What affects how much you can borrow?
There are a few factors that affect how much you can borrow in Ireland, including:
- Central Bank borrowing guidelines: These are known as mortgage measures, and set the Loan to Value (LTV) and Loan to Income (LTI) limits.
- The type of mortgage you want: e.g. first time buyer, self build, buy to let, bad credit etc.
- The type of borrower you are: e.g. first time buyer, second or subsequent buyer or buy to let buyer.
- Your income: or combined income if someone else is on the mortgage with you.
- Your age: If you’re an older borrower, this may limit your mortgage term, and therefore, how much you can borrow.
- Your number of dependants: For example, if you have children under 18, some of your income will be used to support them.
- Your existing credit commitments: e.g. loans, credit cards, overdrafts, hire purchase agreements etc.
- Other monthly outgoings: e.g. childcare costs, household bills and insurances.
- Your credit history: and whether it’s good or bad. Here’s how to check your credit record for free.
Lenders will assess your personal circumstances to work out whether they will lend to you, and if so how much.
Who sets the borrowing limits in Ireland?
The Central Bank of Ireland is responsible for borrowing limits and set out mortgage measures in 2015, to help:
- Ensure lenders lend responsibly
- Ensure you borrow what’s affordable
- Keep the economy stable
These measures are reviewed each year, and may be changed if needed, to maintain a stable economy in Ireland.
What are the mortgage measures?
There are two types of limits Central Bank has put in place for residential properties:
1. Loan to Value (LTV) limits:
These cap your borrowing at a percentage of the property value. The remaining percentage is the amount of deposit you must contribute.
LTV limits vary depending on the type of buyer you are:
- First time buyers: The LTV is 90%, so you need a 10% deposit.
- Second and subsequent buyers: The LTV is 80%, so you need a 20% deposit.
- Buy to let buyers: The LTV is 70%, so you need a 30% deposit.
2. Loan to Income (LTI) limit:
This caps the amount you can borrow at 3.5 times your gross income. If there are two of you on the mortgage, you can borrow up to 3.5 times your combined salaries.
For example, if your income is €40,000, you could borrow €140,000, or the LTV limit if lower.
Or, if you get a mortgage with someone else and your combined income is €100,000, jointly you could borrow €350,000, or the LTV limit if lower.
Are there any exceptions?
Certain types of mortgages are exempt from one or both of the mortgage measures:
- Switcher mortgages: The LTV and LTI limits don’t apply.
- Negative equity mortgages: The LTV limit doesn’t apply.
- Buy to let mortgages: The LTI limit doesn’t apply.
- Lifetime mortgages (equity release): The LTI limit doesn’t apply.
Can lenders override the limits?
Yes, the Central Bank allocates a percentage of mortgages, that can go over the LTI limit or under the LTV limit.
These exemptions are allocated based on the type of buyer:
- First time buyers: 20% of mortgages can go above the 3.5 times income cap, and 5% of mortgages can have less than a 10% deposit.
- Second and subsequent buyers: 10% of mortgages can go above the 3.5 times income cap, and 20% can have less than a 20% deposit.
- Buy to let buyers: 10% of mortgages can have less than a 30% deposit.
Lenders must review each borrower and their circumstances on a case by case basis.
To be considered for a mortgage that’s outside of the usual limits, you’ll need to be a low risk to the lender, and able to afford the larger payments.
How much can you afford?
The amount you’re able to borrow isn’t necessarily the amount you should borrow. Lenders will take into account your current outgoings, but can’t predict how these may change.
You should think about your future plans, and whether you can stretch yourself financially at this time.
Borrowing less would mean lower repayments, and a reduced cost overall. Here are some things to consider:
- The length of your mortgage: A shorter term will mean higher monthly payments, but you’ll be mortgage free sooner. You’ll need to weigh up what’s more important to you, and what’s manageable.
- Interest rates: These can go up as well as down. You could calculate how much your payments would be if interest rates were to go up by 3% for example, and whether you could still afford them.
- Your income: and if this is likely to change. The right insurance can cover you financially in some situations, but not all. For example, if you’re planning a family your income may reduce for a time, and then childcare costs may start, so you need to consider how you’d manage on less income.
- Overpaying your mortgage: If you’re keen to pay off your mortgage early, overpaying each month or annually (up to the penalty free amount), is a great way of doing this - but you’ll need extra funds available.
- Your lifestyle: If you’re going to have to budget long term to afford your payments, you need to be confident it’s feasible. Not being able to have any usual treats, like meals out or holidays may not be sustainable.
- Your credit history: Stretching yourself too far could mean paying for other things on credit. The interest you’ll pay quickly mounts up, unless you pay your bill off each month in full. Getting behind on payments could have a negative impact on future borrowing.
Find out how much you can borrow
The easiest way to get an idea of how much you can borrow is to use a mortgage calculator. These can be found on lots of banks and lenders websites, like Bank of Ireland.
You simply enter a few details about each borrower, such as:
- Marital status
- Number of dependents
- Employment status
- Gross salary
- Monthly outgoings
Once the details are submitted, you’ll get an instant estimate of how much you could borrow with that lender.
You can then choose to see what your repayments might be using a repayment calculator.
You could also go to a lender directly or a broker, to find out what you could borrow.
They are likely to do much more thorough fact-finding, which will enable them to give you a more realistic idea of how much you could get a mortgage for.
What are the next steps?
Once you have an idea of how much you can borrow and how much deposit you need you can work on getting your deposit saved.
How much can you borrow FAQs
Can I be a first time buyer if my partner owns a property?
No. Although it’s the first home you’ve ever bought, if your partner has previously owned one, you’re classed as a second or subsequent home buyer. This means you’d be required to raise a 20% deposit, not 10%.
How much can I borrow if I'm self employed?
You can still borrow up to 3.5 times your salary, but you’ll need to provide more documentation to prove your income than if you were employed.
Our guide: How to get a mortgage when you’re self employed has all the information you need.
How much can I borrow if my credit history is poor?
This depends on a number of factors that are covered in our guide: How to get a mortgage if you have bad credit.