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Your mortgage journey – the guide for first time buyers, switchers and movers While there may be many commonalities, everyone’s mortgage journey will be different. Here’s our handy step-by-step guide to mortgages, whatever your situation
BUYING YOUR FIRST HOME
Unless you have millions of euro hidden away somewhere, then it is inevitable that you will need to get a mortgage in order to purchase your first house! When taking out your first mortgage, the whole application process may seem daunting. But it doesn’t have to be – here’s everything you need when applying for your mortgage, to ensure the process runs smoothly and as stress free as possible.
FIRST THINGS FIRST
Before you can borrow from a lender, you will need to contribute some of your money towards the property price – this deposit is at least 10% of the total cost of the property. Be confident with your savings and consider how much the deposit is and how much you will need to borrow. KBC have handy calculators online (www.kbc.ie) to help you work this
Sunday Independent I February 12 2017
SWITCHING YOUR MORTGAGE You may have taken out a mortgage a few years ago, and haven’t thought about it since, other than to make your monthly repayments. However, you could be paying more than you need to. Do you know how much you can save on your mortgage? It is worth doing some research into switching and how much you could save. With low variable rates for new mortgage customers and reduced fixed rates for new and existing customers, there has never been a better time to switch to KBC. There are some factors you need to be aware of to see if you are eligible to switch. These include the outstanding balance on your mortgage, if you have been making payments on the mortgage over the last 12 months and your loan-tovalue (LTV) ratio (how much you owe on your mortgage in relation to how much your house is worth). Your lender can re-evaluate your LTV ratio while underwriting your loan. If you’re unsure about the process, speak to a mortgage consultant. out. Whether you have a single or joint account, you can start to think about how much you will need to have saved and how much you need to borrow. Regular saving is key and it may be best to set up a standing order to take a set amount from your salary each month as soon as you’re paid.
GETTING EVERYTHING IN ORDER
Getting a mortgage is about showing your ability to repay a mortgage, so it’s important to have your paperwork in good
shape – banks will generally want to see proof that you have a regular income and proof of employment. Many of us get a weekly wage or monthly salary that goes directly into our bank account. We check it’s gone in, that it’s the right amount and then forget about the payslip. Now that it’s time to apply for a mortgage, you’ll need to go digging for those payslips, and a few more bits and pieces. One thing that might appear obvious, but is really important, is that if it’s a joint application you’re making with a spouse, partner, sibling or friend, you both need all of the below. You’d be surprised how easy it is to overlook these things in all the excitement of a mortgage application! If you’re making a joint application and one of you is selfemployed, don’t worry, there is a self-employed guide to getting a mortgage on www.kbc.ie to help you with that too.
WORK BITS
First things first, if you have a job, you’ll need to get an original, up-to-date Employee Status Report from your employer to confirm it. They’ll be well used to this kind of request, as it’s a standard document which confirms your annual salary, any additional payments and the structure of your employment (full-time, permanent, part-time, contract, etc). Your employer must have stamped or signed it within the last six months of you presenting it to your mortgage advisor. You’ll also need two consecutive payslips dated within the last six months to prove your salary. Then, you just need your most recent P60 and that’s that bit sorted.
BANK BITS
If you are applying for a mortgage with your own bank, they probably won’t need you to provide all of the following, as they can see it on their own system. If you are applying to a different bank, however, you’ll need to present six
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THE MORTGAGE PROCESS CAN SEEM DAUNTING, BUT THERE IS ALWAYS HELP AVAILABLE
current and valid passport, or a current and valid Irish, UK or European drivers licence (with photo). Finally, you’ll need to prove where you’re currently living. You can do this with a utility bill dated within the last six months, with your name on it, a bank or building society statement issued in the last three months, or your original household or motor insurance documents, as long as they’re fewer than 12 months old.
FIND IT, SCAN IT, FILE IT
If there’s a person that likes doing paperwork, we’ve still to meet them! That said, most of these are standard documents that you probably have lying around the house, so they shouldn’t be too hard to find. If they’re not close to hand, then search your email, hit those websites or simply ask your mother (because she knows where everything is!). Things like marriage certificates and insurance policies take a little bit longer and may add an additional cost to your budget, but they’re just as necessary. Once you get all the above together, scan everything. While it might be a little bit time consuming, if you do it once, it’s done for life. Then, simply file it all away because if something gets misplaced during the mortgage process, having it to hand is so much easier.
GETTING APPROVED
Before a seller or a real estate agent will accept an offer on a house, you will need an Approval in Principle (AIP), which is an approval which gives you a budget with which to shop around for your ideal property. The AIP lasts up to six months and it gives you the confidence to go searching in the housing market, knowing that you have taken a massive step towards receiving a loan offer. It also puts you in a strong position to be able to put forward an application for property, to work with a vendor or an estate agent.
GET YOURSELF SOME PROTECTION
You’ll be required to have mortgage protection insurance on your mortgage. Simply put, it’s designed to pay off your mortgage in the event of the death of you or your joint applicant before the end of the mortgage term. It might also be a good time to think about income protection insurance. You may have delayed doing so before but with any impending mortgage commitments, it really makes sense at this point.
LISTEN TO THE EXPERTS
The mortgage process can seem daunting, but there is always help available if you are still unsure about your options. Make an appointment with a mortgage consultant at your local KBC hub. The consultant can look at the deposit you have in place and discuss with you exactly what you can borrow over the term, and also look at the repayment structure – whether you’re looking at fixedterm or variable (see the box on the right for more details). Whether you’re a first time buyer, home mover or switcher, there is something that fits all categories.
For more information on the mortgage process, visit www.kbc.ie or call 1800 51 52 53 Lending criteria, terms and conditions apply. Security and insurance are required. The maximum mortgage is 90% of the property value. KBC Bank Ireland plc is regulated by the Central Bank of Ireland.
months of continuous current account bank statements, dated within the last three months. You’ll also need six months of savings statements and six months of credit card statements (both dated within the last three months). The bank needs these to see that you are have good savings habits, and are receiving a steady income that could easily handle your mortgage repayments.
LIFE BITS
In many ways, applying for a mortgage is just the same as applying for anything else. One of those ways is proving that you really are Mary from Dublin. For starters, if you’re married, you’ll need to have your original marriage certificate. You’ll also need identification in the form of a
MOVING HOME
Before you move home, find out the value of your current home. This should help you to work out the budget for your new home – you should get a valuation from a trusted estate agent. You’ll then need to decide whether to buy and sell, or sell and buy. This will mainly depend on timing – you may already have found your dream house and wish to purchase before you sell, or you might want to sell your house and rent until you find the one. When speaking to a property expert, it would be worth doing a sense check with them. While moving home can be stressful, applying for a KBC mortgage isn’t. KBC are there every step of the way to help you get into your new home. Call their mortgage team at 1800 51 52 53 (8am to 8pm Monday to Friday and 10am to 2pm on Saturdays).
WARNING: IF YOU DO NOT KEEP UP YOUR REPAYMENTS YOU MAY LOSE YOUR HOME WARNING: IF YOU DO NOT MEET THE REPAYMENTS ON YOUR LOAN, YOUR ACCOUNT WILL GO INTO ARREARS. THIS MAY LIMIT YOUR CREDIT RATING, WHICH MAY LIMIT YOUR ABILITY TO ACCESS CREDIT IN THE FUTURE VARIABLE RATE WARNING: THE COST OF YOUR MONTHLY REPAYMENTS MAY INCREASE. FIXED RATE WARNING: YOU MAY HAVE TO PAY CHARGES IF YOU PAY OFF A FIXED RATE LOAN EARLY.
HOW TO FINANCE YOUR MORTGAGE
From how long it takes to save for a deposit to what rate to choose, Sarah Ridge, Manager at KBC’s Grand Canal Hub, tells us what you should know SAVING FOR A DEPOSIT
“Many first time buyers typically spend about 1-2 years to build up a deposit for their first home. It really depends on your income and how much you can afford to save every month. So, it can take 1-2 years, or it may take longer, particularly if you’re paying high rent on a monthly basis.”
MORTGAGE ASSESSMENT
“The bank will assess your entitlement by looking at you and your partner’s annual income, plus any outgoing payments you may have, such as personal loans or an existing mortgage. We will look for evidence of repayment capacity to show you can afford to repay the monthly mortgage payments. Affordability can be demonstrated by evidence of a savings record or monthly rent payments over a minimum of a six-month period. Clients must demonstrate a recent (minimum six month) track record of making payments equivalent to the monthly stressed payment of the mortgage. The stressed repayment is assessed at 2% above your mortgage rate, in the event of interest rate increases in the future.”
CHOOSING A RATE
“If you choose a fixed rate mortgage, be it for a one-, three- or five-year term, your interest rate and monthly repayments will remain the same for the particular term chosen. There are no surprises. With a variable rate mortgage, the interest rate and monthly repayments can go up and down – but the advantage is you have the option to make ad hoc payments to the mortgage at any time, whether that’s as a lump sum or extra monthly repayment. This can reduce the term of your loan. “If you have the flexibility to pay more and reduce your loan when you can, then a variable rate may suit you. If you would like to know exactly how much your monthly repayments will be, then a fixed rate may suit you. You can always chose to split your loan part variable part fixed. We would always suggest customers come into us and we can go through the repayment rate options with you.”
MORTGAGE TERM
“The maximum allowable term of a mortgage is determined by an applicant’s age. You can apply for a mortgage up until the normal retirement age of 68, subject to a maximum term of 35 years. The term you choose for the mortgage is usually determined by your affordability. The shorter term you choose, the higher your monthly repayments will be. We can provide quotes over the different terms and see what works for you.”
MANAGING MORTGAGE REPAYMENTS
“I would advise anyone thinking of purchasing a new home to drop by a KBC hub first to discuss how much you can afford. There’s no point in viewing houses, then being disappointed that they are not within your affordability. Based on your income, repayment capacity and savings, we can advise how much you can afford. We will also make sure your current accounts and savings are in order to apply for your mortgage. Once approved, we will supply you with an Approval in Principle (AIP), which lasts for six months. This way, you have that comfort to view houses and when you’re ready to make an offer, you confidently know you have the AIP in place.”