The decline in property prices in recent years has seen many people contemplating entering the market for the first time. What are the factors to consider in arriving at a decision to buy?
Affordability: Will you be able to meet your mortgage repayments? As a general guide, your repayments on a mortgage and other loans should not exceed 35 per cent of your monthly take home pay. If you are buying jointly this means 35 per cent of your total joint take home pay.
House prices: Are prices at their lower limit? The simple answer is we do not know, but unless you are buying as an investment or commodity to trade this should not be a major deciding point. If you find a house in a location you like, and it suits your needs and the potential needs for your family in the future, and it is affordable, why not buy.
Current rent: Is your current rent equivalent to a mortgage? Will your rent increase in the future? With current interest rates on a mortgage term of 30 years, the average rent on a three bed semi in Galway city (€800 per month ) will pay a mortgage of €180,000.
Job security: This is an unknown with many people at present, but if you are renting as a couple, maybe with a family, the same job security issues affecting a mortgage will apply to renting.
Your need to have our own place: This used to be followed by the words ‘at any price’ in the boom years; thankfully this has changed and buyers are more sensible when purchasing.
What to do next: Before you view any houses, you need to find out what mortgage amount you qualify for, and obtain an approval in principle. This gives you an idea of repayment amounts per month and the price range of houses you should be viewing.
Applying for your first mortgage on your own can be daunting, but with the help of a mortgage broker all aspects of the mortgage process and costs are explained in detail.
If you use an independent mortgage broker such as Mortgage Options, the broker can apply for a mortgage on your behalf, package it for the lender to ensure that an approval is granted, or if not, advise you on the steps to take to ensure approval. A broker will take steps to avoid being declined, working closely with the bank and only submitting an application if it is likely to be approved, as a decline can affect further applications to other banks.
Once approval is granted you will know the price bracket you should be aiming for. Usually this approval is in force to give you ample time to buy at your own pace, with one lender issuing an approval which stays in force for six months.
Brian Melia t/a Mortgage Options is regulated by the Central Bank of Ireland as mortgage intermediary.