Q: Where do I start?
Banks and other commercial lenders provide a variety of mortgage rates and options. You should speak with potential lenders to find out how much they are willing to lend you before you start looking for a home. This is known as approval in principle, and this will let you know what price range to look at when searching for a place to buy.
The lender has not yet approved a mortgage or committed to lend you this amount just because they have given their consent in principle. The letter of offer, which the lender will only give once it is completely happy with certain factors, including a value of the property you are buying contains the official mortgage approval.
Q. Are there lending limits on a Mortgage?
Yes, they are as follows:
- Loan-to-value (LTV) ratio compares the amount of the loan to the price of the home you intend to purchase.
- A 90% LTV cap on the total value of the property is applicable if you are purchasing your principal residence for the first time. This indicates that a 10% down payment is required for your home or apartment.
- There is a cap of 80% LTV for new mortgage lending for non-first-time homebuyers, regardless of the valuation of the house, so you will require a 20% deposit.
- A maximum LTV of 70% is imposed on homes that won't be used as your primary residence, including buy-to-let homes.
- Loan-to-income (LTI) ratio is all based on your income to determine the amount of the loan.
- All new mortgage lending for primary residences has a standard cap of 3.5 times gross annual income, with considerable room for flexibility.
- This involves providing money to borrowers who are seeking a mortgage for a new property but have negative equity.
- For buy-to-let mortgages, this cap does not apply.
Generally speaking, for your mortgage to satisfy the standards of the Central Bank, you must adhere to both of these limits.
Q. How should I access a mortgage offer?
You must be confident that the mortgage is both reasonable from your perspective and sustainable if you want to be able to make the payments for the duration of the loan.
Your lender is required to give you specific information on the mortgage offer, such as:
- How long the agreement is valid for
- Information about how to contact the lender
- Key characteristics of the loan, including possible dangers
- Credit type and duration
- Complete information on the borrowing rate(s) and, if applicable, when and how they may change
- Total amount you will pay throughout the mortgage's term
It is very important to do you your research and ask any questions or queries you have for example What are the other interest rates on the market like in comparison to the one I am being offered?
Q. What if I have problems paying the mortgage?
There are various options available to you if managing your finances is proving to be challenging. The Money Advice and Budgeting Service (MABS) may assist you with creating a budget, reviewing your income and outgoings, and managing your debts in general.
Even if you haven't yet fallen behind on a mortgage payment, the Central Bank's Code of Conduct on Mortgage Arrears will safeguard you if you call your lender and explain your situation.
Call the MABS Helpline at 0818 07 2000 (9am–8pm, Monday–Friday) or send an email to helpline@mabs.ie to explore these and other possibilities.
This article is for information purposes only and does not constitute specific legal advice, which should be obtained at all times. For more information, contact Eamon Concannon of Concannon Solicitors on 091-700 172/091 700173 or e-mail concannonsolicitors@gmail.com with any queries
