When it comes to buying a home, one of the most pressing questions is, “How much can I afford to borrow?” While there are general guidelines, your individual circumstances will significantly influence your borrowing capacity.

First-time buyers typically have the advantage of borrowing up to 4 times their annual income. However, second-time buyers generally have a limit of 3.5 times their income.

If you’re applying with a partner, your combined income will be considered. Keep in mind that exceptions or exemptions may allow you to borrow more, but these are less common and subject to specific criteria. Banks have limitations on how much they can lend, especially for higher multipliers.

Aiming for a higher mortgage multiplier requires a stronger financial foundation.

Lenders will scrutinise your finances more closely, expecting to see robust savings, minimal existing debt, and a solid income history. The more you can demonstrate your financial stability, the better your chances of securing a higher loan-to-value ratio.

Understanding Your Income for Mortgage Purposes

Basic Salary:

Your base salary is the foundation of your income assessment. Lenders typically consider 100% of your regular, pre-tax income as this foundation.

Additional Income:

  • Overtime: While a 2-year average is common, some lenders may be more flexible, considering a higher percentage or even the full amount of your overtime earnings.
  • Bonuses and Commissions: These are often evaluated based on a 3-year average, with 50% typically included. However, industries with predictable bonus structures may influence this assessment.
  • Guaranteed Allowances: Shift allowances, car allowances, and similar benefits are generally included in your income calculation. However, the specific treatment can vary depending on the lender.

Remember: The specific treatment of these income components may differ among lenders. It’s essential to consult with a mortgage adviser to get accurate information tailored to your situation.

Self-Employed Income

If you’re self-employed, lenders will scrutinise your tax returns for the past 2-3 years. Additional documentation, such as your accountant’s letter confirming your income and financial statements, will be required. The lender may also assess factors like the stability of your business, the industry you’re in, and the length of time you’ve been self-employed.

Stability is Key

Regardless of your employment status, a consistent income history is essential. Lenders prefer applicants with a stable job or business. While it’s not impossible to secure a mortgage with less than a year of employment, having a track record increases your chances. Factors such as the nature of your industry, your role within the company, and any previous employment history can also influence the lender’s assessment.

Beyond Income

While income is a major factor, other elements can also impact your borrowing capacity:

  • Existing Debts:The amount and type of debt you have, such as credit card balances or personal loans, can affect your debt-to-income ratio and your borrowing power.
  • Savings: A substantial savings account can demonstrate your financial stability and may help offset your debt-to-income ratio.
  • Property Value: The value of the property you’re purchasing will also influence how much you can borrow. Lenders typically have loan-to-value (LTV) ratios that determine the maximum loan amount based on the property’s value.

Remember: Your specific circumstances and the lender’s guidelines will influence your borrowing power. Consulting with a mortgage advisor can provide tailored advice and help you navigate the application process effectively.

How Long Does It Take to Get Mortgage Approval in Ireland?

Getting mortgage approval in Ireland can feel like a long and complicated process, but once you’ve submitted a complete application with all the necessary documents, it typically takes around 10 working days to receive a mortgage “Approval In Principle” (AIP). This is an initial step that lets you know how much you can borrow based on your income and financial situation.

The key to a speedy approval lies in having all your documents in order. This involves gathering everything upfront and making sure there are no missing documents or gaps in your information. This will save you time and frustration down the line. (This is something we help with).

There are some additional factors that can affect the approval timeframe:

  • Complexity of your application: If you’re self-employed or have a complex financial situation, such as multiple income streams or recent job changes, your application may take a bit longer to process. Lenders need to be thorough in understanding your ability to repay the mortgage.
  • The lender you choose: Different lenders have different processing times. Some lenders may have a more streamlined online application process, while others may require more manual underwriting. Talk to your mortgage advisor about the typical turnaround times for the lenders you’re considering.
  • Market conditions: During busy periods in the property market, lenders may be experiencing a higher volume of applications, which can lead to delays. Being patient and prepared is key during these times.

Mortgage Application Checklist

Getting a mortgage can seem overwhelming, but with the right preparation, it can be a smooth process. This checklist will help you ensure you have all the necessary documentation to submit a complete application. Download the mortgage checklist here.

_________

Here to help you save for today, tomorrow and for the unexpected.

At Lynx Financial Services, our team of experienced financial advisors are dedicated to helping you achieve your financial goals. We understand that everyone’s circumstances are unique, and we take a personalised approach to financial planning. 

We’ll work with you to assess your needs, risk tolerance, and investment goals, and develop a tailored plan to secure your financial future. Let us help you navigate the complexities of financial planning and make informed decisions about your retirement income. No jargon, no hidden fees, just plain talking, strategic financial advice.