When you are buying a home, particularly if it is your first home, you will probably need to take out a mortgage. This is by far the most popular way to finance a home purchase in Ireland, and it is considered to be a worthwhile investment so that you get on the property ladder and also so that you will eventually own your home outright. A mortgage is a long-term loan. You get a mortgage from a bank, or a local authority lender. Here are the basics of financing a home purchase with a mortgage.
Getting a Mortgage Approved
Before you can decide on the home you want to buy it is a good idea to get a statement from lenders of how much money in principal they would lend you. Once you have an idea of what you can get from a lender you will have a clearer idea of what kind of price range you need to look in. But keep in mind that these statements are not approval of a mortgage loan and the mortgage will only be granted on approval of other factors such as the valuation of the property.
Lending Limits for a Mortgage
There are limits on how much any bank or organisation can lend in order to finance a home purchase. There are two types of limits – the loan-to-value limit or LTV, which is based on the price of the house in relation to the loan, and the loan-to-income limit or LTI. The loan-to-income limit is, in general, 3.5 times your annual income. The loan-to-value limit is around 90 percent for people buying for the first time, up to a property valued at €220,000.
There is some flexibility within these limits and lenders may be able to exceed these limits, since they can allow a borrower to go past the 3.5 times income limit in 20 percent of applications per year.
Incentives to Help Purchase a First Home
The Help to Buy incentive has been developed in order to allow first-time buyers the opportunity to purchase a new-build home, like those currently being built in mornington co meath, by providing funding for the deposit. It is a form of rebate for the income tax that has been paid over the past four years. Other schemes to help first-time buyers purchase property are also on offer and there are ways of financing a house purchase using shared ownership or another route that allows for greater flexibility and the ability to get a foot on the housing ladder.
Do your homework regarding the best type of mortgage based on your own personal circumstances before committing to purchasing your dream home.