So you’ve decided to take the plunge and invest in your very own gaff; scary AF, we know, but this is where your interest in interiors takes a turn for the INSANE.
Right now you’ll be obsessively browsing Etsy, Pinterest (and GAFF, obviously), dreaming of every tiny detail of your grand decor plans. You’re probably also considering quitting your job and becoming an interior designer (we had that dream too). Way before that, however, there’s some not very fun, real life crap to deal with, such as mortgages (ugh) and life insurance (grim). To make it easier on you in the long-run, and save you time that would be better spent in search of mid-century finds, we’re sharing our 10-step, BS-free guide to buying a gaff, including all of the ugly expenses that may have slipped your notice amidst all that frantic pinning.
1. Deposit (Saving, saving and more saving)
Step 1 is beavering away until you question your very existence, gathering those hard-earned pennies until you have the all-important deposit. For first time buyers, it’s 10% of the house price (or the price range you’re aiming for) when borrowing €220,000 or less, and 20% on the excess if you go over this threshold. It’s 20% regardless of what you borrow when you’re a second-time buyer. The normal maximum level in terms of borrowing that you’ll qualify for is three and a half times what you earn, so if there’s a pair of you in it, take your combined earnings (before tax) and multiply by 3.5, add your deposit to that (which you’ll already have saved in one lump sum) and you arrive at your realistic cap on what you can feasibly borrow/afford. Say for example you earn 40,000 and your other half takes home 35,000 per year, the maximum you can borrow is €262,500 which means you will need a deposit of 10% of €220,000 and 20% of 42,500 which totals 30.5k. Add this to your borrowing amount and the most you can afford to spend on a house is €293,000. Still with us? Time for more caffeine and then we’re on to step 2.
2. Choose your mortgage provider
All banks are competing for your business so their rates are always competitive and they’ll each offer some additional frills on top to lure you in. Some offer a percentage of your borrowings straight into your bank account when you close the sale – essentially a few grand into your account to get you started – but there’s a lot of small print with these kinds of offerings. For us, AIB was by far the easiest to deal with; we got a three-month moratorium which means that you don’t have to start your repayments for three months after you move in, so the money you’d normally spend on rent/mortgage repayments can now be spent on getting your gaff in order. If you go for the break at the beginning – and it’s super helpful – the three months’ worth of repayments are added on to the remainder of your term and spread out to almost negligible effect (so that’s 35 years less 3 months, WAAAH).
If you’re not bothered with sitting down with a whole plethora of bankers, a mortgage broker can always do the hard work for you.
The easiest way to figure out what works best for you though is to head over to this mortgage comparison site where you can key in lots of variants to see how much you’ll wind up paying per month depending on the mortgage provider, the term etc – it was a huge time-saver for us.
3. Variable Versus Fixed?
Variable rate means you can over-pay if you wish, and the rates are usually a bit lower than fixed rates, but if the rate goes up or down, you have to roll with it. It’s flexible but for some first-time buyers they prefer to know exactly what to expect each month. What you can do is opt for a fixed rate for the first year or the first few years and then consider going to a variable rate down the line. When you are signed up to a fixed contract, you must stick with this payment even if the rates go down, but on the upside, if the rates go up, you’ll stay at that fixed sweet spot. This is really down to personal preference. For what it’s worth, we personally decided to go for the lowest repayments for the maximum term – 35 years – and started on a variable rate. Ideally, you will pay your mortgage off well before this, but in those first few years of getting your ducks in a row, it really helps to keep your payments to a minimum.
If you are on variable and wish to switch to fixed just write a letter – sign it from the both of you – instructing the bank to change your repayments but if you are on a fixed contract and you decide to move to variable, there can be costs of a few thousand to break the contract; not ideal.
4. Getting Approved
Then you need to fill out some gross forms to submit for approval. You will usually need (for most providers):
- 3 – 6 months of payslips
- 3 – 6 months of bank statements
- A letter from your employer confirming your employment status/salary cert
- A recent P60
- ID – photo ID and utility bill
- Evidence of saving (this can be as simple as showing that you’ve been paying rent)
- Recent statement of all outstanding loans
- Signed application form – the bank will give you this
Sometimes it helps to just personalise your application by giving more information such as your CV, a few examples of houses you are looking at etc. Seeing your employability and work experience goes a long way.
If you’re self-employed it’s trickier as they’ll want to see your accounts history for the past three years and an auditor’s reference report – word to the wise; if you hate your job, wait until you’ve gotten passed the approval point before leaving, it’s just so much easier to be an employee.
All going well, your mortgage will be approved. Now you’ve got six months – which isn’t very long at all – to find the gaff of your dreams.
At this point you get a letter confirming your loan but it’s ‘Sanction in Principle’. Then the bank requires specific ‘conditions’ before you can proceed to ‘Full Sanction’.
5. Finding the gaff
Be prepared for a lot of heartache here unless you have the luxury of buying a brand new house. With new gaffs it’s usually a case of first come first serve; you put down a small deposit just to get your name on it and then it’s back to your bank and solicitor to get the ball rolling. If it’s a second-hand home you’re going up against the masses where bidding wars can really crush the initial excitement. Steel yourself for this experience and have a bottom line in your head – a figure you absolutely can not go over – to avoid making an irrational, heart-lead and panicked decision. The right gaff will be yours, trust us. When you get through this, it should be plain sailing.
Moving to Full Sanction – Now that you have your gaff you need to show the mortgage provider:
- Address of your new gaff
- Purchase price, borrowing sought, rate, term and any equity input (such as sound relatives who remember you in their will)
- Solicitor details
Find a sound solicitor who’s as efficient as you are eager. They will take care of all the ugly documentation and deal with the other side’s legal team. They’ll draw up the contract for you to sign – scary part! – and then you can trust them to guide you from there.
7. Valuation and Survey
Time to make sure the house isn’t about to fall down, before you hand over the funds. A valuation report is only valid for 2 months under new Central Bank guidelines.
8. Before you close – Life Cover and Home Insurance
You will need to sort out mortgage insurance and home insurance before you can officially draw down your mortgage. This sounds like a laborious prospect but it’s quite simple. You can sort the house insurance over the phone with your insurance company of choice where they will ask you a series of questions but for the life insurance you need to sit down in person with a rep who will talk you through the grim realities of what happens if one of you kicks the bucket, so on and so forth. Remember that your house insurance quote is only valid for 30 days and they need the exact details of the house so you shouldn’t action this until you are relatively close to closing. With the mortgage protection, the cover would be ‘sitting’ on hold and only put into force when your mortgage advisor gives them the go ahead. This usually goes live a month prior to the release of funds.
Life cover (mortgage protection), home insurance and valuation all need to be in place at least a week or two before drawing down the mortgage.
Before you close you sign a direct debit mandate with the bank – yep, every month for the rest of your life they’ll be bleeding you dry – but this is easy peasy. At this point make sure you are ready to rock with your life cover, home insurance, direct debit mandate and valuation report.
Then on closing day, the balance of funds due go from the bank into the solicitors’ account and then on to the people you’re buying from.
10. Moving in (HURRAH!)
Aaaaand breathe. By now you should have your keys and zero left in your bank account; the joys.
As for the rest? Stay tuned!
Costs to be mindful of:
- Initial booking deposit
- Full deposit
- Balance of funds
- Legal fees
- Stamp duty
- Home insurance monthly
- Life cover monthly
- Valuation report
- Snagging (if a new build)
- Van rental for moving day
Keep on writing, great job!
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Fab and informative. As someone who is pretty much freelance and in the artsy world (basically every bank’s nightmare),I strongly recommend a good mortgage broker. Despite having a strong history of saving plus very healthy deposit banks, my career was making it impossible to get a mortgage. Once I found my mortgage broker I had approval within a few weeks. I still call him Superman whenever I recommend him to a friend.
Thanks Gene! Glad you got sorted with your Superman!