Buying a home is a big investment and an anxious time. The property market in Ireland has gone full circle over the last decade, we have experienced the highs and the rock bottom lows but what have we learned from it all if anything?. Below are my BIG 3 important things to consider before jumping on the property ladder;

• Fail to prepare,…prepare to fail

To buy a home today you will need considerably more capital in the form of a deposit than you would have needed in previous years. For first time buyers depending on individual circumstances may need to find up to 15% for initial deposits. I would encourage individuals to set up a good interest-yielding account as early as possible. Lending institutions like to see a strong track record of saving as this will strengthen personal applications. One thing to note is that lending institutions will also require current account statements (usually 6 months) so if you are someone who likes to dabble with on-line gambling maybe think twice about using your card on-line to place bets etc.

When submitting your application whether through a financial advisor or independently make sure you have all the required documents and application forms completed correctly. It can be a long drawn out process from the time you begin filling out the application forms to the time you get a decision from the lending institution so try to avoid making it any longer than it needs to be, after all property prices seem to be increasing daily (AGAIN).

• Planning to avoid confusion

I always encourage first time buyers to set out a plan before they even begin looking at houses. How much you are going to spend? How long do you plan on living in the home? Are you looking for a new or an old home? Is this home an investment or do you see yourself raring a family in it? Are you aware of the secondary costs in purchasing a home? Are you ready to jump onto the property ladder? How much will your home be worth in 10 years?. Most people should be able to answer these questions but you would be surprised at the amount of people that can’t. Without a strict plan and a forward looking view individuals can fall victim to impulse purchasing because of the nice TV, the electric gates, the big bathroom and a couple of years down the line have a big mortgage to pay and a broken bath. That is why I encourage people to spend the time planning before you begin looking at houses or submitting mortgage applications it is worth it in the long run. It is important to be independent and choose a home that is right for you and you particular circumstance, don’t be taken in by news headlines or a persuasive estate agent.

• Fixed or Variable

This is often a tricky decision when it comes to mortgage applications, if there wasn’t enough investment risk already associated with home purchases here is another aspect that people also over look. Currently the cost of borrowing for a mortgage remains at historically low rates. The current ECB rate has fallen to .25% and over a 25 -30  year repayment term these rates are not sustainable. Although there is speculation that the ECB might reduce the main lending rate further you would be foolish to think that this rate wont increase over the next 20 years and in fact if you are of the belief that it will not you should probably move out of the EU as you are waging a big bet that the EU will fall into disarray.  It is important for individual deciding between the two to play around with a few figures and understand the implications of a 1-2% swing in interest rates on monthly repayments. On the opposite side of the spectrum a fixed rate can provide considerable peace of mind and eliminate the volatility and investment risk associated with variable rates. However do not that the costs associated with breaking can be very high so do take time to consider both options.

Happy Hunting

– Terry