CENTRAL BANK & MORTGAGES
NEW LENDING RULES
The Central Bank has finally clarified it's new regulations regarding mortgages provided by banks and mortgage lenders.
Under the new mortgage lending regulations,
property buyers wishing to live in their new houses, will be restricted to borrowing a maximum
of 80 % of the purchase price.
Investors wishing to buy and then lease/rent their properties will have a mortgage lending restriction
of 70 %. Another restriction on mortgage borrowing
is a cap of no more than 3.5 times annual salary.
If the proposed new property is being purchased under a joint application, the cap is 3.5 times the combined household income.
The Central Bank's initial firm stance on first time buyers has softened somewhat. They will now be allow a mortgage of up to 90% (with a cap of € 220,000 and 80% of the balance above that figure.) In other words, a first time buyer purchasing a house or apartment worth € 220,000 will require a deposit of € 22,000. This deposit amount rises to € 38,000 if the property they intend to purchase costs
These new mortgage restrictions may leave potential buyers, particularly in the Dublin area, a lot worse off.
Imagine you were intend on buying a house worth, say € 270,000 (a by no means unreasonable figure in the current market), and you manage to save € 500 per month. Instead of having to find a deposit of € 27,000, you now need a deposit of € 54,000.
If house prices continue to rise, (say by a yearly amount of 5 %), then by 2020 your house will then cost you € 3355,000 and you will now need, not just € 54,000 but € 67,000.
Under the new mortgage rules, banks will be able to exceed the loan restrictions in up to 15 % of cases, and also allowed exceed the 3.5 times household income limit in 20 % of cases. For buy to let mortgages, the mortgage lenders will be allowed a leeway of 10% in excess of their total value of loans .
Please remember that the mortgage calculator should only be taken as an approximate guide, and may vary from the actual figures quoted by mortgage lenders.
This is a summary of an article that appeared recently in the Irish Times Newspaper.
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