Independent Mortgage Advisers Federation

FAQS

The Most Frequently Asked Questions

BUYING A house and taking out a mortgage can seem a daunting task. It doesn't
have to be but if you are taking out a mortgage for the first time - there's a couple of
things you need to know. It's really quite simple and being informed can make the
experience of buying your home a lot easier and enjoyable. The following is a list of
frequently asked questions - as well as some of the answers.

Q. Which comes first...the mortgage or the house?

This is probably the most frequently asked question. It's important to know how much you can realistically afford. The first thing to do is to visit an independent broker and they will be able to calculate how much you can borrow, based on your earnings savings, if any.

Q. How much can I borrow?

This depends on how much you earn. Generally speaking, you can borrow up to 92% of the value of the property. So if the house is worth Euro 250,000, you can borrow up to Euro 230,000. If you are buying a house on your own, you can borrow up to 4 times your annual salary. If there are two of you buying together, you can get three and a half times your joint salary. If you have regular bonuses and / or overtime, they will also be considered.

Q. Now long will it take to repay my mortgage?

You can normally repay your mortgage over any term between 5 to 35 years. The longer the term, the less your monthly repayments will be, however you end up paying back more over the long term.

Q. What additional costs are invoked?

You will need to take out a life policy, which is a mandatory part of the mortgage. You will also need Insurance on the house and it's contents.

Your broker will be able to give you advice on the best product options in the marketplace.

You will have to pay a solicitor who will charge a professional fee plus outlay. It is wise to shop around and get estimates from a few solicitors in advance of proceeding with the purchase.

You will need to get a valuation report carried out to ensure the property is worth at least what you are paying for it. You should budget for a fee of around Euro 130 inc. VAT

In many cases it is good advice to get a surveyors report carried out before you agree to purchase. This is more usual where the property is old - any structural faults, dampness, dry rot etc. will be identified.

You may have to pay stamp duty on your home - see details following.

Q: How much stamp duty will be payable on my home?

This is tax payable to the Government when you buy a new or second-hand home. However, in certain circumstances, you might not have to pay it. It is charged at the following rates:

STAMP DUTY GUIDE (Second hand residential property)
 

1st Time Buyer

Owner Occuper

Investor

€0 to €127,000

0

0

0

€127,001 to €190,500

0

3%

3%

€190,501 to €254,000

0

4%

4%

€254,001 to €317,500

0

5%

5%

€317,501 to €381,000

3%

6%

6%

€381,001 to €635,000

6%

7.5%

7.5%

€635,001 and over

9%

9%

9%

Stamp duty is not payable: If you are buying a new home, where:

(a) The floor space is equal to or less than 125 square metres (1,346 square feet); and

(b) The home is your only, or main, home for at least the next five years and you will not earn any rent from the property during this time.

Q. What is the difference between a fixed and variable rate?

A fixed rate means the interest rate remains the same for a set period of time - 1,2,3,5 years etc.

This option will give you the comfort of knowing that your repayments won't go up or down during this period. No matter what happens with interest rates in the meantime, you will always pay the same amount. On the other hand, a variable rate means that your repayments are linked to market interest rates. These can go up or down during the life of the mortgage. If interest rates go up you pay more, however if rates go down you benefit from lower repayments.

Q. What happens if my circumstances change and I want to pay more or less each month?

Mortgages can be tailored towards peoples ever changing circumstances. These options will allow you to pay more, pay less, or believe it or not, pay nothing at all for a set period! Here are a few examples of flexible options:

Take a break from your mortgage
This is a 3-month break from your mortgage and gives you breathing space when you need it. For example the birth of a child, a wedding, a career break etc. Once you have made two years repayments, you can take a 3 month break. You can take up to four of this 3 month breaks over the term of the mortgage.

Index link your repayments
This allows you to increase the amount of your monthly repayment by a certain percentage each year, enabling you to payoff your mortgage earlier and in turn pay less interest.

Deferred start
This option is specifically available for first time buyers. It allows customer make no
repayment at all for the first 1,2 or even 3 months of their mortgage. This allows breathing space in the critical first few months of the mortgage when outgoings tend to be very high. These missed repayments are then spread over the remaining term of the mortgage.

Q. What if I want to top-up my mortgage, in the future?

More than likely, your property will increase in value over the life of the mortgage. At certain times, you may wish to release some of the equity that you have built up in your home to pay for expenses such as home improvements, school fees etc. Releasing equity is a cost-effective way of financing these expenses.

For example: if you have a mortgage of Euro100,000, and your home is valued at Euro160,OQO - you therefore have Euro60.000 equity built up in your home. You could therefore borrow up to 90% of the value of the house eg. Euro144,000 (160,000 x 90%)

Q. When choosing a mortgage should I just go for the cheapest?

Don't select a lender just because they have just reduced their interest rate. The rate is of course very important but also look at the overall offering.

For example:

  • Does the lender-charge an indemnity bond or an acceptance fee?
  • Will they allow you flexibility on repayments in the future?
  • What fees and charge apply for existing customers?
  • Choose a lender who will support you over the life of the mortgage?

The most important factor is to seek independent financial advice from an IMAF registered broker. They will offer you help and guidance through the mortgage process. They will get an understanding of your circumstances and recommend a mortgage that will best suit your needs both now and in the future