TODAY’S PROPERTY market can feel like an intimidating place for those seeking a mortgage. But there is help out there.
In a new series, we’re helping readers through the mortgage maze by tackling some typical buyer dilemmas with real-world insights from expert lenders.
This week: A couple in Cork who are looking for a bigger home for their three kids.
The dilemma: I live near Cork city with my husband and our three children – I’m 37, my husband is 38. We bought our first home six years ago but soon after our third child was born, we decided to sell up for a home with more space. Our current home has just sold for €415,000, with €230,000 left on the mortgage.
Time is of the essence to find our new place. From what we can see, selling prices in our area are high. They’re averaging around €495,000 for the size of house we need.
Between us we earn €105,000 – my husband works in finance and I’m in admin. We’ve done the sums and reckon we’d need a mortgage of €345,000 minimum.
Up to now we’ve been paying €970 in monthly mortgage repayments with 3% interest, and we can’t really afford for our repayments to rise by more than €350 – €400 a month. What are our options? Are our expectations realistic or should we have waited to build up our savings more before selling our current home?’
The vital statistics
We asked Ray McMahon, Director of ICS Mortgages to share his insights.
Ray: The good news is that your expectations are definitely realistic, not just in terms of the amount you can borrow but also in terms of the amount you’ll be repaying each month.
Let’s start with how much you can borrow. Under Central Bank rules, buyers can apply for a mortgage of up to 3.5 times their salary without needing an exception. For yourself and your husband, that’s €105,000 x 3.5, which is €367,500. The fact that you’re looking for a mortgage less than that threshold is a good start.
As for the repayments, age is on your side here, and it’s one of the big levers you can use to your advantage. By extending out the term of your next mortgage to 30 or 31 years, you can make your next mortgage’s monthly payments more affordable.
The other positive working in your favour is that you’ll be able to get a much lower interest rate than the 3% that you’ve been paying on your current home, so your repayments might not be significantly different to what you’re paying now.
For example, with a house valued at €495,000, you could get a five-year fixed mortgage of €346,500 at 2.1% interest over 31 years with ICS Mortgages.
Your fixed term repayments would be around €1286 per month, which would be €316 more than what you’re paying now, but for a larger house that’s better suited to your growing family.
Life can change a lot in 31 years, especially with three kids at home, so I’d recommend looking for a mortgage with some flexibility built in. For example, with your ICS Mortgage you could get up to three payment breaks during the life of your mortgage. This can be handy, for instance if you have education expenses to budget for.
You could also look at overpaying your mortgage at any time, in order to shorten the term of your repayments. Say you’ve come into some money or had a bonus at work – you can repay up to 20% with no penalties on your fixed rate mortgage.
A big hurdle for buyers moving to a second home is trying to keep the gap between moving out of the current house and moving into the new house as small as possible.
The more advance preparation you can do, the better – be it engaging a solicitor ahead of time, or speaking to estate agents in your area to find out how fast houses in your chosen area have been selling, or both. There’s lots you can do now to put yourself in pole position for a smooth, stress-free transition to your new home.
ICS Mortgages is an award-winning specialist mortgage lender, with accolades including Best Mortgage for Public Sector Employees in 2020 & 2021. With a nationwide network of brokers, along with a direct lending team available on the phone or online, they can help you make that move into your dream home. To find out more, visit icsmortgages.ie/mortgages.
Dilemmas are composites drawn from the real-world experience of lenders at ICS Mortgages.
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