Getting the right finance
How long should I save for a deposit? Should I choose a fixed or a variable rate? We answer your mortgage finance questions
Getting onto the property ladder is a big step in planning for your future. When you put down a deposit and take out a mortgage, you are investing in the rest of your life.
Unlike renting – which involves money you will never see again – when you take out a mortgage you will be moving into a space all of your own, where you can decorate as you like, and put up whatever pictures you like without checking with a landlord. If all goes well, you will own your own home and have equity in retirement.
When you apply for a mortgage, the bank will generally look for you to be in continuous employment for 12 months.
“Things have changed in the employment market,” says Sarah Ridge, Hub Manager at KBC Stillorgan. “In the past people might have been with the same company all their lives, whereas now people tend to move around – and we do understand that.
“The most important thing is to come in and sit down with us for an initial mortgage consultation; we can take a look at your current situation and help you to be mortgage ready – we can help you to prepare so when you are ready to apply for a mortgage it will be a smooth, straightforward process.”
According to recent KBC research, a majority of first time buyers expect to spend one to two years saving for a deposit.
Sarah says: “When you come in to meet us we usually ask to see, based on at least the last six months, that you can pay the proposed monthly mortgage repayments. We would look to see if you are saving regularly and if you are currently paying rent we would take that into account as well.”
When you apply for a mortgage, the bank will assess your entitlement by looking at a multiple of your and your partner’s income – three and a half times your gross joint income is the maximum borrowing limit. Your other financial commitments will also be looked at, such as a car loan. Your total loan commitments won’t be able to exceed 40 per cent of your net monthly income. The bank will also stress test your ability to repay your mortgage, in the event of interest rate rises of up to 2 per cent.
Fixed rate vs variable
Whether you choose a variable interest rate or a fixed rate, there are different benefits to each.
A variable rate can go up or down at any point – but the advantage is that you can make ad hoc payments at any stage, whether it be a lump sum, or an extra monthly payment, or an additional €200 a month, to reduce the term of your loan.
With a fixed rate, be it for a one-, two-, three- or five-year term, you know exactly what your payments are going to be for that period of time, so there are no surprises.
Whether a variable or a fixed rate suits you better really depends on your own circumstances and needs.
“Do you like having flexibility to pay more and reduce your loan when you can? Are you expecting to come into some money down the line that you could use to pay off a chunk of your debt? If so, a variable rate would suit you best,” advises Sarah.
If you prefer to know exactly what you’re paying out on a monthly basis, a fixed rate is probably more for you.
There is also the possibility of splitting the mortgage into part fixed, part variable, with the advantage of both.
KBC’s rates are among the most competitive in the market. New buyers who draw down a mortgage and open a KBC current account now benefit from the lowest monthly repayments in the Irish market today. KBC’s lowest rate is a 3.2 per cent variable, when you take out a loan to the value of 50 per cent of the property or less, and also have your current account with them. When you borrow 80 to 90 per cent of the property value, the rate is 3.65 per cent. KBC’s one-year fixed rate starts at 3.3 per cent.
Whatever finance option you choose, KBC will take you through all the possibilities and help you discover what’s best for you.
“We aim to make it a smooth process from beginning to end,” says Sarah. “We will do all the hard work so people can relax and know they are in good hands.”
MANAGING YOUR MORTGAGE
A mortgage is a major financial commitment, perhaps for most people the largest financial commitment they’ll make over the course of their lives. Here are three tips to help you manage your payments
1. Think of the future
Don’t overextend yourself – think of things that might be coming down the line which will increase your outgoings, such as having kids or changing jobs.
2. The right rate
Consider carefully a fixed rate versus a variable – if you have a tight budget a fixed rate might suit better, while if you expect to land a higher-paying job or come into some money, you will appreciate the flexibility of being able to finish paying off your mortgage early.
3. Don’t get stressed
You always want to make sure you can still live your life – whether it’s going out for a fancy meal or being able to take that well-earned break away. Think about how you live now and make sure you will still be able to afford what’s important to you.
If you’re thinking about buying a new house, make sure to check out kbc.ie. KBC have the lowest rates around, fixed and variable rates, as well as up to 90% finance available. Check out the mortgage calculator online to see how much you could qualify for.
Information based on current market rates correct as at 5th February 2016. Rates may vary over the term of a mortgage. To avail of the 0.2% extra discounted rate, you must mandate your salary and pay your new KBC mortgage by Direct Debit from your KBC Current Account. Offer excludes Buy to Lets. Lending criteria, terms and conditions apply. Security and Insurance are required. The maximum mortgage is 90% of the property value. KBC Bank Ireland plc is regulated by the Central Bank of Ireland.
Visit KBC’s National Mortgage Lounge!
On Thursday 10th March 2016 at 6pm, KBC will host its very first National Mortgage Event at The Mansion House, Dawson Street, Dublin. You can expect a helpful and informative evening on the various steps required to take out a mortgage and buying your own home, plus you will get the chance to speak to industry experts and KBC mortgage advisors. Prepare all your questions in advance as this is an event first time buyers and movers don’t want to miss!
To register, email email@example.com
For more information, visit www.kbc.ie. For advice on the first time buying process, customers can call 1800 51 52 53