How much to get mortgage approval in principal for?

Gregor Samsa

We're looking to bid on a house with an asking price of 450,000 (not in Dublin). We have 325k cash to put towards it (with more savings kept aside). We don't need to rely on selling our current house, which is mortgage free.

I'm thinking that the max we would want to go on this particular house is 500,000. So we'll need a mortgage of about 175,000. With our combined salaries, we'd be able to get way more than that. However if this house didn't work out, and we were looking at something else, we'd be ok to up our budget to about 600,000 (assuming it was appropriate for the particular house)

Question is, how much should we get approval for now? The 175k that would see us hit our budget for this particular house? Or 275k that would see us hit our max budget for something that might come up in the future? I guess what I'm asking is, would it be better to get all the approval we can out of the way now, or just go for what we should immediately need for now, and then get higher approval if we do need it in the future?

Also, due to age, the max term we can get is 17 years, which is fine. We could afford the repayments over maybe 10 years if we wanted. Obviously I know that we will pay more interest over the longer timeframe, but I was thinking of going for the 17 years for now, to keep repayments lower for the first few months after we move in and have the initial moving/redecorating expenses, then up the repayment once we've settled in to reach the 10 year target (and I know you can really only do that on a variable rate, or at least the scope to overpay is more limited on fixed). Any disadvantages to doing this?

Stark

Get approval for as much you can. You're under no obligation to draw down the full amount. I'd also go for longer term mortgage to give flexibility. You can put extra money towards overpayments or towards savings.

Gregor Samsa

https://www.boards.ie/discussion/comment/121038076#Comment_121038076

A succinct and welcome confirmation of my plans. Thank you!

Fred Cryton

at least the scope to overpay is more limited on fixed

That's not necessarily true. I overpaid €30k lump sum when i was on a fixed rate mortgage and the bank charged me €11. That's eleven euro.

Maybe something has changed since then as this was 3 or 4 years ago but i doubt it.

Stark

Depends on the bank, some are more lenient than others. I was with Ulster Bank who gave very generous overpayment terms, 10% of remaining premium each year. From what I've heard, most banks are willing to waive break fees these days as they're losing money refinancing fixed rates.