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If only one word could be used to sum this up, it would be ‘preparation’. You just have to prepare. How long you have to prepare for depends on how you manage your day-to-day finances.  This is the definitive guide to applying for a mortgage in Ireland in 2024.

Demonstrated Repayment Ability (DRA):

The single biggest factor that you will be assessed on is your evidence of ability to meet with your new monthly mortgage repayments – Known as Demonstrated Repayment Ability (DRA). This means that you need to prove to any lender that, from your earned income and other regular resources, you could meet with your new monthly repayment for at least 6 months prior to you submitting your mortgage application to them.

Stress Testing:

You will most likely be stress tested on this too, so for instance, if the actual monthly repayment at one of their current rates was €3,000 per month, you may have to prove that you could handle at least €3,300 a month.

Savings Management:

I shouldn’t have to clarify this, but showing evidence of regular savings also means that you have to be leaving the savings to accumulate somewhere! E.g. Do not show you saving €500 a month by moving the money from your current account into a savings account, but also regularly dip into the savings to cover regular monthly costs. The increase or change in balance from month 1 to the start of month 7 will be divided by 6 to show the average monthly savings increase.

Readiness for Application:

Some people are already there when we meet them. They can prove the ability to repay for at least the last 6 months and they are ready to submit their mortgage application to a lender. At that stage it’s about finding out which lender, or more importantly, which lender’s ‘product’ is best value for them. An interest rate, whether variable or fixed, is just a product. Not all products suit all buyers.

Regulatory Limits:

There are certain Central Bank regulations in place that limit the amount that someone can borrow to buy their new home. For instance, if you are first-time buyers, you can borrow a maximum of 4 times your sole or joint gross annual incomes.

Property Value Limits:

The rules also limit how much of a property value someone can borrow. Gone are the days that you could borrow 100% of the purchase price. First time buyers can typically borrow up to 90% of the purchase price.

Financial Management:

How your current bank account is managed also has a huge impact on your mortgage approval. Unpaid fees are a red flag, unless there is a genuine reason behind it, you own the mistake and it’s a one-off. If you regularly have unpaid direct debits or surpass an overdraft limit, you will struggle to get approval, even if all other requirements are met.

Employment and Credit Arrangements:

What your job is, who you are employed by & what industry you are employed in also have an impact. As do any existing credit arrangements like car loans etc. Whatever your monthly personal loan repayment is will come off any figures before you are assessed for your ability to repay from what’s left, even if there is just a year to go on your loan.

Lender’s Assessment:

Lenders need to be convinced of every loan. They will not fight to get your business. Even if you have a very large lump sum to put towards the purchase and you only want to borrow 50% of the new property value, you will be assessed fully on your ability to repay the 50% that you do want to borrow. If you cannot tick all boxes to show that you can and if your accounts show any sign of poor management or choices, you will struggle.

Conclusion:

If you’re not sure of where you stand or if you’d like some guidance on how to begin the mortgage application process for your new home, then get in touch with a Family Cover mortgage adviser. We know the market, we know what lenders are looking for and we can guide you through the whole process. You may not like some of our answers, but you may also be surprised by some!