If you want to get a mortgage the process is fairly simple, it’s a big undertaking for certain but that doesn’t mean that everything surrounding it is overly complex. A mortgage is a security backed loan, this means that there is some actual asset that a lender has a lien on (lien: this term means ‘ownership of’ so if a lender has a lein on your property in the form of a mortgage then they own the property ahead of you owning it until you pay them off) and its generally called ‘the security’ or just the ‘property’.
The biggest concern for any bank or building society when considering a mortgage is the clients ability to pay back the loan, this is sometimes referred to as ‘repayment capacity’, or if you want the hardcore underwriting terminology its the ‘debt service ratio’ and its normally a calculation that decides numerically if a person has the ability to service a loan obligation. There are different ways of doing this, some banks use a multiplier, for instance: you can borrow four times your salary. Others us a more complex calculation that looks at ‘net’ repayments. This form of calculation is probably more accurate and it looks at your income then makes deductions based on taxes and other debt obligations you may have and it then shows what your net amount is, then it takes a percentage of this – typically 40% and that figure is the amount of repayment you can afford.
It doesn’t stop there though, that 40% net amount (lets say its €1,000 per month) is stress tested, this means they look at where rates are today and then add on (say) 2% to see if you could afford the loan if rates went up significantly. Eventually you come to a figure that shows the maximum a bank is willing to lend based on your personal circumstances of income, taxes, other loans etc. And it has been a good model so far even in times where rates were going up and the property market in general is experiencing difficulty.
That said it’s not totally fool proof, however, prudent lending is a hallmark of the Irish Mortgage Market, that’s why out of all the homes and properties in the country only 57 were repossessed last year, given the sheer number of properties here that is a phenomenally low figure especially given the tightening financial situation that many people are experiencing due to a changing economic environment.
The process of applying for a mortgage is not too difficult, you will need different documents to make the application: income documents, identification documents, bank statements etc. As a Brokerage we typically take all of this and present your case to different banks to see which ones are willing to do the loan, from there (assuming that more than one say they will do it) we present you with the pros and con’s of each option so you can decide which choice you want to make, the most important thing is that you ultimately make the decision as you are the one who has to pay back the loan, we are there to guide you through everything and make the process less work intensive and less stressful.
The Brokerage market has grown every year in the last decade to the point where now a full 57% of mortgages are placed via the broker channel, that’s because brokers live and work in their communities and are often more familiar with the client than a bank will be or ultimately can be. As well its the concept of independent advice which means that a broker does not gain from choosing one bank over another. In a way a broker operates the same as a doctor who took the Hippocratic oath, we are there to ensure that people get the best deal available and to guide them through the options, we are not driven monetarily to place a loan anywhere other than the best mortgage choice for you.
To a degree this is under threat, Permanent TSB are talking of reducing broker commissions, up until now banks paid brokers to give out the professional advice to clients and to take care of the labour of the loan, however now PTsb wants to change the existing model – a model which works excellently for the client and for everybody other than those in the banking sector who suffer from permanent unadulterated greed – so that they keep more themselves, they are trying to push the market towards the English model where people have to pay for the professional advice of a broker rather than getting it for free which is how it currently works.
At Irish Mortgage Brokers we have one of the most highly skilled teams in the country, we know of no other broker where you can sit down with a qualified Accountant, then a practicing Solicitor, and a qualified Mortgage Broker in the same meeting. We believe in our business model and likely that’s why we are gaining ground as a brokerage on a national level every year, however we don’t want to be the biggest, just the best.