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The Central Bank has recently introduced new mortgage rules or lending criteria that the banks must adhere to when granting a mortgage. The purpose of these new rules is to stabilise the property market and prevent another property bubble emerging.
New Lending Rules
The general rule is that you will now be required to provide a deposit of 20% of the price of the property. You will also not be able to borrow more than 3.5% of your combined salary. Therefore if you wish to purchase a property for €400,000 you will need to provide a deposit of €80,000 and also have a combined salary of €91,500 per annum (€320,000 / 3.5).
If you are a first time buyer you will need to provide a deposit of 10% for the first €220,000 and 20% thereafter, while the 3.5% of your salary rule remains the same. For example if you wish to purchase a property for €200,000 you will be required to provide a deposit of €20,000 and earn over €51,500 per annum. Should you wish to purchase for €300,000 you will be required to provide a deposit of €38,000 (€220,000 @ 10% = €22,000 & €80,000 @ 20% = €16,000).
The bank has the discretion to relax the above rules in certain instances and it therefore always advisable to speak with your broker. It is also important to note that the bank will examine your previous savings and mortgage or rent payments so it is advisable to maintain a positive credit rating.
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