Things You Must Know Before You Get a Mortgage

Before you proceed to buy a house or apartment you must get mortgage approval and preparing yourself for approval can take years.

Unlike other financial loan agreements, a mortgage is a serious commitment between you and your bank, whereby you are duty-bound to repay the loan over a period of time that may be extended up to 35 years.

Studies show that the number of people applying for mortgage approval tends to increase on the contrary process of mortgage lending seems to increase at a snail’s pace and the latest figures claim it to be less than one per cent.

Furthermore, these days rising property prices and strict Central Banks lending rules and policies have indubitably made the process of applying for a mortgage even more challenging than ever before.

However, getting a mortgage can be a hassle-free task and you can increase your chance of securing one by knowing following seven things-

1.BE ACQUAINTED WITH CENTRAL BANK’S MORTGAGE LENDING RULES

Getting well-versed with the Central Bank’s mortgage lending rule is important as the rule dictates how much you are allowed to borrow for a mortgage in-relation-to your income and the value of the property you ought to buy.

Along with this it also governs the amount of money you need to save and provide in the form of deposit.

From the year 2015, the Central Bank of Ireland restricted the amount of money that banks can lend and one can borrow. In this context, borrowers can only borrow up to 3.5 times of their annual income.

Another rule signifies the deposit to be made by the borrower. In this context, the first-time buyers need to have a deposit of 10% and second-time buyers to have a deposit of 20% upfront for any property.

Let’s say, for example, that you are a first-time buyer and you want to purchase a property of €400,000. According to the prescribed rules, you need to provide a minimum deposit of €40,000 (10% of the property’s price) before the bank lends you the remaining €370,000.

2.CLEAR UP YOUR CURRENT ACCOUNT

Even before setting up an appointment, try settling up your current account and make some effort to put it into shape.

Personal loans, unnecessary credit card charges, referral charges, and overdrafts etc. reduce your chances of securing either a mortgage approval or approval of the desired mortgage amount, as it is one of the crucial things which the bank looks upon.

So, try to clear up as many debts as possible before applying for a mortgage for enhancing your possibility to secure one.

3.UNDERSTAND YOUR LENGTH OF EMPLOYMENT

Long gone are those days whereupon employers and employees had a long-term employment program.

Now are the days of switching jobs more frequently than ever.

In this matter, now the banks have comparatively relaxed their rules concerning the duration of time you need to be with your employer before applying for a mortgage.

However, one must understand that the banks still require an employee to pass the period of probation (which is generally six months for most of the jobs) and for this, they might take confirmation from the employer.

So, switching jobs right before you apply for a mortgage isn’t generally the best idea.

4.COMPREHEND THE RATES OF REPAYMENT

There are usually two types of interest rates on repayment- fixed and variable rates.

A variable interest rate varies with time and can go up or down over the term of your mortgage period. Simultaneously, the fixed interest rate allows you to pay a fixed amount of money for a predetermined period of time.

Both of them are subject to deep analysis and several other factors so you must clearly understand them and select the one which best suits your needs.

5.GETTING A MORTGAGE PROTECTION

Getting mortgage protection is an essential condition for applying for a mortgage and it is compulsory for all mortgage holders in Ireland.

It is a type of life insurance which pays off the remaining due payment of the mortgage in case you die before the mortgage is wholly repaid.

So, try applying for mortgage protection as soon as possible because sometimes it takes more time than the mortgage approval itself, thereby delaying the whole process.

6.BEAR IN MIND THE EXTRA EXPENSES

There are certain other extra expenses associated with mortgage approval. You need to save for these hefty costs other than the deposit itself, they might be- Solicitor’s fees, Stamp duty, Insurance, Land Registry Fee, Property’s tax, Search fees etc.

7.DON’T RELY TOO HEAVILY ON YOUR ESTATE AGENT

Remember, the estate agent is a representative of the seller and will act accordingly for them.

Hence, you can’t completely rely upon them to disclose to you all the faults and issues of the property or to help you get a fair price of the property.