Mortgage Approval in Principle ...

Mortgage Approval in Principle from a mortgage broker or lender gives prospective buyers an idea of how much they would be approved for based on the information they provide about their finances.  This usually gives a reasonable indication of the type of mortgage you might be able to get but there is a lot more to an application process that can delay or lead to a declined proposal.

As such, I try to dig much deeper at application stage to make sure that there are less surprises and delays further on in the process. There have been instances where people have received approval in principle quickly with a financial institution, but have contacted me months into an application where they are still being asked to clarify information regarding their application. 

Documents required when applying for a mortgage

If your application is approved in principle, the following are examples of documents that you might also be asked to provide: 

If you are a PAYE employee, you will typically need to provide:

  • Your most recent P60 (original)                                                                                                    
  • A Certificate of Income (a standard form provided by the bank for completion by your employer)
  • Your last three months payslips                                                                                                
  • The last six months bank account statements

If you are self-employed:

  • Your last two years’ certified/audited accounts
  • The last six months business bank account statements (if business account is not with that bank)
  • Your accountant’s or auditor’s written confirmation that your personal/business tax affairs (PAYE/ PRSI/VAT) are up to date
  • Your management figures for the current trading year
  • You may also be required to provide identification documents and confirmation of your address. This is usually a current valid passport or driving licence and recent utility bill. 

Additional costs in purchasing a property

  • Valuation: Before you draw down your mortgage, the property will need to be independently valued by a professional valuer – you should expect to pay a fee of between €150 and €250 plus VAT, but this can vary.

  • Legal fees: You will need to pay legal fees to your own solicitor. As part of your own arrangement you need to agree with him or her whether this is a flat fee or a percentage of the purchase price. 

  • Stamp Duty: Stamp duty will also apply to the purchase. The current rates are 1 per cent of the purchase price up to €1,000,000 and 2 per cent of any value over that.

  • Insurance/assurance: You will also need life cover and home (buildings) insurance – the costs of these can vary depending on your requirements and circumstances. Life and buildings cover will need to be in place before you draw down your mortgage.

Mortgage term
Mortgages of up to 35 years are available to first-time buyers. Terms of up to 30 years are available to those trading up or down. Irrespective of whether you’re a first-time buyer or a mover your mortgage term must not go past age 70.

Getting Mortgage-Ready!

Applying for a mortgage can be a detailed and time-consuming process. The bank is eager to see that you can afford to take on a mortgage repayment and still have enough money left each month to enjoy your new home. To help you prepare for this process we have compiled a checklist to ensure that your application is successful.
 

  • Your income - lenders will look at your annual income and some may take bonuses or overtime into account. Some lenders may factor in rental income if you plan to rent out spare rooms.

  • Outstanding loans/Credit record - if you have other loans, this may reduce the amount of money you can borrow. Keep credit cards and personal loans paid on time. Missed repayments could affect the amount you can borrow for your mortgage and also your credit history.

  • Savings Having a regular savings account in which to save your deposit is important.  The bank will also take into account if you are paying monthly rental payments on a property – it demonstrates your ability to support this level of monthly repayments. You should arrange to pay your rent through your bank account – even if you are living at home and making a contribution to the household.

  • Day-to-day finances Make sure you manage your accounts so that you don’t go over your credit limit – this shows that you have been able to manage your finances effectively for a period of time before you apply for your mortgage. Lenders will look at any financial commitments you have, such as childcare costs. 

  • The value of your house - this is the market value, or purchase price of your house.

  • The amount you need to borrow - this is the difference between the amount you have saved to put towards the house (your deposit), and the purchase price of the house.

  • Additional costs You will need to show how you can cover additional costs such as stamp duty, legal fees, valuation fees and any additional expenses that might arise during your application process.

 

Deposit required

  • First-time buyer
    If you are a first-time buyer, a 90% limit will apply with a 10% minimum deposit. If there are two parties applying for the mortgage, both must be first-time buyers for the mortgage to be considered for these advantages. A Help-to-Buy incentive is also available and it is designed to assist first-time buyers with obtaining the deposit required to purchase or self-build a new house or apartment to live in as their home. It provides for a refund of Income Tax and Deposit Interest Retention Tax (DIRT) paid over the previous four tax years to first-time buyers. See the Revenue website for further information.

  • Non-first-time buyers

    If you are not a first-time buyer, different rules will apply. A lender may lend up to 80% of the value of the property that you wish to buy. This means you need to have the remaining 20% saved for your deposit. Banks do have a discretionary option to allow some applicants to apply outside of this criteria.

To be continued...

The future of financial advice in Ireland

So this is where we take out our crystal ball! Consumers sometimes are not clear about the value of financial advice, a situation that we are trying very hard to change. We know the value that is offered every day by Financial Brokers the length and breadth of the country, so here are a few thoughts on what you can expect to gain from seeking financial advice from a professional Financial Broker. The good news is that this future has now pretty much arrived! A good Financial Broker will deliver on these today.

Consumers don’t want conflicted advice
This is probably the key point. Consumers want advice and financial solutions that are based on their specific goals and objectives, and not those of the person giving the advice. The independence of the advice giver is critical here, they need to be able to seek out and provide the very best solution in the market for the client. The days of “force fitting” clients to the single product solution that is the only one available to a product seller are long gone. The solution must start and end with the client – their specific goals, their requirements and their specific circumstances.

Financial Brokers are not aligned to any one organisation and can advice upon the products of many organisations. Their advice starts and ends with the client, not the products available to them.

Consumers want clear and transparent charging
Similar to any other product or service bought by consumers, they rightly want to know what it is costing them. The providers of financial advice need to be able to clearly demonstrate the value that they are bringing through their advice, and what this advice costs. The adviser needs to be able to set out clearly how they will make a difference to the financial future of the client, and charge accordingly for this. Consumers can choose to pay for this through commission taken by the adviser from products, or by separate fees – however the adviser needs to be able to communicate clearly the value that will be gained from their advice.

Financial advice is about lifetime relationships
This might sound like a lofty statement, but it is so true! Financial advice is not a point in time transaction, it is a journey. It starts with the adviser identifying the desired financial outcomes of a client (the destination) and understanding the client’s current circumstances (the starting point). The adviser then puts in place the financial solutions (the vehicle) to help you achieve your objectives.

But as with any journey, the minute that you set off, everything changes! Financial markets change, your circumstances change, maybe your objectives change. So your financial adviser needs to travel on your financial journey with you.

Unlike in your bank branch, your Financial Broker will be a consistent figure throughout this journey. Continuing to guide you and redirect you as needed.

Financial advice was never more valuable. Can you afford not to get it from a Financial Broker?