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Before I save for my first mortgage: the 5 step prep guide

A man doing outdoor cross-country running in early sunrise. Image from the ground.

10 Mar 2017

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If you’re planning to run a 10k, it’s always a good idea to do a bit of training before you attempt the main event. You don’t have to adopt the training regime of an Olympic athlete but doing some work ahead of the race should prevent you from collapsing as you reach the halfway point.

Preparing to apply for a mortgage also requires preparation. Although hopefully not as much sweating! It pays to get yourself mortgage-ready in the months leading up to your mortgage appointment and it’s simpler than you think.

It’s all about adopting the habits that will stand to you when you eventually take the next step. We’ve come up with a few tips to help you do the groundwork for a successful application.

1. Make sure everything goes through your bank account

One of the things that you need to demonstrate is that you can make the necessary monthly mortgage payments. So if your monthly rent is €700 and your mortgage would be €1200, you’ll need to be saving €500 to show that you could make the payments.

You need to be able to demonstrate your rental outgoings and savings. The simplest way of doing this is to have your rent and savings come out of your account so you have a paper trail. If you still pay your rent in cash, ask the landlord to set up a direct debit so that your mortgage agent will be able to clearly identify rent payments on a monthly basis.

If a tree falls in the forest and there’s no one there to hear it, does it make a noise? You can ask a similar question about any money that you put aside.

It doesn’t matter if you’ve been stuffing hundreds of euros into a shoebox in your wardrobe every month. Unless your lender can see a proven record of regular savings, they’re not going to be able to take them into account when assessing your case.

2. Get a saving account

There’s the small matter of the deposit to deal with when you’re applying for a mortgage so you’re going to need to put some money aside. Unless you plan to win the lottery at a very convenient time, which seems like a bit of a long shot.

Aside from having a lump sum to get the ball rolling, your lender will also want to see a history of saving. So even if you’re thinking about a mortgage but don’t intend on applying for a few more months, starting to save early is worth it.

The first step is to set up a savings account and a direct debit to automatically transfer funds. It’s simple to do and it makes it easy for a lender to see what you’re doing.

When saving, put aside a regular amount on a monthly basis to create a solid saving history. Try not to dip into your savings account for holidays as the money that’s withdrawn will not be included when your overall savings are totted up.

3. Work out what you’re spending

One of the major steps towards getting yourself mortgage-ready is working out what you’re actually spending your money on. If you keep adding to your collection of designer shoes or buying rare vinyl records, this one may not be such a mystery.

For most people, it’s easy to overlook casual spending that could add up over the month. Maybe you never check your balance until the second half of the month. Or you regularly blow your pay cheque in the first three weeks and then survive on beans on toast for the rest of the month.

Take a look back over your bank statements and try to establish where you can make savings. You may be surprised to see how much you’re spending on takeaways or nights out. Seeing the details in black and white may even make you rethink some of your bad spending habits.

4. Stay in the black

Credit cards and overdrafts come in handy when you’ve had a particularly heavy month of spending. Maybe the car insurance was due, you had a friend’s wedding or you just couldn’t resist that sale in your favourite online retailer.

If you do have a credit card, you need to be sure to make all your minimum monthly repayments and try to avoid carrying over large debts from month to month. This could be a red flag for lenders.

The same thing applies to your overdraft. This shows that you’re more than capable of living on your wages and that making mortgage payments isn’t going to pose a problem.

5. Pay off existing loans

There’s nothing wrong with having loans – and being able to demonstrate your ability to pay back borrowings can actually be a good thing. If you are thinking of getting a mortgage, paying off any outstanding personal loans can only streamline your application.

That’s not to say that you won’t be able to get a mortgage if you have an existing personal loan. But additional borrowings could impact the amount you can get for your mortgage. Try to use the months before your application to chip away at any loans that you currently have.

If you follow these simple steps, you’ll be nicely warmed up and limber when you finally approach the mortgage starting line. You’ll also be in better financial shape than you were when you started, which can only help you to go the distance and get your mortgage in the quickest possible time.

Are you thinking of buying your own home?

Now that you’ve done all the preparation, it’s a good time to call into your local EBS office for a chat with one of our friendly mortgage advisors. Find out how much you can afford to borrow with our mortgage calculator or book a mortgage meeting to suit you with one of our mortgage expert, or get the ball rolling with our First Time Buyer guide.

Don’t forget to visit our Facebook page for the latest home inspiration, news and great competitions.

EBS d.a.c. neither accepts nor assumes any responsibility in relation to the contents of this blog and excludes all warranties, undertakings and representations (either express or implied) to the fullest extent permitted under applicable law.

EBS d.a.c. is regulated by the Central Bank of Ireland.

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