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How Much Can I Borrow?
Each Mortgage Lender has different criteria, or rules, to calculate how much you can borrow.
I have outlined how the lenders generally calculate your borrowing capacity, and some real life examples.
But First, Please Read This Important Note:
There are lots of variables involved in calculating your approval amount (such as outgoings, loan commitments, age, breakdown of your income into basic, overtime, bonuses etc), so I'd highly recommend that you get approval in principle before you do anything else.
Here's two examples of things that can significantly effect what you can borrow:
- A €400 per month car loan can reduce what you can borrow by over €65,000.
- Most lenders will only take 10 - 20% of overtime, bonus or commission into account when working out what you can borrow, so if they make up part of your income, it's vital to speak to a mortgage professional.
To get mortgage 'approval in principle' visit the online mortgage application page and fill in a few basic income, loan and contact details or call 1890 44 66 44 to speak to a mortgage consultant.
(lines are open 8am - 8pm Monday to Thursday, 9am - 5pm Fridays, 11am - 4pm Sundays)
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Single Applicants:
Lenders will either work out what you can borrow based on a multiple of your yearly before tax income, or based on your net disposable income (i.e. your income after tax and loan repayments etc).
Some lenders use a Multiple of your annual gross income such as:
- 4.75 times your annual pre tax income (on incomes over €35,000)
- 5 times your annual pre tax income (on incomes over €60,000)
Other lenders calculate it based on your Net Disposable Income
- Usually 35% - 40% of your monthly net income (your pay after tax) to cover your mortgage AND any other loan repayments.
- This can increase to 45% - 50% or more for people with large incomes
- They usually calculate it based on a variable rate mortgage over a maximum of 35
years and it is stress tested to allow for increases in interest rates.
- Existing outgoings, such as loans will significantly reduce what you can borrow.
- Overtime & bonuses will also be taken into account, usually to a much lesser degree
Examples of what you could qualify for based on your income if you have NO loans:
- €30,000 - €209,811 maximum
- €40,000 - €221,758 maximum
- €50,000 - €275,000 maximum
- €75,000 - €358,000 maximum
- €100,000 - €475,000 maximum
The example above based on a single borower. Age 30 or younger, taking out a 40 year mortgage with an 8% deposit. No loan commitments. The calculation assumes that the customer qualifies for the maximum TRS & the property has at least 2 bedrooms, allowing for room rental to be taken into account.
How Can I Qualify For A Bigger Mortgage?
- Rent a Room Scheme
If you are planning to rent out a bedroom, under the governments 'Rent a Room' scheme, some lenders (but not all) will take this additional income into account. (For obvious reasons, the lenders will not increase what you can borrow if you are buying a studio or 1 bedroom apartment).
- Buy a home with a friend or family member:
Buying a home with a sibling has become more and more popular over recent years, as it will significantly increase what you can borrow, allowing you both to get on the property ladder.
- Guarantor
A few lenders will allow you to use a family member (non-blood relitives are usually not allowed) as a guarantor, so speak to your mortgage broker about this as an option. In some cases it can help increase what you can borrow, in other cases, it doesn't really help a lot.
- Affordable Housing Scheme
The affordable housing scheme is a scheme to aims to help people on lower incomes get on the property ladder
Joint Applicants:
For Joint applicants, lenders generally calculate what you qualify for based on your Net Disposable Incomes:
- Usually 35% - 40% of your monthly net income (your pay after tax) to cover your mortgage AND any other loan repayments.
- They usually calculate this based on a variable rate mortgage over a maximum of 35
years and it is stress tested to allow for increases in interest rates.
- Existing outgoings, such as loans will significantly reduce what you can borrow.
- Overtime & bonuses will also be taken into account, usually to a much lesser degree
Examples of what you could qualify for based on your joint income:
- €50,000 joint income - €303,757 maximum
- €70,000 joint income - €385,000 maximum
- €80,000 joint income - €453,000 maximum
- €90,000 joint income - €500,000 maximum
- €100,000 joint income - €550,000 maximum
The example above based on a married couple, both working & earning the same income. Ages 30 or younger, taking out a 40 year mortgage with an 8% deposit. They have no loans. The calculation assumes that the customer qualifies for the maximum TRS.
Important Note: There are lots of variables involved in calculating your approval amount (such as outgoings, breakdown of your income into basic, overtime, bonuses etc), so I'd highly recommend that you get approval in principle before you do anything else.
To get mortgage 'approval in principle' visit the online mortgage application page and fill in a few basic income, loan and contact details or call 1890 44 66 44 to speak to a mortgage consultant.
(lines are open 8am - 8pm Monday to Thursday, 9am - 5pm Fridays, 11am - 4pm Sundays)
.
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Mortgages Direct Ltd t/a Mortgages Direct is regulated by the Financial Regulator.
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