“Mortgage exceptions” is a term many of us have heard in Ireland but we're not always clear on what it means.
In general, the Central Bank in Ireland has a number of rules that govern mortgage lending in the country. Banks and lenders are bound to adhere to these rules. These rules were introduced in 2015, and have been designed as a safeguard to prevent over-lending.
Lending rules indicate what a lender can comfortably make available to an individual. For the most part, this is looked at as loan-to-income ratio, and states that a mortgage applicant can lend 3.5 times their income for a mortgage.
However, the Central Bank has also provided for mortgage exceptions. This is where a lender can lend higher than 3.5 x an individual's salary. The Central Bank rules allow for lenders to lend up to one in five of their mortgages on a mortgage exception basis. It's important to note that lenders will still show extreme caution to do this.
But let’s dig into more information.
There are two types of mortgage exceptions
These are:
- Loan to income
- Loan to value
Loan to income mortgage exception
As mentioned, under current rules the maximum a borrower can ask for is 3.5 times their income. This applies for individual and joint mortgage applications. Furthermore, borrowers must have a deposit of 10%.
However, as we have detailed above 20% of mortgages that lenders offer can be at a 4.5x multiple of income.
This is only available to first-time home buyers.
Loan to value mortgage exception
For buyers who are not first time buyers, the loan to value ratio is the mortgage exception lenders can put into place.
This refers to the percentage of value inherent in a property that an individual can borrow for compared to how much they must have in the form of a deposit.
Generally speaking, the minimum deposit required to avail for this type of mortgage exception is 20%. Lenders do have some discretion on this, and occasionally provide mortgages to buyers who have only a 10% deposit.
How can you get an exception
The beginning of the year is generally the best time to apply for a mortgage exception. As the year starts anew, lenders can refresh their allotment of mortgage exceptions to give lenders.
For the first time, we’re seeing lenders being allowed to carry over their unused exceptions from 2021. This is great news for home-buyers as it means there are more exceptions on offer in 2022.
It's important to remember that for any mortgage application you need to prove affordability and your repayment capacity.
We regularly help our clients apply for mortgage exceptions. But we are also upfront about the power mortgage applicants can put in their own pocket through a regular savings routine and by eliminating debt.
Contact us for help with your mortgage journey. We help hundreds of clients find which mortgage is right for them. We’d be delighted to chat with you on a no obligations call to see how we can be of assistance.
Robyn Jacobs
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