How much can you lend for a mortgage?

2020-09-11

“How much can you lend for a mortgage?” is one of the most frequent questions we get asked by people eager to buy a property.

It makes sense. You need to know exactly what the banks are prepared to underwrite so that you can go and find the house or apartment of your dreams.

The general rules around mortgage lending

All banks in Ireland are governed by the rules of the Central Bank when it comes to mortgages.

In general, these rules state that first time buyers can borrow up to 90% of the house value. (The current Help To Buy scheme has increased from 5% to 10% and could help first time buyers even further.)

Another general rule to pay attention to is that there is a restriction that banks will lend you no more than 3.5 times your annual gross income. (This is called the income multiple.)

This table will provide you with an idea of what you can borrow from a bank. It’s based on a single earner. Joint incomes would be considered in the same way.

Our mortgage calculators will also help you understand how much you qualify for in terms of lending.

The exemptions around mortgage lending

The Central Bank rules are set up in such a way that banks have some leeway to make exceptions.

The most obvious example of this is banks lending more than 3.5 times income to 20% of first time buyers.

In 2018, 2,465 first time buyers availed of an exemption and gained mortgages higher than 3.5 times their earning potential.

The importance of a deposit for a mortgage

One of the most powerful ways to make your mortgage application stronger is to have a deposit saved.

How to save for a mortgage is up to you, but people often make large and small changes to their monthly budget to get the deposit together.

Don’t feel disheartened by the time it might take to save for your deposit.

Firstly, you might be quite surprised at how quickly you can start building a nest egg simply by reallocating your monthly budget. And secondly, banks like to see a consistent period of saving.

There’s also good news in the fact that any rent you’re paying monthly will generally be considered in the same light as savings.

Other general considerations for mortgages

“Sustainable employment” is one of the considerations banks request.

This means that you can show you’ve been permanently employed for a significant period of time by your employer. Generally, being able to show payslips for 12 months or more will count in your favour.

We also work with self-employed people. It helps to show that you have been trading for at least two years, but we guide our clients throughout the whole process.