14 Jul 2017
Here at EBS, we take the mantle of ‘Mortgage Master’ very seriously. Unlike other financial institutions, we don’t get bogged down with a vast array of financial products. Instead, our goal now is the same as it was back in 1935… we want to help Irish families move into their first homes, and save for the things they need. Simples! We find ways to make the system work for you, not the other way around.
So, let’s say that you are thinking about getting a mortgage. An EBS Mortgage Master knows the answers to all the questions you might have (and some questions you haven’t even thought about asking yet). So here’s our guide to feeling the ‘Mortgage Fear’ – and banishing it, once and for all.
This is a personal preference question you’ll ask yourself at he beginning. And how do you know, really? Well, there are a few basic questions you can start off with, such as: are you in a secure job? And, are you confident that the area you are thinking about will suit you and your family?
The other side to this question is a financial one. The first step in finding out if you can afford to buy, is coming in to have a chat with your local EBS mortgage master. One mistake people make is thinking that coming into us for a chat goes on your record or anything like that. It won’t. It’s not national school. Instead, we’ll talk to you about whether you are in the right financial state to be applying for a mortgage. And even if you are not quite there yet, we’ll tell you exactly what you have to do to qualify in six or 12 months down the line.
Don’t worry, we won’t let you apply for a mortgage blind! Before you make your application, we’ll look at your finances to make sure you’re up to the application criteria, and are able to meet your future repayments, whatever life throws at you. We’ll offer you free Mortgage Master wisdom to prep you on saving and spending, too. None of the stuff we’ll ask you is too scary, so don’t get cold feet. What kind of thing will we look at first? We’ll need to see that you are in a secure job. This will mean getting your last six payslips. Once we see your income, we will then look at your repayment capacity. We’ll get into this in more detail later, but that basically means that we ask, have you shown over the last six months that you will be comfortably able to afford your mortgage repayments with enough money left over to live your life in comfort. You’ll also need to have your deposit ready.
You’d be surprised the number of buyers who come to us at the beginning, with a small amount of savings, worried to bits about meeting their target. But the thing is, 98% of them make it – they want their own home so much, they make it work. We’ll give you all the advice you need about how to save, and curb your spending (without losing your mind).
Under the Central Bank rules, all first-time buyers must have 10 percent of the value of their house as a deposit. So if you are looking at a house valued at €250,000, then you simply just have to have a deposit of €25,000. This doesn’t necessarily mean you have to have saved that 10 percent. You might be lucky enough to get a parental gift or an inheritance or even a bonus payment from work. There are certain tactics which help, too – such as using free, online budget tools and setting up a direct debit into a walled savings account. Some buyers move back in with their parents or relatives for six months to save, and others take on freelance work. Whatever works for you! Your Mortgage Master will look at your unqiue situation and give you tailored advice to suit. The point is, it’s almost always possible. Once you have the deposit sorted, the repayment capacity is the next thing you’ll have to show.
Don’t fear. If you’ve been provisionally approved for a mortgage, the odds are in your favour, and you’ll most likely be able to meet your future repayments. That’s because any lender will have tested you for ‘repayment capacity’ and will also have conducted a ‘mortgage stress test’, to make sure that you have a strong ability to repay. But what is all this testing about? It’s nothing you need to worry about.
Your repayment capacity is simply when we look at your incomings and outgoings, to make sure you will be able to afford the repayments on your mortgage. We look at a range of different factors for this. Let’s say that your mortgage repayment would be €1,200 per month. In this case we’d look at your history over the last six months to show that you’re able to afford this amount. If you’re paying €900 per month in rent and putting €400 into your savings account every month, this will show a repayment capacity of €1,300 per month.
Now comes the stress test (which isn’t that stressful). if your repayment was still that €1,200, our test for repayment capacity has to show that you’d still be able to repay your mortgage if interest rates went up, or if you income went down. So we test your repayment capacity at a higher level (adding 2% on top). So, for a €1,200 mortgage repayment, we’d want to see that you’d be able to repay €1,450. So this means that a person who really was in that hypothetical situation above, would probably need to save €550 a month for the six months before applying.
The best way to examine your repayment capacity is to call in and speak to a Mortgage Master. We can help you find examples of repayment capacity that you might not even have thought of. For example, we recently had a couple who were commuting from Mullingar to Dublin to work every day. But when they applied for a mortgage for a house in Dublin, we were able to use the money they’d save as a result of commuting as a source of repayment capacity.
It’s the same thing when it comes to a loan that might be ending shortly. If you have a car loan that will be finished in three months’ time and you are paying off €200 per month, then we can see that you’ll have an extra €200 per month in three months’ time. We can use those kind of examples to help you with your repayment capacity.
If you’re thinking of your own home, you can get some free mortgage master wisdom in your local area. Book a mortgage meeting to suit you with one of our mortgage expert, try out our mortgage calculator or get the ball rolling with our First Time Buyer guide.
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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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