Key Post First Time Buyer mortgage guide

Brendan Burgess

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".
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For some people, the most important thing is to borrow as much as possible. Normally, you cannot borrow more than 4 times your combined gross annual income. For example, if you earn €30k per year and your partner earns €40k per year (before tax, in both cases), your combined gross annual income is €70k and the maximum amount you can borrow is €280k.

If you need an exemption to borrow more than the "4x income" limit, you should go to a mortgage broker, who will know who is best for your particular circumstances.

But as a general guide (thanks to
  • Avant is the most selective
  • Finance Ireland is the most "generous". But their rates are now high after the increases of summer and autumn 2022.
  • Finance Ireland also does a sub-prime mortgage ("Progress Plus") if you have a bad credit record or if you are self-employed and don't meet the banks' normal accounts requirements. The rates on these mortgages are about 0.9% higher than on their prime mortgages.
If you have a good credit record and don't need to stretch beyond the banks' normal lending limits, then you should be looking for the lender with the lowest long-term mortgage rate and the rest of the thread will discuss this.
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Some useful links for First Time Buyers

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Think carefully before choosing Bank of Ireland, permanent tsb or EBS, as their rates have usually been much higher than the other lenders over the last several years. Some of their rates and/or cashback offers may make them appealing. But before you commit to one of these lenders, ask yourself if you will be willing and able to switch to another lender in a few years' time. If you don't/can't switch, you will be stuck with their high rates when your initial fixed rate ends (in the case of BOI their lowest rates are not available to existing customers), and those higher rates will cost you dearly over the long term.

See this post for a list of reasons why you might not be able to switch in the future. E.g., your income might have reduced significantly because you or your partner has given up work to look after the kids.

If you want the cheapest mortgage, look at the interest rate – not at the repayments. A lender can make the repayments lower by extending the term. (The APR or APRC is of little relevance when looking at fixed rates – look at the headline interest rate instead.)

Reminder: LTV means "loan-to-value ratio". For example, if you are borrowing €344k and the property you are buying costs €400k, your LTV is 344k/400k = 86% – and so you fall into the "80% to 90% LTV bracket" (sometimes written as "≤90% LTV").
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If you have applied to two lenders and you have been refused the amount you want to borrow, you may qualify for a Rebuilding Ireland Home Loan.

The loan can be used to buy a new or a second-hand home, or to fund a self-build.

  • 3.35% fixed for up to 25 years
  • 3.45% fixed for up to 30 years
You must partake in the Local Authority Mortgage Protection Insurance Scheme, which costs 0.555% of the balance on the mortgage. For some people, this is much more expensive than insurance obtained on the open market. But for others, it's cheaper. Why is Local Authority MPI so expensive compared to the market?

The main eligibility criteria for a Rebuilding Ireland Home Loan are:
  • You must be a first-time buyer (or qualify under the "Fresh Start Principle")
  • You must be in continuous employment for at least two years if you are the primary earner
    • Or at least one year if you are the secondary earner
  • Maximum gross annual income:
    • €70,000 for a single person in all counties
    • €85,000 for joint borrowers in all counties
  • Maximum market values of the property that can be purchased are:
    • €360,000 in the counties of Dublin, Kildare and Wicklow
    • €330,000 in the counties of Cork, Galway, Louth and Meath
    • €300,000 in the counties of Clare, Kilkenny, Limerick, Waterford, Westmeath and Wexford
    • €275,000 in the rest of the country
  • Maximum LTV: 90%, i.e., a deposit of at least 10% of the purchase price
    • At least 3% of the purchase price must be from your own savings, i.e., not borrowed or from gifts
It seems that the funds available for these loans are limited, so you might qualify but there might be no money available to lend to you.

Rates and Ts&Cs updated 31st March 2023 (but confirm them here and here and here).
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If you take out a €300,000 mortgage with BoI you will pay €37,000 more interest over the life of the loan than you would pay to Avant or ICS in exchange for getting €9,000 cash back up front.
That's a strange way of comparing it, Brendan - over the full life of the loan. Surely a fairer comparison would look at the comparison over 5 years, at which point the borrower should switch.
Surely a fairer comparison would look at the comparison over 5 years, at which point the borrower should switch.

Why 5 years? Why not one month, as they can switch as soon as they get their cash back?

The reality is that most people do not switch. They stay with their lender and pay the higher costs over the term of the loan.

But I have updated that post to account for your point:

Of course, you could take out a Bank of Ireland mortgage today, and switch to Avant immediately after you get the cash back. But most people just do not switch.

That's a strange way of comparing it, Brendan - over the full life of the loan. Surely a fairer comparison would look at the comparison over 5 years, at which point the borrower should switch.

I once thought the same, but I've come around to Brendans way of thinking on this one.

All going well you could possibly save a bit of money by jumping immediately after your fixed rate ends, but you have no idea what the state of the market will be then, or the state of your personal finances. You may not be able to move for various reasons, or banks may have tightened rules, or interest rates may have changed. For those reasons I've gone with the AIB option above as I'd rather be with a bank with a solid reputation just in case I'm stuck there, foregoing cashback
Brendan you suggest to opt for the longest term possible? Are you not reducing interest payments by going for a shorter term?