How to get a Mortgage in 6 Simple Steps

Are you dreaming of owning your own home in Ireland? For first-time buyers, Taking the leap into homeownership in Ireland is an exciting yet complex journey, especially for first-time buyers. The key to a smooth experience lies in preparation and understanding the nuances of the property market. Here are essential steps to get you started on the right foot.

Essential Steps to Start Your Journey

1. Start Early

Begin saving for your home purchase at least two years in advance. Banks value consistency and will look for a six-month savings record when you apply for a mortgage. With the average age of first-time buyers approaching 40 and the necessity for quicker loan repayments, early saving is more crucial than ever. Banks value consistency and will look for a six-month savings record when you apply for a mortgage. Early savings will not only help with your down payment but also position you as a strong mortgage candidate.

2. Assess Your Finances

In light of recent data showing a continuous climb in property prices, it’s imperative to examine your debts, expenses, and credit score to gauge how much you can realistically afford for a down payment. This financial clarity is crucial for setting realistic savings goals and determining your borrowing capacity where a modest-sized house requires a salary—or combined salary—of more than €100,000.

3. Consider Additional Costs

Beyond the down payment, remember to account for moving expenses, closing fees, and any immediate home repairs. These additional costs are often overlooked but are essential for ensuring you’re financially prepared for all aspects of buying a home.

4. Get familiar with Government Schemes available:

The Help to Buy scheme helps first time buyers purchase newly built homes. You must be a first-time buyer who buys or self-builds a new residential property between January 1, 2017, and December 31, 2025. To qualify as a First Time Buyer you can’t have had a mortgage before. If you have taken out a mortgage under your name either in Ireland or overseas, you are no longer a First Time Buyer. Importantly if there are two people going on the mortgage, both must never had a mortgage before to qualify as a First Time Buyer.

The Help to Buy allows first time buyers to claim 10% of their property value to help them pay a deposit on newly built homes. It’s a Government tax refund scheme and in order to claim, you must have paid the equivalent amount of 10% of your property value in tax in the previous 4 years before moving into your new home. The HTB Scheme provides a refund of the income tax and Deposit Interest Retention Tax (DIRT) you’ve paid in Ireland for the 4 years before the year you apply. In order to claim from this scheme, your home must be valued at €500,000 or less. The most you can claim is €30,000, so if your home is valued at more than €300,000, you still can only receive €30,000 max.

In addition, The First Home Scheme, which is a newer initiative that acts as a shared equity scheme, filling the gap between a buyer’s mortgage and the total cost of the home. It’s aimed at buyers who find the property they wish within reach but just out of grasp financially.

For example, you find a property that cost €250,000, but with your deposit and mortgage, you can only raise €200,000. The FHS scheme would pay the extra €50,000 and then have a 20% share in your property.

You will need to fit the eligibility criteria, but there are no income limits, so your earnings are not considered when you apply.

Now, Budget Wisely

1. Annual Budget:

By conducting an annual budget is more important than ever, with property prices climbing by an estimated 4.4% last year and likely more this year. This ensures you are aware of what you are earning and spending, helping to set aside more than €1,250 monthly to keep pace with rising prices. Check out Alpha Wealth’s complimentary financial budget calculator here

2. Prioritise Saving:

Adopt a “save first, spend later” approach to ensure you’re consistently setting money aside for your home purchase.  It is really important that you are saving your money in the most appropriate accounts with the highest returns to ensure your money is working for you. This is why it is vital to consult an impartial financial advisor to ascertain what the best account is for you in terms of your saving goals and time to purchase. Click here to discover the best savings options for your monies

3. Develop Saving Habits:

Focus on the habit of saving regularly, whether weekly or monthly, rather than initially focusing on the amount. By adopting early saving habits, you can demonstrate repayment capacity to lenders. The key is to start as early as possible, ideally tow years before your purchase date. The banks will look for a savings record for at least six months before your mortgage application. Example: So if you are borrowing €400,000, you would need to show a repayment capacity of circa €2,000 per month but this can include your rental payment if applicable.

4. Avoid Short-term Debt:

Clear any short-term debt before embarking on your homeownership journey to maximize your saving capacity. If you have short term debt, its best pay it off as quickly as possible.  Credit card companies thrive on high-interest rates, often around 22%. Don’t fall into this trap. Strategy to pay off debt: Start with your smallest loan. Pay it off as quickly as possible, then move to the next smallest. This ‘Snowball Effect’ creates momentum in clearing your debts.

5. Seek Independent Advice:

Consult with a financial advisor for unbiased advice tailored to your financial situation, helping you avoid pitfalls and adopt the best saving practices. You can book an appointment with one of our financial advisors here or contact us via info@alphawealth.ie

Conclusion

By cultivating a habit of saving, making informed decisions, and seeking the right professional advice, you can turn your dream of homeownership into reality. With the right preparation and mindset, stepping into Ireland’s property market as a first-time buyer can be a fulfilling and successful journey.

Understanding the Current Housing Market Landscape

If you’re in the market to buy or sell a property, choosing the right time to make a move can be a major deciding factor. The Covid-19 pandemic induced a surge in demand in the Irish housing market, and the last 12 months have seen noticeable fluctuations. Fuelled by low interest rates, increased housing demand, and government incentives, certain areas in the Irish property market experienced double-digit growth in house prices. However, recent research from Daft.ie reveals a new trend: house prices in Ireland have fallen in year-on-year terms for the first time since mid-2020

Media Influence and Perception

While this news might suggest that house prices are indeed dropping, it is important to question whether this is a genuine decline or simply a result of media propaganda. The media plays a significant role in shaping public perception, and their coverage of the housing market can sometimes create narratives that may not align with the reality on the ground.

Poll Results and Market Sentiment

To delve deeper into this topic, we conducted a recent poll on the Alpha Wealth Instagram page, asking our followers if they have noticed a price drop in houses. Unsurprisingly, 85% of the voters responded that they have not noticed any decrease in house prices. This raises the question of whether the reported decline in house prices is truly reflective of the overall market sentiment or if it is being exaggerated or misrepresented.

Understanding The Irish Housing Market

It’s important to remember that the housing market is complex, influenced by various factors such as supply and demand, economic conditions, government policies, and external events like the Covid-19 pandemic. While certain areas may experience a decline in prices, it doesn’t necessarily mean that the entire market is following the same trend. If you are a fist time buyer, we have a video that will help you.

Seeking Independent Financial Advice

Navigating the housing market can be challenging, especially when conflicting information is presented. As independent financial advisors, we bring a fresh perspective to the table. We take a holistic approach to assess your unique circumstances, goals, and the current market dynamics. Whether the market is experiencing a genuine price drop or if it’s a result of media narrative, our expertise allows us to provide unbiased guidance and help you make informed decisions.

Conclusion

So, if you’re considering entering the housing market, don’t solely rely on media reports or headlines. Consult with professionals, conduct your own research, and take into account your personal circumstances before making any major decisions. After all, your financial well-being and satisfaction with your housing choice should be based on thorough analysis rather than potentially misleading information. Contact us today if you would like expert assistance and guidance in navigating the housing market.

Investment property is a popular form of income for many people who rent out rooms or second homes. Utilising the funds as a form of investment allows you to grow your streams of income and potentially retirement funds. However, investment properties have many outside factors that can affect the amount of income you might receive.

Whether you end up as a landlord by accident or purposefully seek out the job, there are many factors that can influence whether the role is right for you. In this blog post, we discuss the important points to keep in mind when deciding whether to buy, sell, or keep an investment property to aid your financial future and retirement funds.

What is Rental Yield and how does it help

Rental yield is used to measure the return on investment or ROI of a rental property. In other words, it’s the money you earn from owning the investment property. It can be determined by dividing the annual rental income by the value of the property. For example, if you receive €12,000 per year in rental income and bought your property for €300,000, you would receive a 4% yield.

 A higher rental yield generally indicates a greater ROI, and therefore a better reason to keep an investment property. However, there are outside factors that need to be deducted from rent in order to generate the net rental yield.

These include:

• The property’s physical location
• Maintenance costs
• Potential periods of non-rent, or market conditions.

This means sometimes rental yield can be negative, and people don’t realize until it’s too late and you’re losing a valuable financial income potential.  

The benefits of Capital Appreciation

Property has the ability to change in value over the years; when it increases, this is capital appreciation. It is the difference between the price of the property when it was purchased versus what it can be sold for.

If you bought for €200,000 fifteen years ago, and the current value is €250,000, then the value has appreciated by 25% or 1.67% per year.

It’s important to determine whether it has increased at a stable rate or if something has occurred recently for the value to rise. If the value will continue at this rate, you have to ask whether it is worth keeping or selling. Look at the other investments in your portfolio and compare their growth to determine whether this is profitable and will actually yield a higher return on your financial investment.

What is Opportunity Cost and how does it work?

Sometimes keeping a rental property can actually cause you to lose out on benefits you might receive from other investment types. Investment properties are highly illiquid. In comparison, the stock market has yielded average returns of 10% pa over the long term. Plus, you can get 40% immediate relief on pension contributions. This equates to an approximately 66% immediate return.

When looked at comparably to the above yield and appreciation figures, the stock market generates a higher return. This is because property investments are far less diversified and involve more ongoing costs. This doesn’t mean that property is always the wrong decision. Sometimes yield and appreciation on properties are extremely high. It’s important to look at your property’s specifics.

Present Financial Situation and Portfolio

Your current income and tax position may affect whether you should sell or purchase investment properties. If you’re already earning highly taxed income at the top rate in a day job then a property investment might not be the most tax-efficient way of accumulating wealth. It may make more sense to use vehicles like a pension to grow your wealth tax-free whilst you are working and re-consider a property for passive income in your later years when you need it.

The other investments in your portfolio will also affect whether a property investment is the right investment for you. If you have no other investments with very little savings and 2 residential properties, you’ve concentrated all your wealth in one asset type which is illiquid. In this case, it makes sense to sell the property and diversify your portfolio with other more liquid investment types. This gives you more flexibility as well as safety by spreading your funds.

Nurturing your Financial Investments

Investing in real estate can be a great way to diversify your portfolio to increase your finances and generate passive income. However, it involves high levels of risk and many responsibilities. Alpha Wealth can help you decide if keeping the property is best for you through individualised financial plans and advice from our certified financial advisors. It’s important to determine whether buying, selling, or keeping your investment property is best based on your own individual situation.

Contact us now to see if your investment properties are increasing your financial freedom.