where to start - get a mortgage or find the house

Hi,

my partner & i are both first time buyers, currently paying €1k a month on rent in a house shared with another guy...with the market the way it is are looking into buying a house with the hope of renting out the additional rooms to our current housemate

we are both novices to this & dont know what to do first - shud we find a place we like & then go for a mortgage or vice versa? how do u go about getting a mortgage. We both earn gross €40k a year & get bonus of around €5k each a year. i have shares that were bought for me, can they be used as collateral??

we have seen a few house around the area we are currently living in & the asking prices are high but from the looks of things no1 seems to be paying the asking price these days...basically im looking for help on where to start & what to expect

Thanks for your help

Im no expert but I would advise you seek the mortgage approval first.

No point looking at houses until you know exactly what you can afford.

newhomeowner said:

Im no expert but I would advise you seek the mortgage approval first.

No point looking at houses until you know exactly what you can afford.

Click to expand...

Agreed.

Also in this market, if you are ready to go you might be able to negotiate the price down a bit in return for a quick sale.

ok, thanks for the advice...do i go to all the banks?? what kind of mortgage do I look for - fixed, variable, interest only for 2years?

You have the option of talking to all the banks yes. For an initial investigation it may not be a bad approach. Alternatively you could approach a broker who can investigate the options open to you (bear in mind that not all banks lend via brokers and not all brokers deal with every available bank).

I would suggest that you first check out the information for each lender on their website, then contact some and speak to their mortgage advisor to get a feel for what you may be able to afford. Alternatively investigate brokers in your area and get one of them to do the research for you. I think though it is probably best if you investigate yourself first. Reason being you will learn more quickly and you will have a better set of questions to bring to a broker if you decide to go down that route.

Check out www.itsyourmoney.ie for some basic information on mortgages.

Fixed is usually best if you need certainty in your outgoings, it is usually a slightly more expensive rate and during the fixed period penalties may apply if you vary your payment.

Variable means that you do not have that certainty of your outgoings, the interest can be changed usually at the discretion of the lender (though generally it is a bit lower than the fixed rate offered). A variant of a variable rate mortgage is the tracker mortgage. For these mortgages the lender is restricted in how they can vary the rate. The rate will remain tied to a "base rate", such as one set by the ECB, so while it can increase it is not within the banks power to do so outside of base rate changes.

Interest only means slightly cheaper repayments but that you are paying nothing off the capital. It is more expensive in the long run as you only start repaying the amount borrowed at the end of the interest only period.

Regarding your shares, the lender most probably won't use them as collateral. You have the option of selling them to raise further funds (and therefore decreasing the mortgage amount you require) or alternatively if you don't want to sell them in the current market, you can advise your lender/broker that you have them, their approximate value etc and they may look more favourably on your application. This is especially useful if you're borderline.

You're first port of call is the lender/broker. Once you know how much you can afford to spend, you can then start looking at properties within your range.

When you are assessing the monthly repayment affordability, don't forget to factor in additional expenses such as life assurance and house insurance, management fees etc.