Below you find the answers to the most common mortgage questions we are asked...
- What is APR & how is it calculated?
APR stands for annual percentage rate and its purpose is to give borrowers a true representation of the effective interest rate on their loan. APR factors in not only the interest rate but certain costs and fees which are spread over the life of the loan. All lenders have to tell customers their APR before you sign an agreement. It will vary from lender to lender. Generally, the lower the APR, the better the deal for you. - What documentation will a lender want to see?
- Salary Certificate (obtainable from your employer)
- Payslips
- Most recent P60
- Loan statements
- Savings Records
- Photo ID
- Utility Bill (for current address)
- Current Account Statements
- Either audited accounts or self certification (if you are self – employed)
- What is "Approval in Principle"?
An approval in principle or 'AIP' is simply an indication of the amount of money that a Bank or Building Society is likely to lend to purchase a home. The approval is based on the information provided by the customer. It is important to note that an 'AIP' is only an indication regarding how much can be borrowed. It is NOT formal Mortgage approval. Lenders often require additional information such as proof of earnings before they issue a “letter of offer”. This is the formal legal agreement with the Lender. - What is Self-Certification?
There are a lot of benefits of being self-employed and running your own business. However, getting a mortgage isn't always one of them. Lenders like to see documentation that shows a good steady income and a good indication that this income will continue.
Self certification (also know as self certified) mortgages are ideal for applicants whose income is not easily verifiable, or where accounts have not been audited.
If you are self employed, a company director or a contract worker, you may be unable to provide audited trading accounts. As a consequence it can be difficult to secure the mortgage you want.
In short, if you know you can pay a mortgage, but have difficulty proving it in the usual way, we can help. With a self certified mortgage you do not have to provide accounts, payslips or other proof of income, but instead your Accountant simply certifies that you have sufficient income to service the repayments. You could qualify for up to 95% of the purchase price. - Do I need to find a Mortgage Broker?
You've already found one! Blue Sky Financial is one of Ireland's largest mortgage brokers with Mortgage Broker Advice. If you choose us to look after your mortgage needs, we can guarantee you expert mortgage advice. - What Tax Relief is Available?
Mortgage interest tax relief is granted at source i.e. by the lender. TRS (Tax Relief at Source) replaces the system where interest relief was administered through the tax system. The new system means that the borrower's account will be debited with the amount of the full mortgage repayment when due and credited at the same time with the amount of interest relief. A single first time buyer can for example get tax relief on annual interest paid up to €10,000. Tax at 25% gives actual savings of €2,500. - Is it Possible to Borrow 100%?
Yes, but in very limited circumstances. If you are a recently qualified professional person i.e. Solicitor, Doctor, Accountant etc sometimes a bank may consider you for 100% finance. - How Much Can I Borrow?
This depends on your income, your savings and which lender you go to. It can be based on a multiple of your income (and your partner's income if applicable). However, most lenders base the loan amount on your disposable income. They look to see that your mortgage repayment does not exceed 30-40% of your net income after all other loans are paid each month. For first time buyers, it is very important to shop around to see what is on offer. At Blue Sky Financial we can do the searching for you and will can advise which lender would best suit your circumstances. - How Long Does the Mortgage Process Take?
For normal house purchase mortgages, first time buyers or existing homeowners moving home, the length of the process is determined by the legal process more so than the mortgage process. It would be unusual for the mortgage process to delay matters.
In relation to remortgages or switcher mortgages where there is no house purchase involved, it can take as little as ten days, particularly if title insurance is used instead of a normal solicitor. - What is the Difference between a "Prime" and a "Sub-Prime" Rate?
A "prime" rate is the standard rate offered to borrowers who have a sound credit history. A "sub-prime" rate is a higher rate offered to borrowers who have had issues with their credit in the past. The rate is higher and this is to allow for the perceived additional risk taken on by the lender. - What is Mortgage Protection and Do I Need It?
With a few exceptions, mortgage protection is compulsory when you take out a mortgage. It is essentially a life cover plan which pays off the mortgage in the event that one of the mortgagees dies during the term of the mortgage. It is also possible to add critical illness cover to the life cover but this is optional. This pays off the loan in the event that one of the mortgagees is diagnosed with one of the specified illnesses listed on the contract. - What is Title Insurance and Do I Need It?
Title insurance is a policy that protects the lender against loss should the condition of title to land be other than as insured. When you buy a home, or any property for that matter, you expect to enjoy certain benefits from ownership. For example, you expect to be able to occupy and use the property as you wish, to be free from debts or obligations not created or agreed to by you, and to be able to freely sell or pledge your property as security for a loan. Title insurance is designed to cover these rights.What options are available for customers looking to switch their mortgage?
There has never been more options for customers! There are lenders looking for your business now! They are prepared to pay some or all of your legal fees meaning that you can take the immediate benefit of lower monthly repayments. - What is "Buy to Let"?
Buy to let deals are mortgages designed for people who want to purchase a property in order to rent it out to tenants. It's becoming an increasingly popular way to invest. Properties provide income for the investor from the tenant's rental payments and growth from any increase in the property's value. - What is a Pension Mortgage?
This is one version of an interest only mortgage. You only make interest repayments but the capital is repaid in part or in full by means of a pensions lump sum payment. This type of mortgage is more suitable for self-employed people. - What is an Interest Only Mortgage?
An interest only mortgage is where you only repay the interest on your mortgage debt each month. Alongside this you will need to put money into a separate investment vehicle which is designed to grow sufficiently to pay off your loan when your mortgage comes to an end. You are responsible for the repayment of the capital when the mortgage reaches the end of its term. - Fixed Rate, Variable Rate, Tracker Rate... Which is Best?
- What is a variable interest rate? As the name suggests, a variable interest rate is one that can go up or down during the life of the mortgage. It is determined by the European Central Bank rate (also known as the ECB rate). Any fall in the ECB rate results in lower repayments but an increase means higher repayments.
- What is a Tracker Rate? This is a variable interest rate that tracks the European Base Rate* (also known as the ECB rate) with a margin that is fixed for the full term of the loan. The margin is dependant on the amount borrowed and the value of the property to be mortgaged. Any fall in the European Base Rate results in lower repayments but any increase means higher repayments.
- What is a fixed interest rate? This is a rate of interest that is set for an agreed period, e.g. 1/2/4/5/10 years. At the end of this period, the rate converts to a variable interest rate. This type of interest rate means that you know for certain what your repayments will be for the fixed interest period, helping you to plan your finances.
- What costs can I expect when buying a house?
- Valuation Fee A valuer will assess the value of the property you wish to buy to ensure that it is worth at least its asking price for the purposes of the mortgage. The lender may insist that the valuer is chosen from their own panel of valuers.
- Surveyor's Fee We recommend you arrange a survey to confirm the structural soundness of the property you propose to buy. This will allow you to identify any faults and factor these into your renovation budget.
- Legal Fees You will need a solicitor to make sure that that everything is legally in order for the house-buying process. Solicitor's charges can vary considerably, so it's worth shopping around.
