Getting My First Mortgage: What Can I Afford?

It began as a quick calculation in your head while perusing house listings. How much you are currently paying on rent V. a monthly mortgage payment? Surprisingly similar, you think to yourself. Hang on, even less? And so the seed is planted. Suddenly you find yourself pausing to gaze in every estate agents window you pass. Your evenings are spent trawling housing websites. You binge watch home improvement shows at the weekend. You finally decide that it’s time to give this whole mortgage thing some serious consideration.

But first, you have to find out: What can I afford?

Figuring out exactly what you can afford can be a real head scratcher at first glance. But don’t fret, help is at hand. Read on for our guide to get to grips with everything you need to know.

The 10% rule:

You’ve probably heard a lot of news lately about the 10% rule. So what exactly does this mean for you? It’s actually pretty straightforward.

Here’s how it works:

Irish Banks are now only allowed to lend you 90% of what your house will cost. You need to have the other 10% deposit saved up before you take out a mortgage. So for example, if you have your eye on a house costing €200,000 you will need a deposit of €20,000 saved up before you get your mortgage.

The 20% rule:

Now here’s where it gets a little more complicated. The 10% deposit only applies to a mortgage that’s under €220,000. If you need to borrow more than that, you’ll need a deposit of 20% of the excess. A simple way to figure this out is to take €220,000 away from the cost of your house. Then figure out 20% of that amount. Add that 20% on to €22,000 and that’s what you need for your deposit.

Not too fond of maths?

If your head is still spinning trying to figure out what you can afford, don’t worry. We have a handy mortgage calculator you can find here. Just fill out the form and in less than five minutes you will know (in principle) what you can borrow. Simple.

Get Your Ducks in a Row:

We humans have a tendency to seek out patterns so it stands to reason that banks, who are run by humans too, also enjoy seeking patterns. And there’s no better place for patterns than your savings. Here’s a couple of tips from our Mortgage Expert to make sure you’re doing it right.

· Set up a savings account and don’t be tempted to dip into it – showing you can maintain a regular savings account will show that you’ll be able to meet your mortgage repayments.

· The easiest way to make sure you’re saving regularly is to set up a standing order. A top tip is to set it up to go out on the day you’re paid – you won’t miss it quite as much!

· Get your paperwork in order ahead of your application. Things like a salary certificate can take a few weeks to come through. Order these well in advance to save you stressing out closer to applying.

Meet Emmet:

Emmet is a single guy living in Cork city. He has a busy job in finance and an annual income of €60k. He recently decided to take the plunge and buy his first house. Under the new rules, Emmet can spend up to €310k on a house by taking out a mortgage of up to €270k and self-funding the difference of €40k. His monthly mortgage repayments will be €1,169.68 a month*

Meet Siobhan and Patrick:

Siobhan and Patrick are a couple living in Dublin. Siobhan is a teacher and Patrick is an electrician. They have a combined income of €80k. Under the new rules they can afford a house worth up to €422,500, which means they can borrow up to €360k and add a €62k deposit to that. Once they get their mortgage, their repayments will be €1,537.55 per month*.

*Calculated using the AIB mortgage calculator as of 16^th March 2016

Finally, although it sounds like a daunting task, most people are genuinely surprised by how straight forward the mortgage process is once they sit down with an advisor and chat through everything. Approval is faster than you think so pop in for a chat to talk about your options.

We’re open from 8am to 7pm Monday to Friday for mortgage appointments.

Allied Irish Banks, p.l.c. is an authorised agent and servicer of AIB Mortgage Bank in relation to origination and servicing of mortgage loans and mortgages. AIB Mortgage Bank and Allied Irish Banks, p.l.c. are regulated by the Central Bank of Ireland.