Unless you are Richie Rich that has a bank account with a seven digit balance, the first thing that concerns you when buying a property, is the price tag. For any first time buyer it is almost impossible to think of buying a property without a mortgage. But even with a mortgage, a lot of upfront money is needed.

In today’s Irish mortgage market there are many restrictions on how much mortgage banks can provide. Here is a very short version of them:

  1. Having a permanent preferably pensionable job that you passed the prohibition period for it.
  2. Maximum 90% of property value can be mortgaged. This is called loan-to-value (LTV)
  3. Mortgage amount is limited to 3.5 times of annual salary or combined salaries in case of joint application (Unless you qualify for an exception).
  4. Mortgage amount will be the least of the above two
  5. Mortgage period is usually limited to maximum 30 years or years left to your  retirement age, which ever is smaller. (Unless you qualify for an exceptions)
  6. Having a good credit history (gambling of any sort is a big no no) and cleared previous loans.
  7. Proven ability to repay, even if your mortgage rates increase by 2%. This is also called the stress test.

On top of these, specific banks can have their own criteria. For example, KBC only provide mortgage to an Irish stamp 4 visa holder (or one is case of joint application) if total annual salary(ies) is more than 100,000 Euros. Regrading exceptions; banks have a limited amount exceptions per year and there is a chance you can get them. I will come back to this later.

The savings and costs:

First things first, for buying a property you need saving and a lot of it. The main reason for savings are to cover the 10% remaining of property value plus fees. The other reason is to show your proven ability to pay. Banks look at evidence of your past 6 savings pattern for this. If you are already renting, your rent will also be counted toward proven ability to repay. As mentioned, proven ability to repay is stress tested against plus 2% of your mortgage rate monthly payment. For example, if you will paying back a a mortgage with 2% interest rate, it will be stressed tested for 4% interest rate in case there is a sudden increase in mortgage rate. Your proven ability to repay should be more than monthly repayment of the mortgage with 4% interest rate. These two reasons and the fact that you will much more to cover while buying a property; makes regular savings a pivotal factor. Here is a short list of main cost that is on you to cover:

  1. Minimum 10% of the property value.
  2. 1% of property value for stamp duty
  3. Bank’s property valuer fees
  4. Legal fees including solicitor, commissioner of oath, title of deed, and etc.
  5. Structural survey for old properties and snagger for new properties.

The three last items costs add up to around 3000 – 4000 euros at the time of writing this blog. You also have to include 11% of the property value to cover all your fees.

A note about external money, if you are getting any either in the form of someone helping you or lodging other sources of savings to your account; you need to be able to show the evidence for them. If the money is paid by someone as a gift, they need to sign a gift letter saying they do not have the intention of vesting any interest in the above property, and if it is your own money from another account (e.g. saving account in foreign banks), you need to have evidence from the account in your name. If you are moving your cash savings (or in my case savings from other currencies from home) I would recommend not to mentioned the word”gift” in your lodgement. This will alert banks that someone have given you a gift toward your property. It means you need to provide a gift letter as mentioned above.

Finally, there are a couple of other costs that you need to consider such as home insurance, mortgage life insurance and local property tax, although they won’t be necessary until the time of money draw down (prior to mortgage check is issued).

Help to buy:

If you are a first time buyer and planning on buying a newly built property (or even building one), there is some great news for you: Help to buy (HTB) incentive. The Help to Buy incentive is a scheme for first-time property buyers that will help you with the deposit and it can cover up to 5% of the property value. You must buy or build the property to live in as your home. When you buy or build your home, the incentive will give you a refund of Income Tax and Deposit Interest Retention Tax (DIRT) that you paid in Ireland over the previous four years. You must make sure to file your forms 12 with revenue in advance of your application.

The mortgage:

I will cover the actual mortgage application process in the coming episode(s). I will talk about the two separate routes for a mortgage; personal application or a mortgage broker. For now if you want to get some ideas of how much mortgage you can get; I would highly recommend using the bonkers.ie website.