6 things you need to consider if you’re looking for the best deal on your first mortgage
Brought to you by the CCPC.
Are you thinking of buying your first home?
Buying your first home isn't like buying a new pair of shoes. It's a massive investment so you obviously want to get it right.
Part of getting it right is making sure that you don't pay over the odds for your new place. So you need to think about what you'll pay for your new home in the long term and how to get the most value for your money.
So what are the factors that you need to consider? We've listed out six things to focus on if you're looking for the best deal on your first mortgage.
1. Think about your deposit
Getting a deposit together can be a challenge. First time buyers need to save 10% of their house’s value to get a mortgage – that’s €25,000 if your house is worth €250,000.
That makes it easier for first time buyers as the deposit you need ìs not as big as people buying their second or subsequent home, but there are other considerations. You can potentially get more favourable mortgages if you have a big enough deposit.
Try to put aside as much as you can. That means you’re borrowing less money and paying your lender less in interest. The size of your deposit will ultimately dictate how much you pay for your home in total.
2. Shop around
It seems obvious but you should shop around with different lenders. Find out what interest rates they’re offering and how much you’ll have to pay in total. Remember that you’re not restricted to borrowing from your own bank so shop around to get the best deal on your first mortgage.
The difference between variable interest rates offered by lenders to first time buyers is as much as 1%. It may not seem like much but that works out at a difference of €144 per month on a mortgage of €250,000, and €52,000 in the cost of credit over 30 years.
You can use the CCPC mortgage comparison tool to break the figures down for you. It'll show you all the competing rates in one place and let you see the overall cost over the lifetime of the mortgage.
3. Don't get distracted by offers
Different lenders also have incentives like 3% cashback offers on mortgages for new borrowers, which could be a welcome bonus for cash-strapped buyers. Others offer to pay the cost of your legal fees.
Make sure you look beyond the incentive to see what's really on offer in terms of interest rates and lending terms. Don't let short-term gains distract you or you could end up paying more in the long term.
4. Decide on a fixed or variable rate
What’s best for you – a fixed rate or a variable rate? The beauty of a fixed rate is you’ll know exactly what your monthly payments will be for the next five years or however long the agreed term is. That might suit people who’d struggle to make higher payments if the variable rate rises. One potential downside is that you'll have to pay a penalty if you want to break out of your fixed rate agreement early.
Variable rates can rise or fall so you’re going to be at the mercy of the market. However, they can give you more flexibility. So you've the option to pay more off your mortgage each month or contribute a lump sum to reduce the balance without having to pay early repayment charges. You can also switch mortgages down the line without any penalty.
5. Get your finances in order
Lenders will go through your financial records with a fine tooth comb so you’ll need to tidy up your finances in the months before you apply for a mortgage. That increases your chances of getting approval from as many lenders as possible, which ultimately gives you more options.
You should do an Irish Credit Bureau credit check to find out what your credit history is like. A bank will automatically do this when you apply for a loan so you need to know if there are any outstanding issues with your credit rating.
Get rid of overdrafts, clear your credit card bills and ensure that you’ve no black marks on your current accounts. You want to show the lender that you don’t have any bad habits and that you’re not struggling financially. Start a saving plan and be prepared to show the lender that you’re ready to take on a mortgage.
You can get the lowdown on what’s involved in applying for a mortgage and buying a house from this useful guide by CCPC. It’ll walk you through everything from saving a deposit to moving in.
6. Check everything
This is the biggest investment you’ll ever make so you don’t want to make a mistake! A survey is an important part of the process. Consider hiring your own surveyor, engineer or architect to carry out a detailed structural survey. Especially if you’re looking at an older property or thinking of buying a fixer-upper.
Your solicitor will handle the legal side and ensure that everything is above board. If you’re buying a new build, they’ll also help you draw up a “snag list” once the builder completes the house. This highlights any problems the builder needs to fix before a final inspection.
Make sure you’re happy with the house before you buy and avoid investing in a money pit that will ultimately cost a lot more than it’s worth. With all that in mind, now you just need to find your dream house. Good luck!
Brought to you by the CCPC.