Applying for a mortgage
Before you start looking at properties, try to get ‘approval in principle’ for a mortgage first so you know how much you can borrow. This way you know the price range of properties you should be looking at and how much you can afford to pay for your new home.
You can apply for a mortgage in two ways:
- Directly to the lender (banks, building societies, certain credit unions and retail credit firms who are not banks or building societies) – in this case, you will deal directly with the lender
- Through a mortgage intermediary (broker) – in this case, your intermediary will deal directly with the lender on your behalf.
Before you start you may want to get financial advice so that you know you are making the right choice. If you want to use a mortgage intermediary (broker), you can get a list from the Central Bank’s registers website – but make sure you know what type of advisor you are using, how many lenders the broker represents and what they will charge you.
- Photo ID: such as a valid passport or driving licence
- Proof of your current address: such as a household bill in your name
- Proof of your income: your latest P60 and at least three recent salary slips
- Evidence of how you manage your money: bring current account and loan account statements for the previous 12 months
You can also use other documents to prove your identity and address. It’s a good idea to keep photocopies of any documents you give to your lender or broker.
- Don’t panic and take the first mortgage you are offered. Apply to a number of lenders and if you are offered more than one mortgage, compare the rates carefully. Keep your eyes open for better offers from other lenders. Use our mortgages shopping around checklist to help you
- Don’t be seduced by ‘freebies’, like free legal expenses or discounted insurance without looking at the mortgage as a whole. Introductory and first-time buyer packages can save you money in the short term but remember to consider the long-term costs when the ‘introductory rate’ runs out
- Use our mortgages comparison to see the mortgage rates available from lenders
When you apply for a mortgage, a lender will look at:
- Your income – lenders will look at your annual income and some may take bonuses or overtime into account. Some lenders may factor in rental income if you plan to rent out spare rooms
- Your age and number of years left until you retire
- Outstanding loans – if you have other loans, this may reduce the amount of money you can borrow or you may find it difficult to get a mortgage
- Outgoings – in addition to any loan repayments, lenders will look at any financial commitments you have, such as childcare costs
- Savings – this shows you have an ability to save and have built up enough money to pay for your deposit and other expenses
- Credit record – this shows the repayments you have made on any loans you have. If you have missed repayments in the past, it may make it more difficult for you to get a mortgage
- The value of your house – this is the market value or purchase price of your house
- The amount you need to borrow – this is the difference between the amount you have saved to put towards the house (your deposit) and the purchase price of the house
- Whether anyone will act as guarantor by agreeing to repay the loan if you are not able to
- Whether you are borrowing on your own or with someone else
Get more information on how much a lender will give you.
If someone, maybe a family member, asks you to guarantee a loan for them, you need to understand that you are entering into a contract with the bank to repay a loan taken out by someone else. You should think carefully before agreeing and consider the implications for you and your estate. For example, you should think about how long the contract is for, how much of the loan you are guaranteeing, how you can end the contract and what would happen if you were to die.
Under the Central Bank’s Consumer Protection Code, a lender must tell you what your responsibilities are and warn you to take legal advice if you are guaranteeing a loan for someone else.
- Many lenders give ‘approval in principle’. This means that your lender approves you for a mortgage of a set amount, based on the details you provided in your application
- Your mortgage loan approval will remain valid for a short period of time, usually three to six months. Your mortgage offer will have an expiry date – and you must draw down your mortgage before this date. Once a loan offer expires, you will need to apply again and if your circumstances have changed or your lender’s criteria has changed, you may not get approval again
- The interest rate shown on your mortgage loan approval is not necessarily the rate you will pay. Usually, the interest rate for your mortgage will be set only on the day that the money is actually lent to you
- Keep a copy of all correspondence and documentation from your lender in a safe place
- Shop around for mortgage protection and home insurance. Brokers and lenders cannot link services. This means they cannot offer you a mortgage or a certain interest rate on condition that you deal with a particular estate agent, solicitor or buy a particular mortgage protection product. Your lender can insist that you have mortgage protection insurance in place, but you don’t have to buy it from them
- When your mortgage is approved, your lender will ask you to fill in a direct debit form so your repayments can be collected from your bank account