Brendan Burgess
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Some tips and Frequently Asked Questions when applying for a mortgage as a first-time buyer (FTB)...
Start by getting mortgage approval from the lender you bank with
If you have your current account with Bank of Ireland, then apply directly to them for a mortgage. Assuming you have a good credit record, you will, at least, have one approval in principle (AIP) to start with.
But don't rely on the bank you have your current account with
Two of the most expensive lenders are permanent tsb and Bank of Ireland and a lot of people take out mortgages with them because that is where their current account is and because they are tricked by cashback. While you should apply for mortgage approval from your own bank, shop around and get approval from a few lenders.
Now more than ever, it's very important to apply to a few lenders
In early June 2022, Finance Ireland was highly recommended as one of the cheapest lenders. But overnight, with a rate increase, it became one of the most expensive. Anyone who relied solely on Finance Ireland was badly caught out. So get approval from a few lenders (or make sure that your broker does). This is especially important at the moment because rate increases across the various lenders are so frequent.
The fixed rate you pay is usually determined at the time you draw down the mortgage, which might not be for 3 or 6 months. Make the final decision on which lender to go for as late as possible.
It is most likely that AIB and Avant will be the best value in the long term
You should apply to both AIB and Avant for mortgage approval, as they are likely to be the best value. But no one knows for sure and other lenders may have better long-term rates when it comes to drawdown.
It is most likely that Bank of Ireland and permanent tsb will be the most expensive in the long term
They both offer lower rates or cashback upfront to attract new customers, but they have much higher rates for existing customers. You should only apply to BOI or ptsb if you can't get loan approval for the amount you want from another lender.
How long should I borrow for?
It's better to take out a mortgage for as long a term as possible, e.g., 30 years.
This does not mean that you must keep it for 30 years. You can pay it off over 20 years by making additional repayments from time to time. You will save many thousands of euro in interest by doing so.
If you take out a 20-year mortgage and get into difficulty, it may be difficult to extend the term to 30 years without damaging your credit record.
These days, most of the lowest rates are fixed-rate mortgages. The downside of a 30-year mortgage is that some lenders may charge you a break fee if you overpay a fixed-rate mortgage. So if you are very comfortable with a 20-year mortgage, then you should take out a 20-year mortgage instead of a 30-year mortgage. (But bear in mind that some lenders, e.g., Avant, allow you to make very large overpayments every year without charging you a break fee, and so you can take out a 30-year mortgage but make regular large overpayments if you want to.)
Fixed or variable?
Bank of Ireland and ptsb keep their variable rates artificially high. This is because many customers who fix initially default to this artificially high variable rate when the fixed rate ends.
So, in general, it is right to fix.
You should fix for about 4 or 5 years. This is because a lot of the best rates are 4- and 5-year fixed rates, and because fixing for this long reduces the size of any potential break fee if you move home before then.
But if you really like the security of a longer-term fixed rate, and you don't expect to move home in that timeframe, you could consider a longer fixed rate.
However, if you intend to overpay your mortgage, you might be better off with a variable rate as there are no penalties for early repayment of variable rates. AIB is the only lender with an attractive variable rate for new customers.
This is discussed in detail here:
Some lenders, such as Avant and Haven, only operate through brokers
So you must go through a broker to get a mortgage from them.
However, for mainstream lenders such as AIB or Bank of Ireland, there is usually no advantage in going through a broker
So go direct. In fact, AIB does not deal with brokers, so you can't go through a broker for AIB even if you want to.
If you want to borrow a lot, get an exception, or have some issues, use a mortgage broker
They will know best how to present your case.
If you are a discharged bankrupt, Bank of Ireland is the most flexible
If you are self-employed and finding it difficult to get a mortgage
Bank of Ireland is the most flexible.
If you are borrowing around 80% LTV, try to get it down to just under 80%
Rates are typically about 0.1% lower for a mortgage under 80% LTV. That might not seem like a lot, but on a €400,000 mortgage it's a saving of €400 per year every year.
Note: LTV means "loan-to-value ratio". For example, if you are borrowing €300k and the property you are buying costs €400k, your LTV is 300k/400k = 75%. And where you see, e.g., "<80%", that means a loan-to-value ratio of less than 80%.
As a First Time Buyer, you must have an LTV of 90% or lower, i.e, you must have a deposit of at least 10% of the purchase price. You are very unlikely to get an "LTV exemption".
Start by getting mortgage approval from the lender you bank with
If you have your current account with Bank of Ireland, then apply directly to them for a mortgage. Assuming you have a good credit record, you will, at least, have one approval in principle (AIP) to start with.
But don't rely on the bank you have your current account with
Two of the most expensive lenders are permanent tsb and Bank of Ireland and a lot of people take out mortgages with them because that is where their current account is and because they are tricked by cashback. While you should apply for mortgage approval from your own bank, shop around and get approval from a few lenders.
Now more than ever, it's very important to apply to a few lenders
In early June 2022, Finance Ireland was highly recommended as one of the cheapest lenders. But overnight, with a rate increase, it became one of the most expensive. Anyone who relied solely on Finance Ireland was badly caught out. So get approval from a few lenders (or make sure that your broker does). This is especially important at the moment because rate increases across the various lenders are so frequent.
The fixed rate you pay is usually determined at the time you draw down the mortgage, which might not be for 3 or 6 months. Make the final decision on which lender to go for as late as possible.
It is most likely that AIB and Avant will be the best value in the long term
You should apply to both AIB and Avant for mortgage approval, as they are likely to be the best value. But no one knows for sure and other lenders may have better long-term rates when it comes to drawdown.
It is most likely that Bank of Ireland and permanent tsb will be the most expensive in the long term
They both offer lower rates or cashback upfront to attract new customers, but they have much higher rates for existing customers. You should only apply to BOI or ptsb if you can't get loan approval for the amount you want from another lender.
How long should I borrow for?
It's better to take out a mortgage for as long a term as possible, e.g., 30 years.
This does not mean that you must keep it for 30 years. You can pay it off over 20 years by making additional repayments from time to time. You will save many thousands of euro in interest by doing so.
If you take out a 20-year mortgage and get into difficulty, it may be difficult to extend the term to 30 years without damaging your credit record.
These days, most of the lowest rates are fixed-rate mortgages. The downside of a 30-year mortgage is that some lenders may charge you a break fee if you overpay a fixed-rate mortgage. So if you are very comfortable with a 20-year mortgage, then you should take out a 20-year mortgage instead of a 30-year mortgage. (But bear in mind that some lenders, e.g., Avant, allow you to make very large overpayments every year without charging you a break fee, and so you can take out a 30-year mortgage but make regular large overpayments if you want to.)
Fixed or variable?
Bank of Ireland and ptsb keep their variable rates artificially high. This is because many customers who fix initially default to this artificially high variable rate when the fixed rate ends.
So, in general, it is right to fix.
You should fix for about 4 or 5 years. This is because a lot of the best rates are 4- and 5-year fixed rates, and because fixing for this long reduces the size of any potential break fee if you move home before then.
But if you really like the security of a longer-term fixed rate, and you don't expect to move home in that timeframe, you could consider a longer fixed rate.
However, if you intend to overpay your mortgage, you might be better off with a variable rate as there are no penalties for early repayment of variable rates. AIB is the only lender with an attractive variable rate for new customers.
This is discussed in detail here:
Key Post - Is there any downside to fixing your rate for a longish term at present?
In a normally functioning market, if interest rates are expected to rise, fixed rates should be higher than variable rates. But the Irish market is dysfunctional, and all lenders have higher variable rates than fixed rates. So you are getting the insurance of a fixed rate for free. The main...
www.askaboutmoney.com
Some lenders, such as Avant and Haven, only operate through brokers
So you must go through a broker to get a mortgage from them.
However, for mainstream lenders such as AIB or Bank of Ireland, there is usually no advantage in going through a broker
So go direct. In fact, AIB does not deal with brokers, so you can't go through a broker for AIB even if you want to.
If you want to borrow a lot, get an exception, or have some issues, use a mortgage broker
They will know best how to present your case.
If you are a discharged bankrupt, Bank of Ireland is the most flexible
Key Post - Bank of Ireland - non-standard mortgages cases (bankruptcy, self-employment, proprietary director)
Bank of Ireland don't offer the best mortgage rates. Between this and their reliance on a cashback offer, they don't tend to be recommended on these boards. But this thread https://www.askaboutmoney.com/threads/from-bankruptcy-to-a-mortgage-with-bank-of-ireland.225035/ and my own experience got...
www.askaboutmoney.com
If you are self-employed and finding it difficult to get a mortgage
Bank of Ireland is the most flexible.
If you are borrowing around 80% LTV, try to get it down to just under 80%
Rates are typically about 0.1% lower for a mortgage under 80% LTV. That might not seem like a lot, but on a €400,000 mortgage it's a saving of €400 per year every year.
Note: LTV means "loan-to-value ratio". For example, if you are borrowing €300k and the property you are buying costs €400k, your LTV is 300k/400k = 75%. And where you see, e.g., "<80%", that means a loan-to-value ratio of less than 80%.
As a First Time Buyer, you must have an LTV of 90% or lower, i.e, you must have a deposit of at least 10% of the purchase price. You are very unlikely to get an "LTV exemption".
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