How to get a foot on the property ladder

18 July 2023

Financial Expert Paul Merriman’s Comprehensive Guide to Getting a Foot on the Property Ladder in Ireland.

Purchasing your first home is an incredible milestone, signifying a major step towards establishing a solid financial future. It is crucial to embark on this journey with careful consideration, ensuring that you take the right steps to enter the property market and lay a strong foundation. There are a number of essential factors that first-time buyers need to be familiar with including becoming mortgage ready, effectively managing debts, understanding your budget, exploring finance options such as the Help to Buy scheme and having a proper understanding of the additional costs involved in the process.

In this article, we will guide you through the entire process, providing valuable insights on clearing credit card debt, avoiding significant expenses, comprehending mortgage options and empowering you to make well-informed decisions regarding property upgrades. By delving into these crucial aspects, you will be better equipped to navigate the path towards homeownership with confidence and success.

Top tips to help you get your first property

1. Becoming Mortgage Ready

Preparing yourself to apply for a mortgage is a critical first step. It's essential to evaluate and optimise your financial health, to appeal to the lenders’ interests. Starting with a clean slate could prove to be advantageous, so begin by clearing credit card debt or any outstanding loans. Additionally, review your credit report for any discrepancies or errors that may impact your mortgage application, and take prompt action to rectify it.

First-time buyers looking to purchase a property exceeding €220,000 will have a 90% applied to it, with an 80% on anything over the amount of €220,000. The maximum mortgage you can acquire as a first-time buyer will often be limited to 90% of your total income. This means that a minimum of 10% is required as a deposit.

2. Managing Debt Before Applying

Reducing your overall debt burden is key to obtaining mortgage approval. Lenders closely examine your debt-to-income ratio, which compares your monthly debt payments to your income. To improve this ratio and appear as a more attractive borrower, consider paying off or consolidating high-interest debts. By proactively addressing credit card debt and reducing other outstanding debts, you demonstrate financial responsibility and increase your chances of securing a mortgage.

3. Avoiding Big-Ticket Purchases

During the mortgage application process, it's prudent to avoid significant purchases that could strain your finances. Lenders assess your financial stability based on your income and existing debt obligations. Large purchases such as a new car or luxury items increase your debt load and potentially impact your mortgage eligibility. Instead, prioritise building your savings and maintaining a stable financial position, thereby enhancing your chances of mortgage approval.

4. Know Your Budget

Having a clear understanding of your budget is crucial when entering the property market. Take the time to calculate your monthly income and household budget that includes, any outgoing expenses, accounting for mortgage repayments, utilities, insurance, and maintenance costs. By factoring in all these expenses, you can determine the maximum mortgage amount or monthly repayments that align with your financial situation. Numerous online mortgage calculators are available to help you estimate affordability based on current mortgage rates in Ireland.

5. Exploring Finance Options

For first-time buyers in Ireland, the Help to Buy scheme is a valuable resource that can significantly ease the financial burden of purchasing your first property. This government initiative assists buyers by providing tax relief on the deposit or mortgage interest. It is crucial to thoroughly understand the eligibility criteria and application process for the scheme to maximise its benefits.

6. Purchasing a Property in Need of Upgrades

If you are considering buying a property that requires upgrades, it’s essential to explore suitable finance options. Renovation mortgages or home improvement loans are available to help finance the cost of renovations. These loans allow you to borrow additional funds based on the post-renovation value of the property. Consulting with a financial broker will enable you to explore the best finance options to suit your specific circumstances.

7. The ‘hidden’ additional costs when buying a property

When purchasing a residential property, you will need to make payments for stamp duty and a registration fee. The stamp duty amount is determined by the purchase price. If the price is below €1 million, the stamp duty is 1% of the purchase price. For properties valued above €1 million, the stamp duty is 2% of the property value.
In addition, there is a land registration fee based on the consideration mentioned in the Deed of Transfer. The fee varies depending on the value as follows:

Consideration in Deed of Transfer	Land Registration Fees
Up to €50,000	€400
From €50,001 to €200,000	€600
From €200,001 to €400,000	€700
Above €400,000	€800

Furthermore, your solicitor will charge legal fees. While some solicitors may have a fixed fee, most fees are variable. Generally, you can expect to pay between 1% and 2% of the house price, plus VAT. It is advisable to discuss this with your solicitor beforehand to avoid any surprises at the end of the process.

In conclusion, getting a foot on the property ladder in Ireland requires careful planning and financial preparedness. By becoming mortgage ready, managing debt, knowing your budget, and exploring finance options like the Help to Buy scheme, you can navigate through the process with ease and confidence. Clearing credit card debt, avoiding big-ticket purchases, making informed decisions about property upgrades, and having adequate understanding of the additional costs involved in the process, are all essential steps to ensure a successful journey towards homeownership. Remember to consult with a trusted financial broker who can provide personalised advice and guide you through the intricacies of the mortgage process. With careful consideration and informed decisions, you'll be well on your way to buying your dream home in Ireland and securing a bright financial future.

The Help to Buy scheme in Ireland is designed to assist first-time buyers in purchasing a new build or self-build property. However, not everyone qualifies for the scheme. Here are some important points to consider:

Eligibility: To qualify, you must be a first-time buyer or a person who hasn't owned or built a property in the past five years. Additionally, you need to meet specific income and purchase price limits set by the government.
New Builds: The Help to Buy scheme applies to newly built or self-built properties that meet specific energy efficiency standards.
Tax Relief: The scheme provides tax relief on the deposit or mortgage interest paid over a certain period, which can significantly reduce the financial burden of buying a property.

To determine your eligibility and understand the specific requirements of the Help to Buy scheme, it's advisable to consult with a financial advisor or visit the official Help to Buy website for up-to-date information.

As a first-time buyer, it is essential to be aware of the following:

Research: Conduct thorough research on the property market, including location, property prices, and amenities. Understanding market trends and fluctuations will help you make informed decisions.
Affordability and Budgeting: Determine your budget by calculating your income, expenses, and savings. This will guide you in assessing what you can afford and ensure you don't overstretch financially.
Saving for a Deposit: Start saving for a deposit early on to increase your chances of securing a favorable mortgage. Setting up a dedicated savings account and exploring government-backed savings schemes can help accelerate your savings.
Mortgage Options: Familiarise yourself with various mortgage options, such as fixed-rate and variable-rate mortgages. Understanding the pros and cons of each type will help you choose the right option for your circumstances.
Property Inspections: When viewing potential properties, conduct thorough inspections to identify any issues or necessary repairs. Engaging a professional surveyor can provide an unbiased assessment of the property's condition.

When applying for a mortgage, there are several key factors to consider:

Creditworthiness: Lenders assess your credit history and score to determine your ability to repay the mortgage. It's crucial to clear any outstanding debts, pay bills on time, and maintain a healthy credit score.
Affordability: Lenders evaluate your income, expenses, and debt-to-income ratio to determine how much you can borrow. Knowing your budget and calculating your maximum mortgage amount or monthly repayments will help you determine what you can afford.
Deposit: Typically, a deposit of at least 10% of the property's value is required. The higher the deposit, the better your mortgage terms and interest rates may be.
Documentation: Prepare necessary documents such as proof of income, bank statements, identification, and employment history. Organising these documents in advance can streamline the mortgage application process.

Get More Money Management Tips

2 December 2024

Christmas Shopping Tips: Stay Safe and Save Money this Christmas

23 September 2024

Managing Money and Expenses During the School Year

26 August 2024