IF you are planning to buy or build in the next five years, it is a good idea to start the journey as early as you can. Even though there is a housing supply issue in the market currently, it will not always be like this and if you can start a savings habit, a small weekly amount can be a good help in the long run. The message here is start forward planning for the day you want to own your own home, even if this is well into the future. Companies including EBS provide 12-month approval in principle, which gives applicants time to find a home.

How much can you borrow?

We look at your mortgage application and assess how much you can afford to repay. As a general rule, a mortgage repayment should be no more than 35% of your net monthly income. In EBS, for example, for first-time buyers, single or joint applications, we can lend up to four times your gross earnings and 3.5 times for second-time buyers. If part of your income is variable, such as overtime, shift allowance or annual bonus, an element of this income can be used to make up your total gross earnings.

Maximum loan to value of owner-occupier residential properties is - 90% of the purchase price or valuation, whichever is lower.

How do you become mortgage ready?

The key point here is to show you have the repayment capacity to cover your proposed future mortgage repayment. Evidence of monthly rent payments and regular savings patterns would be key indicators. Banks will also look for good and stable income patterns with related satisfactory bank account operation over a six-month period.

How long it takes to deal with your application?

Can vary from financial institutions, but once all the financial documents have been provided, allow up to 10 working days but more often than not, decisions can be back sooner than this. A good tip is to compile all the relevant financial documents the bank needs to assess your application in one go. It may seem painful at the time, but it will be worth it in the end.

How long does my mortgage Approval in Principle last for?

Mortgage Approval in Principle (AIP) is valid for 12 months, after which a new formal application will need to be submitted - although this should be straightforward once there is no material change in financial circumstances.

Self-build mortgages

This type of mortgage is drawn down in stages upon certification from your engineer. If you own your own site, this can be used as your deposit and your bank may lend up to 100% of the build cost.

A good tip is to employ a good architect to design your house. A few extra euro spent here will save you in the long run! The important thing here is to ensure your architect and builder are on the same page regarding build cost as you do not want any cost over runs.

Some banks will cover your buildings under the course of construction insurance for the first 12 months, which can be up to €2,000 in the first year, so worth checking this out.

What is a BER and how does it affect my mortgage application?

Building Energy Rating (BER) is a rating on the overall energy efficiency of a residential property or building. The BER scale ranges from A (most energy efficient) to G (least energy efficient).

From January 27th, 2025, all our mortgage customers must give us a valid BER certificate/completed Building Certificate before their mortgage funds are released. A BER certificate is valid for 10 years. The mortgage must be taken out before the end date on the certificate.

If you are buying a new or second-hand property, the seller of the property will have the BER certificate. The estate agent or solicitor should be able to share it. Or the BER reference number will be available on the property listing. This reference number can be used to source the complete report from the SEAI National BER Register.

If the property you are buying is registered as BER exempt, you must provide us with documents that show this from the appropriate Local Authority Record of Protected Structures (PSR) prior to draw-down of your mortgage. The cost of a BER certificate varies based on factors like the provider and property size, so it is not included in our credit cost calculations.

Should I go fixed or variable on my mortgage rate?

It is really a matter of choice. Fixed rates are more competitive than variable rates currently and you are buying certainty, however, bear in mind you may have to pay a penalty if breaking early out of a fixed rate contract and you cannot make any ad hoc payments to your mortgage while on a fixed rate.

You also have the option to split your mortgage between a fixed and variable rate option. A general tip is if you are planning to pay any lump sums into your mortgage within a three-year period, it would be probably good advice to fix for no more than one to two years.

What is the First Home Scheme?

This is a shared equity scheme between the scheme and the borrower. The scheme can potentially give first-time buyers building or buying a new home up to 30% of the purchase price/build cost or 20% of availing of Help to Buy funds also. To be eligible, you must have a funding gap between your mortgage +savings and the purchase price/build cost and be at your maximum mortgage approval with your bank. For further eligibility requirements and information log on to www.firsthomescheme.ie

Any advice for self-employed applicants?

This question should be applicable to a number of The Irish Field readers. Banks will need to see three years trading financials/Revenue returns as unlike PAYE workers; self-employed earnings can vary from year to year so banks will look at the three-year average.

For example, EBS will review two years financial trading figures where the tax returns have been filed, if the two years are consistent in terms of turnover and net profit. Three years would be required where there are fluctuations from year to year.

If you do not have a full two/three years trading history as the business is relatively new, your accountant or tax advisor may be able to prepare projections for the following year or cashflows for the current year along with evidence of your current actual trading revenues via your business bank account statements. Also, if you worked in the same industry as a PAYE worker before becoming self-employed, your tax returns for previous years would show your taxable earnings in previous years.

The key point here is that the business must be able to show stable earnings, as it is your business that will be the dominant source of income for repayment of your future mortgage.

Additional costs

Your bank will need line of sight of your funds to cover professional fees such as solicitors, valuers, engineers (self-build only), as well as the property stamp duty.

Also where building your own home, your planning approval may outline ancillary costs to be paid for services such as electricity and water connections, which would need to be factored into your balance of funds.

Once you move into your new home, you will also have to take out a life and house insurance policy.

For anyone looking for advice on any of the above, you can contact Paddy on 086 3803232 or paddy.glynn@mail.ebs.ie

Note: Lending criteria, terms and conditions apply. Over 18s only. Security may be required. EBS d.a.c. is regulated by the Central Bank of Ireland.