Sunday 24 June 2018

Your kind of mortgage: A guide for first time buyers

Getty
Getty

Here’s a handy guide for every step of the mortgage ladder.

Where do I start?

“One of the first questions that first time buyers ask is ‘how much can I borrow?’” says Conor McGowan, Head of Mortgages at KBC. “The second question is ‘how much will it cost me each month?’ Before you can borrow from a lender, you will need to contribute some of your money towards the property price. This deposit is at least 10% of the purchase price of the property."

Conor encourages first time buyers to try the handy online mortgage calculator to get an idea of how much you can borrow.

“Then, you should meet with one of our Mortgage Consultants at your local KBC hub to discuss your application in more detail. You can make a booking on our online booking facility or if it’s not convenient to call in we can come to you in your home or workplace*."

What do I need to bring with me?

Conor advises getting your documentation in order early.

“While people might have an idea of what sort of property they want to buy, the documentation is the bit that takes some organising.”

Typically, the bank will ask for:

• Six months of continuous current account bank statements (latest dated within the last three months) – this provides the evidence that you are receiving a steady income and can afford the mortgage.

• Six months of continuous savings/rent statements and 2 months credit card statements (latest dated within the last three months) – the bank needs these to see that you have good savings habits or have been paying rent, and that you can easily handle your mortgage repayments.

• Employee Status Report – this confirms your annual salary, any additional payments and your employment type (i.e full-time, permanent, part time, contract). Your employer must have stamped or signed it within the last six months of you presenting it to your mortgage advisor.

• Most recent P60 – this shows you are employed and confirms your earnings.

• Two recent payslips dated within the last six months

• Identification – You’ll need a photo identification in the form of a current and valid passport, or a current and valid Irish, UK or European drivers licence. If you’re married, you’ll also need to provide your original marriage certificate.

• Proof of address – Bring a utility bill with your name on it dated within the last six months; a bank or building society statement issued in the last three months; or your original household or motor insurance documents (as long as they’re less than 12 months old).

Don’t forget that if it’s a joint application you’re making with a spouse, partner, sibling or friend, you both need to submit all of the above.

Conor adds, “These documents apply to self-employed applicants too, but we do also require sets of audited financial accounts for the preceding two years to show us how the business is performing, as well as tax clearance certificates.”

"The whole point of determining affordability is to ensure people don’t borrow more than they can afford,” says Conor. “We want people to be able to live their lives and to be comfortably paying their mortgage.”

First time buyers may have very little other commitments at the moment, but a couple of years down the line, they might have other commitments such as kids or a new car so consider this when deciding how much to borrow.

Conor McGowan.jpg
Conor McGowan, Head of Mortgages at KBC

Getting approved

After going through documentation and your own personal circumstances, all information is sent to the credit department. Upon successful assessment, you will then be given an Approval in Principle (AIP) based on their assessment.

“The AIP allows you to go out and get shopping for the home of your dreams,” says Conor. Most estate agents will ask if you have an AIP, which shows you are in a position to buy a home. This puts you in a better position than a buyer who has yet to start the process. The KBC AIP is fully underwritten, so once you find the house, the next steps are easy.

“We will arrange a valuation on the property – through one of our appointed valuers – to show that it’s worth what you’re paying for it, and the mortgage is appropriate for that property. We can then progress to a formal loan offer – this is the contract between you and the bank, so you and your solicitor will review this before you draw down the funds.”

Choosing a rate

Customers can choose between variable rate mortgages and fixed rate mortgages, but how do you know which one to pick?

“Discussing the rate that suits you with your mortgage advisor is the best approach,” says Conor. “Variable rate mortgages by their name mean that the rate can change at any time, and as a result, so can your monthly repayment. This is all good if rates are going down, but obviously if rates go up, so does your monthly repayment. Another consideration is your employment type. Lots of people are working in industries where they receive a regular bonus or commission payments. A variable rate allows you to make additional lump sum payments and so reduce the length of time to repay your mortgage.

“A fixed rate gives you comfort that your monthly repayment will remain the same for a period of time. We offer fixed rate products from one to 10 years. Our fixed rate products are proving very popular with first-time buyers and switchers alike, with rates starting as low as 2.90%.”

If you like both options it is also possible to split your mortgage between variable and fixed giving you the best of both worlds.

Be protected

You will be required to have mortgage protection insurance on your mortgage. Simply put, it’s designed to pay off your mortgage in the event of the death of you or your joint applicant, before the end of the mortgage term. It might also be a good time to think about income protection insurance. KBC partner with Irish Life to offer suitable protection products to our customers as part of the mortgage process.

You’ll also need to insure the property and again KBC are partnered with Zurich to offer very competitive rates with a 50% discount** in year 1.

Listen to the experts

“We are all individuals and we all have different circumstances so it’s best to talk to a mortgage advisor at your local KBC hub to discuss your individual case,” says Conor. “Be totally honest: if there’s an old credit card issue or other loan that caused some problem, tell us about it. It’s better for us to have all the facts up front rather than find out later on!”

For more information, visit www.kbc.ie

*Geographical exclusions may apply for the mobile mortgage team. **Offers subject to terms and conditions. Exclusions apply. Lending criteria, terms and conditions apply. The property is mortgaged to secure the loan. Life and home insurance are required. The maximum mortgage is 90% of the property value. KBC Home Insurance products are exclusively underwritten, administered and provided by Zurich Insurance plc, subject to Zurich Insurance underwriting terms and conditions. KBC Bank Ireland plc has an exclusive agency agreement with Zurich Insurance plc for the provision of Home Insurance. Zurich Insurance plc is regulated by the Central Bank of Ireland. KBC Bank Ireland plc is tied to Irish Life Assurance plc for Life Insurance. Irish Life Assurance plc is regulated by the Central Bank of Ireland. Life insurance products are unwritten, administered & provided by Irish Life. KBC Bank Ireland plc is regulated by the Central Bank of Ireland.

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