Home to stunning landscapes, serene lakes, and stylish architecture, Ireland has quickly become a favoured destination for expats around the world. With marvellous views on land and at sea, and deep-rooted, historic culture, the allure of this cosy country island is hard to deny.
Popular with people looking to work, study, and retire, Ireland has some amazing places to call home. But if you’re heart is truly set on moving to the Emerald Isle, then you’re going to need to think about getting a mortgage in Ireland; as well as finding the property of your dreams, of course.
However, this is where Ireland differs from many other popular expat countries. While simple in its structure, the process of applying for a mortgage in Ireland can be lengthy and arduous for those looking to move from abroad.
But don’t let that dampen your spirits. If you’re ready to cross the channel and make a fresh start in Ireland, we’ve pulled together the important steps you need to know about Irish mortgages, the different types of Irish mortgage rates available, and the pitfalls you need to look out for, letting you navigate this tricky process as seamlessly as possible.
Are Irish mortgages available to non-residents?
Yes, Irish mortgages are available to non-Irish residents, but there is a catch. Due to the nature of the Irish lending system, there are far more restrictions placed on foreigners looking to borrow money when compared to Irish residents.
It’s never been easy to apply for a mortgage in Ireland, and an uptick in these restrictions in recent years has only made it more difficult. Many Irish banks won’t even consider you for a mortgage if your income isn’t listed in Euros, and some won’t lend to foreigners at all.
This can make getting a mortgage in Ireland from the UK particularly tricky, but not impossible. There are still several banks that welcome applications from expats and finding the right international mortgage solution to go with these can help take the pressure off your application.
The current state of the Irish mortgage market
When it comes to lending in the Irish mortgage market, the policy has always been one of stringent conservatism. While the market is well-developed and offers a range of mortgage products, Irish banks are traditionally very careful in who they lend to in order to keep the market stable and resilient.
Banks are very strict on how much you can borrow for a mortgage and encourage sensible lending behaviour by preventing people from borrowing beyond their repayment means. This is all done with a view to preventing too much excess credit from building up in the Irish financial system.
That being said, if you’re financially stable, there is a good chance that any mortgage application you make will be accepted.
How to begin the process of getting a mortgage in Ireland
As we mentioned previously, the process involved in applying for Irish mortgages is not overly complex. However, it is a lengthy process if you live outside of Ireland.
Generally speaking, the mortgage process begins like that in any other country. You approach a bank or lender of your choice and inquire about the different types of mortgages they offer.
But while you can do these opening steps on your own in other expat-favoured countries, in Ireland, it’s highly recommended you work with an international mortgage broker.
Directly applying for a mortgage on your own requires you to do your own research in order to find lenders who will work with you. This can be tricky, and you may also experience some or all of the following hurdles:
- Limited market access when it comes to the types of mortgages available.
- The potential for making mistakes during the application process with no one to guide you through it.
- Extensive time spent chasing things up to move the process along.
- Discovering your mortgage has become unpayable down the line but being unable to claim compensation.
- Surprise fees and penalties several months after taking your mortgage out.
Instead, it’s highly recommended that you apply for an Irish mortgage with the aid of an international mortgage broker, such as the ones we work with here at Blacktower.
An international mortgage broker will know the market and be able to guide you through the whole process, from beginning to end. This makes applying for an Irish mortgage much easier by finding you the right lenders for your needs, helping you understand mortgage criteria, and cutting through the potential red tape that might get in the way.
But regardless of how you choose to proceed, once you’ve reached out to a bank or lender of your choice, the next step will be to prove to said lender that you’re able to meet your mortgage repayments far into the future, despite market fluctuations.
This process is likely to involve something called a mortgage stress test, as well as presenting strong evidence that confirms the stability of your past, current, and future financial situation.
As with other mortgages, it’s advised you start this process immediately so that you can get a mortgage in principle, letting you budget appropriately and begin housing-hunting as soon as possible.
What is a mortgage ‘stress test’?
If you’ve never heard of a mortgage stress test before, that’s okay; it’s not always a necessity when applying for an international mortgage. However, if you’re getting a mortgage in Ireland as an expat, it becomes a crucial step in the process.
In simple terms, a mortgage stress test looks at your income, outgoings, and spending habits, to make sure you’re a financially responsible individual who can afford the mortgage you’re applying for.
For this test, you’ll need 12 months of bank statements as a way for the bank to assess how capable you are of repaying your outstanding debts, and if you can manage mortgage repayments on top of these.
In essence, they want it to be clear that you have some disposable income that will allow you to meet payments should unforeseen financial hazards occur.
How much can you borrow for an Irish mortgage?
The various mortgage options available to you from Irish lenders are very much the same as other European nations and will be especially familiar to anyone getting a mortgage in Ireland from the UK. There are, however, a few things you need to be aware of.
How much you can borrow is dependent on some or all of the following criteria:
- Your income.
- Your outgoings.
- Your credit history.
- Your age.
- Your savings and assets.
- Your loan-to-value ratio with regards to your chosen property.
- Whether or not you’re borrowing solo, with a partner, or under the supervision of a guarantor.
As a form of protection for the lender, you can only borrow a maximum of 3.5 times your gross income. This loan-to-income limit restriction even applies to couples looking for a joint mortgage. Fortunately, there is space for exceptions to this rule:
- First-time buyers can increase their loan by up to 20% of their mortgage value.
- Second-time and buy-to-let buyers can increase their loan by up to 10% of their mortgage value.
On top of this loan-to-value protection limit, you also need to be aware of the mortgage deposit limit. You’re required to have the following minimum deposits before any mortgage application is accepted:
- 10% of the property value if you’re a first-time buyer.
- 20% of the property value if you’ve previously bought a home.
- 30% of the property value if you plan on buying-to-let.
Again, there is some freedom to apply exceptions to these rules, but these are rarely applied if you’re a non-resident and you may even be required to pay an even bigger deposit due to associated risk factors.
What do you need to get a mortgage in Ireland?
Unlike many other European countries, when it comes to documentation and other requirements, Irish lenders aren’t as litigious outside the mortgage stress test. In order to qualify for an Irish mortgage, you will need to present some or all of the following documents:
- Copies of ID (passport, driver’s licence, etc…).
- Documents to prove you’re creditworthy in the form of 6-months of financial statements.
- Detailed evidence of your income and outgoings that the bank will need to verify the legitimacy of.
- Documents to prove the affordability of the mortgage you seek.
There may, of course, be other documents that a lender asks to see, which is another reason that seeking assistance from an international mortgage broker can be so beneficial. A broker can tell you which lenders will accept your level of evidence and support the application to completion.
Different types of Irish mortgages and Irish mortgage rates
There are two key types of Irish mortgage rates that should be familiar to anyone who’s looked at applying for a mortgage in the past: fixed and variable rates.
- Fixed mortgage rates maintain the same interest over the entire repayment period of your mortgage loan, often set for a limit of 2-10 years. This type of rate is ideal if you want to keep your loan repayments at a similar price each month, but usually has higher rates than variable loans.
- A variable rate, on the other hand, will have its interest fluctuate depending on the rates given by the Central Bank of Ireland. Some will match this, others may be higher, and few could be lower. The downside to a variable rate, however, is that they’re subject to constant change, potentially making steady repayments difficult.
As for the types of Irish mortgage you can apply for, Irish banks have very similar mortgage products to banks in the UK, with a few additional unique options:
- Cashback mortgages – commonly sold to first-time buyers, a cashback mortgage gives you a cash payment for taking the mortgage out that you receive upon the completion of the application or making the first payment. This cashback will be a set financial amount or a percentage of your mortgage value.
- Flexible mortgages – designed to give you more freedom in how you repay your mortgage, a flexible mortgage allows you to overpay to increase monthly payments without charge, pay additional lump sums, and even apply for a payment holiday if you can’t pay in certain months.
- Guarantor mortgages – this type of mortgage gives you a safety net in the form of a guarantor, someone who can cover the cost of the mortgage loan if you default.
Finalising the process
Once you have a mortgage product in mind, and have agreed on a mortgage in principle, you’ll need to find a property within budget and agree to a sale price with the seller. From here you should reach out to a local solicitor to oversee the signing of documentation, pay your deposit to secure the deal, and agree to a completion date.
All that’s left after this is to sign the mortgage agreement and finalise the sale of your new home. It’s as simple as that.
Other things to know
As a final touchpoint, there are several nuances you should be aware of when looking at an Irish mortgage.
First and foremost, there are fees associated with the process, primarily in the form of admin and legal costs, as well as any mortgage broker charges. So, be sure you have the funds to cover these costs, or your application may not be successful.
It is also a necessity in Ireland to have a life insurance policy as protection for repaying your mortgage should the worst happen. This is non-negotiable except under the following circumstances:
- You’ve been declined life insurance in the past or are unable to obtain it.
- The insurance premiums are too high for you to afford the insurance payments.
- The property you’re buying won’t be your main residence.
Last, but not least, it is much harder to get accepted for a buy-to-let mortgage than a residential mortgage, in Ireland. They have a lower loan-to-value ratio and may also have a maximum limit on the property value you can apply for.
With these last points covered, you should have everything you need to navigate the process of getting an Irish mortgage. Again, it’s highly recommended that you work with a broker to avoid any inconveniences in the Irish mortgage process and make it as smooth a transition as possible.
And if you’re looking for a mortgage in Ireland, then you’ll no doubt be looking for a property as well. Be sure to read our guide to buying property in Ireland . This guide includes everything you need to know about property hunting around the Emerald Isle, so you can find the right place for you.
Of course, we don’t just help with expats looking to move to Ireland. You can find a wealth of information on other popular expat countries on our locations page, as well as other useful information about moving abroad in our free guides. You can also find more insightful pieces and research relating to life as an expat over on the Blacktower blog.
This communication is for informational purposes only, based on our understanding of current legislation and practices which is subject to change and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.