Getting a Mortgage.

DapperGent

I just about to start looking for a mortgage and was wondering if anyone one has any advice about going about it?

Are the salary multiplyers set in stone? Most seem to give a multiplyer of about 3.5 or so where I'd be more looking for 4.5 as I'm young and my salary will definately increase and I'm trying to buy somewhere in Dublin which is pricy to say the least.

Anyone have any thoughts on whether this is a good time to buy a place or not as well?

Negative equity is scary.

zenith

Hi,

The banks are policed by the Central Bank about the salary multiplier, so you'll find them pretty inflexible on it: however, two of the most common ways of getting around it are -

Tell the bank that you're going to rent a room: this gives you additional income, thus making your salary seem larger, or -
Buy the property in partnership, with your significant other, or even your brother, thus getting the benefit of 1.5 times their salary. You'd need to trust them, and they you, as you'll both be liable if it goes pear-shaped.

The salary multipliers are there for good reason, by the way: they're the central bank's take on what constitutes 'affordable' in a mortgage, and - particularly in the first couple of years - are really only barely affordable on moderate income if you drive, drink or like to eat out. You may get away with it if you like to sit in rooms and read library books.

The only good time to buy is if you can afford it, and need the place: you don't sound like an investor, and really - if you want it to live in, and not to make money - then there's no real problem with negative equity. You'll have a place that you like, that you can afford, and that you want to hold on to. Negative equity seems unlikely, and mortgage rates are historically low, so it's probably a good time to buy, and I'd consider fixing my mortgage for a significant term to give you the benefit on the good side of the interest rate rises that seem to be on the way.

Hope this helps. I am not regulated by the Central Bank of Ireland as a Financial Services Advisor, thus you should make up your own mind, probably in consultation with a mortgage broker - they're not all sharks, actually, and can help you through the process.

BTW, 30-year mortgages blow.

Supercell

I wasnt aware that renting a room would count towards "income" .

If i buy a 3 bed house and rent 2 of the bedrooms to perhaps 4 people @ €350 each (as an example) , does the extra €1400 (less tax ) count ? .

Ie will they consider this as perhaps €800 monthly income in addition to my salary ?

Really curious about this, would be the only way i could afford a mortgage at current houseprices here.

zenith

All the details here:

http://www.oasis.gov.ie/housing/buying_a_house_or_flat/rent_a_room_scheme.html.en

Limits are not very generous - your example would not work - but it is a bit of slack in the rope.

machalla

Check out www.askaboutmoney.com for a fairly active board regarding mortgages and money in general.

Fixing a mortgage is not really advisable in most cases as it will most likely cost you money unless you can see the future. Mortgage rates will fluctuate over an extended period (25-30 years) quite a bit. Think for instance of anyone who fixed last year and are now paying more than anyone whos still on a variable rate. Anyone who fixed 10-15 years ago for 20 years (extreme case) will have paid a massive amount more than someone who just went with the flow of a varible rate.
Anyway its a point to consider.

If you're buying to live then you'll likely never lose. Investing is a whole different ballgame though,

Victor

Disposable income is what the banks are really looking at these days. They will take renting rooms into account, but not at 100%, because you won't always have someone in the spare rooms.

Originally posted by zenith
Negative equity seems unlikely, and mortgage rates are historically low, so it's probably a good time to buy

I would say these two points conflict. If mortgage rates are historically low, then they are likely in the medium term to go up a reasonable amount (whatever about short-term). Doubling of interest rates from 3% to 6% (remember the days of 15% interest rates - although short of "war" this is unlikely to ever happen again) will more than double your repayments. This means that more of the money is going on interest and less on principal reducing the amount available for the principal. This principal (relative to disposable income) is the true driver of house prices. If the principal goes down, house prices go down.

Supercell

Great, thanks for the links, will have to do some reading up on the subject it seems.