Self-Build Mortgage Donegal

The Best Journey Always Takes Us Home

So, what is a Self-Build Mortgage?

A mortgage is a loan required to finance the building of your property. A mortgage allows individuals to borrow to build their home now and pay for it over a number of years.

When you are obtaining a mortgage, you will need to put down a deposit. The amount of this deposit will depend on whether you are a first-time buyer or a non-first-time buyer. It will also depend on the lender’s criteria for the amount they will lend compared to the value of the property. The mortgage amount can be the purchase price of the site + the cost to build the house, less the amount of your deposit (which can be made up of savings and any financial gifts from e.g., parents).

In Donegal the gift of a site from a family member is commonplace, you can use the site as your deposit if you already own it or are being gifted it.
Regular payments must be made over the term of the mortgage to repay the mortgage loan. These payments are usually made monthly.

Self Built Mortgage Donegal

Fact File:

The larger the deposit that you can put down, the less money you will have to borrow, meaning the less interest you will have to pay over the term of the mortgage.

It is important to review your mortgage protection policy regularly which can be done through your Advisor.

Building your home

Before deciding on how much you wish to borrow, you should review your budget to find out how much you can afford in monthly mortgage repayments. The CCPC has a budget planner that you can use to see how much you can afford each month.

There are lots of issues with building a house using a mortgage, so it is important that you seek advice from a trusted advisor
A good mortgage advisor will be able to explain the choices available to you in simple language allowing you to make an informed decision.

Fact File:

You can get mortgage approval in principle before you start to look for a site and or go for planning permission. This lets you know how much you will be able to borrow.

It is important to review your mortgage protection policy regularly which can be done through your Advisor.

Building your home

Before deciding on how much you wish to borrow, you should review your budget to find out how much you can afford in monthly mortgage repayments. The CCPC has a budget planner that you can use to see how much you can afford each month.

There are lots of issues with building a house using a mortgage, so it is important that you seek advice from a trusted advisor
A good mortgage advisor will be able to explain the choices available to you in simple language allowing you to make an informed decision.

Fact File:

You can get mortgage approval in principle before you start to look for a site and or go for planning permission. This lets you know how much you will be able to borrow.

Mortgage Protection Insurance

When taking out a mortgage, you need to consider how it will be paid off in the event of your death. You may also consider how to continue repayments if your income falls, due to illness, unemployment, or other reasons. When you get a mortgage to buy your home, you will generally be required to take out Mortgage Protection Insurance.

This is a particular type of life assurance taken out for the term of the mortgage and designed to pay it off on the death of the borrower or joint borrower.
There is also another type of Mortgage Protection insurance called Mortgage Repayment Protection insurance. This insurance is usually optional. It is a type of payment protection insurance that is designed to repay your mortgage for a certain amount of time. It is important to review your mortgage protection policy regularly which can be done through your trusted advisor.

Fact File:

In most cases, the lender is legally required under Section 126 of the Consumer Credit Act 1995 to make sure that you have mortgage protection insurance before giving you a mortgage. You can shop the market for this insurance, you do not have to take it out with your lender, in most cases we would recommend that you don’t take it with your lender.

What you should know for your mortgage application

If you haven’t yet found a site or got planning permission, you can get approval in principle, you should think about:
    • The area in which you want to build

    • The estimated build cost.

If you’ve found the site you wish to buy or are being gifted the site
    • The exact correct address of the site, including the Eircode, if available.

    • The agreed price of the site, or if being gifted, the value…

  • Your income

Your annual base income. Some lenders may also take into account a portion of any irregular income such as bonuses and overtime payments or sources of additional income. Some lenders may take an additional part-time income into consideration as well.

  • Outgoings and Spending

What you typically spend each month including rent/mortgage payments, groceries, bills, clothing, travel, entertainment, childcare, and loan/credit card repayments. Take account of major irregular expenses such as house/motor/health insurance or holiday expenses.

  • Savings

The amount of savings that you have and any regular savings commitments that you have. Savings are important to pay for a deposit and additional expenses, including legal costs, involved in buying a property.
Lenders will also take into account whether applicants can show the ability to manage money and save.

  • Outstanding loans

Any outstanding loans including overdraft balances, personal/motor loans, hire purchase agreements, credit union loans, point-of-sale credit agreements, and credit card balances.
The more borrowing you have, the less additional borrowing, in the form of a mortgage, you will be able to take on.

  • How much do you need to borrow

The difference between the price of the site + the build cost and the amount you will put towards the project yourself. This will depend on the savings and other funds you have available to pay for the deposit. If you own the site, this can be factored in as well.
You will need to factor in other expenses such as solicitor’s fees and a valuation/surveyor report into the purchase price.

  • Repayment term

The period in years over which you plan to repay the mortgage. The shortly the repayment term the higher the monthly repayments will be and vice versa.

Checklist of items needed for a mortgage Application

When applying for a mortgage the following may be needed for all applicants.
This list is for guidance only and different lenders may not require everything in this list

      • Photographic ID (originals or certified copies)
      • Address verification
      • Proof of PPSN
      • Most recent 6 months’ bank account statements (for all bank accounts)
      • Most recent 6 months’ online bank account statements (i.e. Revolut)
      • Most recent 6 months’ savings account statements (if applicable)
      • Most recent 6 months’ credit union statement (if applicable)
      • Last 6 months’ credit card statements (if applicable)
      • 12 months’ statement on all loans if applicable
      • Most recent mortgage statement for all mortgages (if any)
      • Foreign Credit History Report, English version, (if living in, have a loan or bank account in any country outside Ireland)
      • Gift letter (if getting a gift for the deposit)
      • Copy of your Marriage Cert (if applicable)
      • Copy of your Divorce or Separation agreement (if applicable)

If you are an Employee, paying income tax under PAYE

  • Up to 3 months’ recent pay slips
  • Most recent Employment Detail Summary
  • Salary Cert completed by your employer

If you are Self Employed or Director


If you own more than a 25% shareholder of an LTD company, lenders will class you are self-employed even though you are being taxed under PAYE.

  • 3 years’ accounts
  • 3 years’ revenue notice of assessments/ chapter 4
  • 3 years Form 11
  • Confirmation of Tax Clearance cert
  • Most recent 6 months’ business bank account statements (for all bank accounts)
  • 12 months’ statement on all business loans

For the build

  • Breakdown of build costs (Your lender will provide the template)
  • Copy of architects’ PI cover
  • Copy of planning permission
  • Copy of plans
  • Copy of ordinance survey/ site map, showing the site marked
  • Gift letter if the site was gifted (template available from your lender)

Please note:

The above list is for guidance only and does not constate a completed list. Lenders may require more or less information than listed above. If you are borrowing from the lender you bank with you will not have to provide bank accounts etc.

What a lender needs to know

Lenders assess mortgage applications in different ways. The lender will take into account the information you provided to assess how much you can afford to borrow and whether or not you will be able to meet the mortgage repayments.

In making a decision, the lender must comply with the Central Bank of Ireland rules which apply limits to mortgage lending in the Irish market. These limits apply to loan-to-value and loan-to-income measurements and are reviewed every year.

In making its decision, the lender will also look at other issues:

  • Your age – how old you are and when you will retire may affect the repayment term most appropriate to your situation.
  • Your credit record – your history of loan repayments may affect the lender’s assessment of your ability to meet repayments in the future.

The Reliefs that may be available to you

Help to Buy (HTB) Incentive: Only available if this is your first house.

As a first-time self-builder or buyer, this incentive will help you towards the deposit you need to buy or build a new home. The incentive gives you a refund of the income tax and Deposit Interest Retention Tax (DIRT) you paid over the previous four tax years. The incentive applies if you buy, or self-build a new residential property as your main home.

First-Time Buyers (FTB) Relief:

You pay DIRT on the interest you receive on your savings in financial institutions such as banks and building societies. If you are a first-time buyer that buys or self-builds a property to live in, you may be able to claim a DIRT refund. The FTB is relief applied to homes bought or self-built between 14 October 2014 and 31 December 2017.

Why use a Mortgage Broker like Advice First Financial?

Clear. Concise. Professional.
Advice First are trusted expert for Mortgage Advice and Financial Planning matters and works on your behalf giving you a choice of products and providers from across the market. We will work with you to understand your mortgage & financial goals and helps you create a plan to meet your personal finance objectives.
Our services can include Mortgage Advice, personal financial planning, life cover, serious illness cover, income protection, savings, investments, pensions, retirement planning, business financial planning, inheritance tax planning, and mortgages.
We will be able to explain the choices available to you as a first-time buyer in simple language allowing you to make an informed decision.

Help to Buy (HTB) scheme

The Help to Buy (HTB) scheme is an incentive for first-time property purchasers including self-builds. It will help you with the deposit you need to purchase or self-build a new house or apartment. You must purchase or self-build the property to live in as your home.

Where you meet the required conditions, you will receive a refund of:

  • Irish Income Tax

And

The refund will be from the four tax years prior to when you make your application. The refund will not include any refunds you have already claimed.

Who can claim HTB?

To claim HTB, you must:

  • be a first-time purchaser at the time of the claim
  • purchase, or self-build, a qualifying property between 1 January 2017 and 31 December 2022
  • live in the property as your main home for five years after you purchase or self-build it
  • be tax compliant. If you are self-assessed, you must also have tax clearance
  • take out a mortgage on the property with a qualifying lender.

The mortgage must be at least

  • 70% of the: purchase value of the property

Or

  • approved valuation, in the case of a self-build.

To qualify, you must not have previously purchased or built a house or apartment, either on your own or jointly with any other person. If you are purchasing or self-building the new property with other people, all of them must be first-time purchasers. If you have inherited, or have been gifted, a property, depending on the circumstances, it may not affect your eligibility.

If you are purchasing the property, you must have signed a contract to purchase that property to get payment.
If you are self-building, you must have drawn down the first part of the mortgage to get payment.

Approved developers and contractors

The contractor you are purchasing your home from must be approved by Revenue. You can check the list of approved developers and contractors to ensure that your developer or contractor is approved.

If you are self-building, you do not need to use a Revenue approved contractor. You can use direct labour. However, you will require a solicitor (registered with Revenue as an ‘HTB approver’) to verify your HTB claim.

A qualifying property?

To qualify for HTB, the property that you purchase, or self-build must be:

The property must never have been used, or have been suitable for use, as a residential home. If the property was non-residential but has been converted for residential use, it may qualify for HTB.

If you purchase or self-build the property as an investment, it does not qualify for HTB.

  • Purchase value

The purchase value of a new build means the price you purchased it for. The value of the property must be €500,000 or less to qualify for HTB.

  • Approved valuation

If you are self-building a property, the approved valuation is the valuation of the property approved by the lender at the time you took out the mortgage. The approved valuation must be €500,000 or less to qualify for HTB.

  • Mortgage

You must take out your mortgage on the property. This loan must only be used for purchasing, or self-building, the property. The loan must be at least:

  • 70% of the purchase value

Or

  • 70% of the approved valuation. For a self-build, the approved value will be on the completed property, the market value, which also takes account of the site value.

This is known as the loan-to-value ratio.

You are allowed to have a guarantor on the loan. The guarantor does not need to be a first-time purchaser. Please Note: Most lenders currently will not allow a guarantor on the mortgage.

How much can you claim?

An enhanced HTB scheme was introduced in 2020 as part of the Government’s July Jobs Stimulus Plan.

You are eligible for increased relief under the enhanced HTB scheme if, during the period from 23 July 2020 to 31 December 2022, when you:

  • sign a contract for the purchase of a qualifying property
    or
  • make the first drawdown of the mortgage, in the case of self-build qualifying property.

The original HTB scheme applies from 1 January 2017 to 22 July 2020.

Amount of relief under the enhanced HTB scheme

The amount that you can claim is the lesser of the:

The maximum payment is €30,000 per qualifying property under the enhanced relief. This cap applies regardless of how many people enter into a contract to purchase the qualifying property.

Universal Social Charge (USC) or Pay Related Social Insurance (PRSI) are not taken into account when calculating how much you can claim.

Amount of relief under the original HTB scheme

The amount that you can claim is the lesser of :

  • €20,000
  • 5% of the purchase value or approved valuation
  • the amount of Income Tax and DIRT you have paid for the four years prior to when you make your application.

The maximum payment is €20,000. This cap applies regardless of how many people enter a contract to purchase the qualifying property.

USC or PRSI are not taken into account when calculating how much you can claim.

How will the refund be paid?

If you purchase a qualifying property, the refund will be paid to the qualifying contractor.

If you self-build the qualifying property, the refund will be paid to a bank account you hold with your loan provider, following the first stage payment.

What is needed before you apply?

Before you apply, you must be registered for either:

If you are an employee pay tax through PAYE

Before you apply for HTB, you must submit an Income Tax (IT) Return for each year you wish to select as a refund year. A refund year must be within the four years prior to when you make the application. Any outstanding tax due for the selected refund years must be paid in full prior to submitting your claim.

If you were registered for another tax in any part of the refund years you are applying for, you must have a Tax Clearance Certificate (TCC).

Use myAccount to submit an IT Return for the relevant years. Online Income Tax returns are pre-populated with your pay and tax details.

You should not make your HTB application until:

  • you have submitted an Income Tax Return for each year you want to select as a refund year
  • you have received a Statement of Liability for all years for which you submitted an Income Tax Return
  • there is no outstanding tax due in any refund year
  • you have received your Tax Clearance Cert, if applicable.

Failure to do this could result in delays to your application.

If you are Self Employed and are self-assessed for Tax

If you are self-assessed, you must be fully taxed compliant and have tax clearance. You must have filed your Income Tax returns and paid all the taxes that you owe for all years when you were self-assessed. Use ROS to submit your IT Return (Form 11). Obviously, if you have an accountant, they can do your claim for you.

Selecting years for a refund

The refund of IT and Deposit Interest Retention Tax (DIRT) is based on the four years immediately prior to the year of application, starting with the earliest year.
In order to select a year in your HTB application, you must:

and

  • have received:
    • your Statement of Liability from Revenue for that year, if you are a PAYE taxpayer. The Statement of Liabilities is not issued until after your return has been submitted.
    • a Letter of Acknowledgement of your self-assessment, if you are a self-assessed taxpayer.

How to apply for HTB?

There are three stages to the online process:

  1. Application stage
  2. Claim stage
  3. Verification stage.

1: Application stage

Before starting your application, please ensure you are tax compliant. You can apply as:

  • an individual
  • part of a group.

Use myAccount or Revenue Online Service (ROS) to apply. Complete the declaration and select the years you wish to use for a refund.
If you are tax compliant, your application will be approved, and you will be given:

  • an Application Number
  • a summary of the maximum amount you can claim
  • an Access Code (sent through MyEnquiries).

Keep a safe note of these numbers, you may need to provide them to your:

  • lender
  • contractor or solicitor at the verification stage.

Please note: Even if your application is approved, all conditions of the Help to Buy (HTB) scheme must be satisfied for the claim to be approved.

A valid claim must be submitted before the application expires, otherwise your application will have to be resubmitted. Applications made between:

  • 1 January and 30 September automatically expire on 31 December of the same year
  • 1 October and 31 December automatically expire on 31 March of the following year.

Lenders and contractors can use Revenue’s Mortgage Query Tool to check your potential maximum HTB refund.

2: Claim stage

You can make your claim using revenue websites ROS for the self-employed or MyAccount if you are an employee, once your application is approved, and all other conditions are satisfied.

Step 1

Upload evidence of your mortgage and, if you are:

  • purchasing a new property, upload a copy of the contract, signed and dated by the vendor and all purchasers
  • self-building, upload:
    • proof of the drawdown of the first part of the mortgage

and

  • a copy of the valuation report from your lender.

Step 2

You need to confirm details about the:

  • property
  • purchase value (if you are purchasing a property) or approved valuation (if you are self-building)
  • date of completion
  • mortgage
  • amount of deposit already paid.

If you are applying with other people, you will also need to confirm the portion of the refund due to each person.
If you are self-building, you will need to provide the BIC and IBAN of the relevant bank account held with your mortgage provider.

Once you have submitted your claim, you will be provided with a Claim Number.

If you enter incorrect information during your application or claim, you must cancel it. You can then submit a new application or claim before continuing to the next stage.

3: Verification stage

Before you receive any refund, the information you have provided will need to be verified by the:

  • Qualifying contractor, if you are purchasing a property
  • Your solicitor, if you are self-building.

When you have submitted your claim, advise your eligible verifier and provide them with your:

  • Claim Number (issued after the claim stage)

And

  • Access Code (issued when your application was approved).

The refund that you receive is limited to 10% (5% under the original HTB scheme) of the:

  • purchase value
  • or
  • approved valuation.

This may mean that it is different to the maximum relief amount advised at the application stage.

Can Revenue claw back a refund?

Revenue can claw back refunds if you:

  • were not entitled to the refund
  • do not live in the property for a minimum of five years
  • did not finish the process to purchase the property
  • did not finish building the property.

Revenue can claw back refunds from the contractor if:

  • the property is not purchased by you within two years from when the refund was made to the contractor
  • Revenue has reasonable grounds to believe that the property will not be purchased by you within that two-year period.

There is some flexibility around the two-year period. This can apply if Revenue is satisfied that the property is either:

  • almost complete at the end of the two years
  • likely to be completed within a reasonable time period.

Once the property is completed and purchased by you, you are solely responsible for meeting the conditions for the Help to Buy refund. The developer is no longer responsible after this point.

What some of our happy Self-Build Mortgage customers have to say…

{

Pascal has been great at sorting us out with a mortgage. He’s knowledgeable and it’s better to have someone impartial on your side when you’re making a bit financial commitment. Couldn’t recommend enough.

5
Kieran McGee
{

Thankfully I was referred to Pascal at Advice First at a time when I was having difficulties securing my first time mortgage. Pascal and the team provided me with a wealth of information about mortgages, insurances etc. Such an invaluable service and I would highly recommend them to anyone out there looking for a mortgage. They took away all the worry about applying to banks and were always on hand to answer any questions I had about insurance, income protection and mortgages. Needless to say I also saved money by switching my income protection policy. I couldn’t recommend Pascal and his team highly enough.

5
Marnie Grier
{

Last year I had the good fortune of being referred to Pascal and his team at Advice First Financial Services in letterkenny when I was looking to applying for a mortgage. Pascal is a wealth of knowledge and I was impressed from the word go by his professionalism. Pascal was able to explain all the information to us in a clear and concise manner and he always checked to ensured that it was being fully understood. I found Advice First to be excellent communicators when engaging with their clients and all questions that we had (of which there were many) were answered promptly. I can honestly say that Pascal and his team were a dream to work with and I would highly recommend them to anyone looking for financial advice.

5
Cormac Mc Clafferty
{

I would highly recommend Pascal. He was a great help with getting our mortgage, insurance etc. sorted for our build. With the stress that can be involved in building or a purchase, this is definitely the best money you can spend.

5
Grainne Sheils
{

I would highly recommend Pascal. He was a great help with getting our mortgage, insurance etc. sorted for our build. With the stress that can be involved in building or a purchase, this is definitely the best money you can spend.

5
Matthew Havlin
{

We have been dealing with Pascal at Advice First since 2005. He has helped us so much through the years with our mortgage, Life Insurance, Income Protection and financial guidance. Pascal is so kind and explains everything so well. His attention to detail is second to none and always on hand if we need advice. I would highly recommend Advice First Financial Services. Caroline & Gary McLaughlin.

5
Caroline McLaughlin
{

Highly recommend advice first Pascal was so helpful and kind took all the stress and hassle out of the mortgage process! Would 100% recommend to anyone looking for advice!

5
Toni Donnell
{

Quite simply, I would have given up trying to get a mortgage without Pascal’s help. The banks put every obstacle they had in our way, but Pascal smoothed the path for us. We are now happily settled in our own home. Thanks Pascal!!!!! For everything

5
James Burgess
{

I had a 5 star experience with these guys. I went looking for help with a getting mortgage approved, and here I am, in my own home. I was also facing issues with getting mortgage protection, but that was no problem to Advice First! I would recommend anyone starting on their mortgage journey to give these guys a call…you won’t regret it!

5
Celine Furey
{

Pascal and the team at Advice First have literally changed my life – I was guided through the whole mortgage process from the very first initial meeting, with positive support and encouragement. Highly recommend Advice First for all financial needs!

5
Jane Donnellan

Frequently Asked Questions about Self-Build Mortgage Donegal

Can I use a site as my deposit?

Yes, if you already own or are being gifted a site this can be used as your deposit.

Who offers self-build mortgages in Ireland?

These are the main lenders that offer self-build mortgages:

  • AIB
  • Bank of Ireland
  • EBS
  • Haven mortgages
  • Permanent TSB

Their lending criteria varies, and your personal circumstances will be taken into account.
Some lenders offer the option of an interest only mortgage for the first 12 months, to help keep costs down in the first year.

Is applying for a self-build mortgage different than if buying?

The lending criteria for self-build mortgages can be stricter than other if you were buying a house.
This is due to costs and timeframes often being stretched and some projects sadly not completing which makes self builds a higher risk to lenders.
Employment checks are usually more stringent, and you’ll need proof of either:

  • Your deposit contribution
  • Ownership of the site for your new house (which may be used as your deposit)

What additional documentation do I need for a self-build?

Before your mortgage can be approved, you’ll need to provide your lender with this additional documentation including:

  • Final grant of planning permission
  • Site map
  • Professional indemnity insurance and initial report from your Architect/Engineer/Surveyor

Building plans and costings

At are stages payments of the self-build mortgage process

There is usually flexibility over the number of ‘stage payments’ you can receive, to best suit your build. This is when a payment is made to cover part of the build.

For example, if you’ve already own or have been gifted the site, you’ll skip the first stage.

There are usually between 4-6 payment stages. They may include when you:

  • Buy the site
  • Prepare the site and foundations
  • Build to floor level
  • First fix
  • Second Fix
  • Completion, lender will hold back 10% of the loan amount for this stage.

Each stage of the build must be certified by your Architect before a payment is released. Payments are requested each time via your solicitor.

What insurance do I need?

It’s vital to protect the funding for your home as well as the actual property – both during construction and when it’s fully complete and furnished. Here are the insurances you need:

Self-Build or House Under Construction Insurance, this will be a requirement of your loan offer.

This protects your home while it’s being built as well as the site and property, from damage caused by:

  • Fire
  • Storm
  • Flood
  • Break in and theft

It can also include public and employers’ liability if you opt for direct labour rather than paying a contractor to manage the project.
You will have to put in place full House Insurance for your last stage payment..

Speck with you mortgage broker about this.

What exactly is a mortgage?

A mortgage is simply a long-term loan that’s used to pay for a house.

How do I start the application process?

There are a number of easy ways to begin your application:
Get in touch with a mortgage broker, who will do all the work for you or get in touch with the lenders directly. Obviously, we would recommend the mortgage broker route as they will shop around all the lender and provide you with the best options for you. I would suggest dealing with a fee-based broker though. If the broker is not charging a fee, then they will only deal with lender who pay them a commission, which means you only get options from a select number of lenders rather than the entire market.

Here are some tips on getting mortgage ready

What’s a fixed rate mortgage?

With a fixed rate mortgage, your interest rate and monthly repayments are fixed for a set time as agreed between you and the lender. You can choose the best time frame for you.

Although a fixed rate means your repayments cannot increase for a set period of time, your repayments will not fall during the fixed rate period. As a result, you could miss out on lower interest rates and lower repayments. Fixed rates may cost more over the long run, but they offer peace of mind as you know your repayments will not rise during the fixed rate period.

We would recommend speaking with a mortgage broker though, you can discuss all rate options and they will help you decided whether a variable rate fixed rate is right for you. They will also be able to do market research for you on the best rates available for you.

What’s a variable rate mortgage?

Variable rates offer the most flexibility. They allow you to increase your repayments, use a lump sum to pay off all or part of your mortgage or re-mortgage without having to pay any fixed rate breakage fees.

However, because variable rates can rise and fall, your mortgage repayments can go up or down during the term of your loan.

How much will my repayments be every month?

Your repayments will depend on how much you borrow, the term or length of your mortgage as well as the interest rate that you’re charged. See this handy online Mortgage Calculator for an indication of how much your monthly repayments might be. We would recommend speaking with a mortgage broker though, you can discuss all rate options and they will help you decided whether a variable rate fixed rate is right for you. They will also be able to do market research for you on the best rates available for you.

What’s the minimum amount I can borrow?

The minimum loan amount you can borrow for a mortgage approx. €40,000. The minimum loan amount for a top-up, can also be called a further advance, is €25,000.

What’s the maximum amount I can borrow?

When giving you a mortgage, lenders use different criteria to decide how much they are willing to lend you and they must follow specific Central Bank of Ireland rules when doing this.

The Central Bank of Ireland’s rules apply limits to the amount that lenders in the Irish market can lend to mortgage applicants. These limits apply loan-to-income (LTI) ratios and the loan-to-value (LTV) ratios for both family homes and buy-to-let properties and are in addition to the lenders’ individual credit policies and conditions. For example, a lender may have a limit to the percentage of your take home pay that can be used for mortgage repayments.

How long will my mortgage last for?

Every mortgage has a life span or term. The minimum term would be 5 years and you could also possibly qualify for the maximum term possible which is 35 years. For a family home the maximum term of the mortgage is determined by your age. The maximum to have the loan repaid is age 68 with some lenders and age 70 with others. For Buy to Let mortgages have a maximum term of 25 years.

A shorter term means you’ll pay your mortgage off quicker, but it also means your monthly repayments will be higher. It is good advice to clear your debts, including your mortgage, as quickly as you can, it is also important to have a life and have to money to do all the other things in life that are important. So, striking the right balance is very important.

What documents do I need to make a mortgage application?

You will need certain documents when you apply for a mortgage, and you should keep a copy of anything you give to a lender or broker.

Proof of ID, proof of address and proof of your Personal Public Service Number (PPSN)

Proof of income: latest P60, payslips, certified accounts if self-employed

Evidence of how you manage your money such as current and loan account statements for the last three to 12 months, depending on the lender

Her is Permanent TSB’s full list of documents required here.
Her is AIB’s full list of documents required here.
You can see that the lists are very similar, which is the same with all other lenders.
These lists will not be complete for everybody as they do not take account of your individual circumstances.

What’s a loan-to-value (LTV) ratio?

LTV, or loan-to-value, is all about how much mortgage you have in relation to how much your property is worth. It’s normally a percentage figure that reflects the percentage of your property that is mortgaged, and the amount that is yours (the amount you own is usually called your equity).

For example, if you have a mortgage of €150,000 on a house that’s worth €200,000 you have a loan-to-value of 75% – therefore you have €50,000 as equity.
So, the lenders set LTV limits, which means you need to have a deposit of a certain amount before you can get a mortgage. There are different limits in place depending on what category of buyer you are.

  • First-time buyers need to have at least a 10% deposit
  • Second and subsequent buyers need to have at least a 20% deposit
  • Buy-to-let buyers need to have at least 30% deposit

Lenders have a limited amount of discretion when it comes to these limits and in a calendar, year can make exceptions for:

  • 5% of the value of mortgages for first-time buyers
  • 20% of the value of mortgages to second and subsequent buyers
  • 10% of the value of buy-to-let mortgages

These rules don’t apply to switcher mortgages and housing loans for restructuring mortgages that are in arrears and pre-arrears.

How much can you afford to borrow?

When making a mortgage application it can be tempting to apply for the maximum amount possible. However, you need to make sure you will be able to cope with future events such as an increase in interest rates, having children, redundancy or illness.

You can use this budget planner to work out what you can afford to repay each month and make sure to include a regular amount for ‘unforeseen expenses’. You can use our mortgage calculator to see how much your monthly mortgage repayments would be.

If you have other loans or debt, your lender may offer you a lower amount, ask that you pay off these loans or refuse your application.

The shorter the term of your mortgage, the higher your monthly repayments, but you will pay less interest in total. With a longer-term mortgage your monthly repayments will be lower, but you will pay more in interest over the lifetime of the loan.

Example:

MORTGAGE AMOUNTTERMINTEREST RATEMONTHLY REPAYMENTSTOTAL COST OF CREDIT
€200,00020 years3%€1,109€66,206
€200,00025 years3%€948€84,526
€200,00030 years3%€843€103,554
Difference in cost of credit between 20- and 30-year terms€37,348

Even a small difference in interest rates can have a big impact on the overall cost of a mortgage.

MORTGAGE AMOUNTTERMINTEREST RATEMONTHLY REPAYMENTSTOTAL COST OF CREDIT
€200,00020 years3%€1,109€66,206
€200,00020 years2.5%€1,059€54,353
Difference in cost of credit between interest rates€11,853

Example:
When you apply for your mortgage, and over its lifetime, it is important to get the lowest rate possible as it can lead to significant savings.

As well as mortgage repayments there are other costs to consider when it comes to buying a home

What are the other Mortgage fees and charges?

When buying a property, or switching your mortgage, it is not just your regular mortgage repayments you need to think about. There are a number of other costs involved which you should be aware of and ask your lender about. Some of these can be reduced or avoided by shopping around.

They include:

  • Brokers’ fees – some brokers charge a fee to arrange your mortgage or for mortgage advice. This might be a percentage of the mortgage amount or a flat fee. Not all brokers charge a fee so if you are planning to use a broker it is important to ask about this and to shop around. If a broker is not charging a fee, check with them what lenders they advise on. They may only work with lenders who pay them commission and you may not get a full market comparison.
  • Estate agent fees – if you are selling a property and using an estate agent you will have to pay a fee for this service. It is usually between 1% and 2.5% but can also be a flat rate.
  • Solicitor’s fees – to look after the legal aspects of your mortgage a solicitor will charge a flat fee or a percentage of the mortgage amount, typically 1% to 2%. It is worth shopping around a few solicitors.
  • Valuation fee – this is paid to a professional valuer to estimate a property’s market value and is required by the lender as part of your mortgage application. A valuation is valid for a short period of time, typically four months. You will need to get an up-to-date valuation of your property if you want to switch mortgage. Valuation fees typically run between €150 and €185.
  • Structural survey fee – a structural survey is done to find out the condition of a property. If any issues arose during the valuation of the property or it is very old, your lender may insist on a structural survey. Even if your lender does not require it, you may want to get a survey anyway to be sure there are no problems with the building. The amount you will pay can be dependent on the type, age and location of the property. It is not always a requirement for the lender, but it is always recommended to have a structural survey done for your own peace of mind.
  • Stamp duty – this is a tax payable on documents when you transfer ownership of a property. For residential property it is charged at 1% of the property value up to €1 million and 2% for anything above that.
  • Local Property Tax – this tax, collected by Revenue, is charged on all residential properties and came into effect in 2013. It is a self-assessment tax, and you calculate what is due based on your own assessment of the market value of your property. It can be paid in a lump sum or spread out over the year.

You should take the above into account when you are working out how much you will be able to borrow.

What is the stamp duty payable on mortgages?

Stamp duty is payable at 1% on properties up to the value of €1 million euro and 2% on properties over this amount.

What are lenders' normal lending criteria for a mortgage?

Every lender will look at various criteria before deciding whether to approve a mortgage. Some of the main factors that are taken into account are:

  • A good credit history.
  • Being aged 18 or over.
  • Age not greater than 70 at the end of the mortgage term. With some lender this age is 68.
  • Ability to repay – as a guide mortgage repayment on all loans including your mortgage should not exceed 35% of your net income
  • Secure employment.
  • Continuous employment at least 12years.
  • Self-employment for at least 2 years, some lenders require 3 years.
  • Good bank account management

With all lenders the primary focus is on your repayment capacity.

How much of a deposit do I need?

All lenders must follow Central bank deposit rules, which require a 10% deposit for first time buyers. So, if the value of your property is €200,000, you’d need a deposit of €20,000. This deposit can come by way of a gift, or part gifted, if you are lucky enough to have some-one willing and able to help you out. Borrowing for your deposit will not be acceptable to your mortgage lender, no matter where you are borrowing for.

What else should I bear in mind when taking out a mortgage?

You’ll generally need to arrange home insurance and mortgage protection before drawing down your loan.

Home insurance is a property insurance which covers private homes, buildings and contents. The cost of home insurance often depends on what it would cost to rebuild your house and how much it would cost to replace all of the contents of the house. The replace value of your property may be more than the purchase price.

When taking out a mortgage you’ll also need to consider how it’ll be paid off in the unlikely event of your death before the mortgage has been fully repaid. When you get a mortgage to buy your home, you’ll generally be required by your lender to take out mortgage protection. This is a particular type of life assurance taken out for the term of the mortgage and is designed to pay it off on the death of the borrower or joint borrower before the end of the mortgage term.

What is the timeline for the mortgage process?

Wherever you are on your mortgage journey, whether you’re ready to make an application, or just want to ask some questions – we’re here to support you so book an appointment today with our mortgage team!

We’ll outline the mortgage process and the required documents you’ll need for your application and you can then gather and submit the documents required at a time that suits you, allow 1-2 weeks for gathering these documents.

Once the lender receives your application and supporting documentation, they will get back to you in 3 working days to let you know if it’s ready to go to our underwriting team for a full assessment, or if they need any further documents or information from you first.

Once they submit the documents to their underwriting team for full assessment, they will let you know if they can approve your application within 10 working days. In the rare event that they can’t come to a decision in that timeframe, they will be in touch to let you know and to inform you of when they will have a decision.
If you are using a mortgage broker the lenders will communicate this update to them who will in turn communicate with you.

Once your application for credit is approved, (called approval in principle, AIP) and you have found your home, you will be required to arrange for a valuation of your property. A credit check will also be undertaken on all applicants of the mortgage, and you will need to arrange Life Insurance and Home Insurance. Your lender will issue the loan offer to your solicitor and once you sign the documents, your solicitor will arrange the transfer of funds and collection of your keys to your new home.

If you have questions or need Self-Build Mortgage Donegal advice, call 074 9103938 or email now

Financial Services Companies are regulated by The Central Bank.