about 1-2 years to build up a deposit for their first home. It really depends on your income and how much you can afford to save every month. So, it can take 1-2 years, or it may take longer, particularly if you're paying high rent on a monthly basis."

Mortgage assessment

"The bank will assess your entitlement by looking at you and your partner's annual income, plus any outgoing payments you may have, such as personal loans or an existing mortgage. We will look for evidence of repayment capacity to show you can afford to repay the monthly mortgage payments. Affordability can be demonstrated by evidence of a savings record or monthly rent payments over a minimum of a six-month period. Clients must demonstrate a recent (minimum six month) track record of making payments equivalent to the monthly stressed payment of the mortgage. The stressed repayment is assessed at 2% above your mortgage rate, in the event of interest rate increases in the future."

Choosing a rate

"If you choose a fixed rate mortgage, be it for a one-, three- or five-year term, your interest rate and monthly repayments will remain the same for the particular term chosen. There are no surprises. With a variable rate mortgage, the interest rate and monthly repayments can go up and down - but the advantage is you have the option to make ad hoc payments to the mortgage at any time, whether that's as a lump sum or extra monthly repayment. This can reduce the term of your loan.

"If you have the flexibility to pay more and reduce your loan when you can, then a variable rate may suit you. If you would like to know exactly how much your monthly repayments will be, then a fixed rate may suit you. You can always chose to split your loan part variable part fixed. We would always suggest customers come into us and we can go through the repayment rate options with you."

Mortgage term

"The maximum allowable term of a mortgage is determined by an applicant's age. You can apply for a mortgage up until the normal retirement age of 68, subject to a maximum term of 35 years. The term you choose for the mortgage is usually determined by your affordability. The shorter term you choose, the higher your monthly repayments will be. We can provide quotes over the different terms and see what works for you."

Managing mortgage repayments

"I would advise anyone thinking of purchasing a new home to drop by a KBC hub first to discuss how much you can afford. There's no point in viewing houses, then being disappointed that they are not within your affordability. Based on your income, repayment capacity and savings, we can advise how much you can afford. We will also make sure your current accounts and savings are in order to apply for your mortgage. Once approved, we will supply you with an Approval in Principle (AIP), which lasts for six months. This way, you have that comfort to view houses and when you're ready to make an offer, you confidently know you have the AIP in place."

Sunday Independent

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