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.
First up: a public sector worker who wants to buy her first home, and is planning for a family.
The buyer: My partner and I got married earlier this year, and we’re saving for a home. I’m a 31-year-old nurse working in a hospital in the midlands; my salary officially is €39,502 but I would typically earn around another €9,500 a year between overtime and allowances, bringing my annual income before tax to just over €49,000.
My husband is a marketing manager who earns €40,000 a year. He gets a bonus which can be up to 15 per cent on top of that, but it’s not guaranteed. Over the last few years we have managed to save just under €35,000 towards a deposit, and we don’t have any outstanding debt except a car loan – the repayments are just over €300 a month.
We have a property in mind, which is going for €345k. However we can only borrow 3.5 times our salaries, which works out at €276k if we can’t take overtime and bonuses into account, plus our deposit. What are our options? Should we wait until next year and try to get an exemption?
The vital statistics:
We asked Tom Birch, Lending Manager at ICS Mortgages, to share his insights.
Tom: Based on the information you’ve provided and subject to underwriting, I would expect that you could be able to get to around €310k, or 90% of the purchase price. The reason is that for people working in the public sector, we look at your future salary when calculating your income. We also take into account up to 100% of whatever regular allowances and overtime you get. This allows us to give more flexibility to borrowers.
As a next step, most mortgage providers look for evidence of repayment capability over a six-month period, so we’d be getting an idea of: do you pay rent? How much? How much do you save per month? Based on the figures you’ve shared, you’ve got some savings, presumably you’re saving on a consistent basis. So you should be fully qualified.
However, I can see that you might face challenges with some lenders. Firstly they are unlikely to work above your current salary, and secondly they may not take as much of the regular additional income into account. So you might not get that same level of flexibility.
That flexibility can be really important, especially for a first-time buyer. Because there are other things to think about on top of your 10 per cent deposit and your 90 per cent mortgage. Typically with new builds there are other costs – you need to furnish the house, you have your legal fees and so on – and you don’t want to be leaving yourself short.
You’ll also want to consider the house and life insurance that needs to be in place before buyers can get their keys – you’d be surprised by how many people are taken unaware and left in a rush to get quotes at the last minute
Another thing to take into account here is the Help To Buy scheme, which is available to anyone who is looking at a new build. Even though you have your 10 per cent deposit, this would give you some added flexibility – it might free up some more cash for those extra costs, or if the purchase price was to increase a little bit. Depending on how much combined tax you have paid in the last four years, you could potentially be eligible for up to €30k on the scheme.
In terms of mortgage types, you could go with either a fixed or variable rate. Most lenders will allow a certain overpayment element on a fixed rate – with ICS Mortgages, it’s 20% per year on fixed rate mortgages. If you’re expecting to overpay by more than this on your mortgage or want more flexibility, then the variable rate could be a good option. Or if you want the security of knowing exactly what your monthly repayments are for a longer period, the fixed rate could be worth thinking about.
If you take an example of a fixed rate for someone looking to borrow 90%, the 3 year fixed rate of 2.35% – one of the lowest on the market – with a 35-year term would mean repayments would work out at €1,083 per month.
For us, it’s important to be open and upfront. Being a first-time buyer is a big financial decision, and you haven’t been in this situation before. A lot of those scenarios which are new to you, we would see day in day out, and can make the experience of getting your first home a lot smoother.
ICS Mortgages is an award-winning specialist mortgage lender, 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.
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