Over the last 18 months, the net income of many people has fallen, due to income reductions and tax increases. It is now much more difficult to obtain the mortgage needed to purchase a house or apartment, so for many the dream of owning a house of their own, despite falling house prices, is still as far away as ever.
Most mortgage providers today will demand a deposit of 20 percent of the price of the property for which the mortgage is being sought. Banks and building societies no longer offer the 100 percent mortgages that were available 18 months ago. Now the maximum on offer is generally 90-92 percent.
Bank of Ireland offer a maximum mortgage of normally 90% of the property value. As a general rule, loan amounts are subject to monthly repayments not exceeding 30% to 40% of the borrowers disposable income and will vary according to individual circumstances.
Allied Irish Banks offer a first time buyer mortgage of up to 92% finance, flexible repayment options including 3 months deferred start, where you make no repayments whatsoever for the first 3 months and the interest is simply added to your loan.
The letters LTV stand for loan to value and this is the ratio of the loan outstanding against the value of the property. Banks are now more willing to provide mortgages for lower LTVs. Allied Irish Banks now offers a variable rate mortgage of 2.25 percent for loans involving an LTV of 50 percent or less.
Buyers must decide on the mortgage package that’s right from them. Fixed rate mortgages may make more sense to today’s house buyer. Although lenders will charge a substantial fee to allow you to switch to another mortgage, fixed rate mortgages shield buyers from the steadily rising costs of variable rate mortgage deals.
Some banks are also making distinctions between new customers and existing long term customers seeking mortgages, with existing customers being offered higher loan, while other lenders are now closed for new business, although the major banks such as BOI and AIB, as well as ICS and EBS are still providing mortgages.
Those banks that are willing to lend are now much more cautious about who exactly they will lend to. The banks will want as much proof as possible that the applicants job is recession proof and that the chances of the applicant defaulting on the mortgage is reduced to the minimum.
Banks are required to ensure that their customers will be able to repay the mortgage at a minimum of the European Central Bank rate plus an addition 2.75 percent.
To formally apply for a mortgage, you will need a recent P60, a certificate of income from an employer, a recent payslip, photo id and a recent utility bill. The banks may also ask for loan statements and evidence of your own financial situation.
Self employed applicants will have to provide two years of audited accounts and confirmation that tax is paid up to date. A valuation report will also be required on the property to be purchased.
Shorter term mortgages, 30 to 35 year terms, are now replacing the previous 40 year mortgages. These shorter term loans mean high monthly repayments, although they do reduce the total mortgage payable compared to the longer 40 year term.
Please remember, as with all mortgages, your home is at risk if you do not keep up payments on a mortgage or any other loan secured on it. The lender may adjust the payment rates on a housing loan from time to time and you may have to pay charges if you pay off a fixed rate loan early.
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