House prices are still on the rise, putting people under increasing pressure to pull together the funds needed to buy a home.
Yes, the pace of growth may have abated – prices rose by 7.5 per cent in July, down from 7.9 per cent the previous month according to Central Statistics Office (CSO) figures – but they are still increasing. Nationally, the average price stood at a staggering €422,418 in the 12 months to July, while in Dublin, the average was €588,057.
Given an average annual income of just under €53,000, an income multiple of four times salary means the amount the average earner can borrow (about €212,000 in this example) is now dwarfed by house prices.
While Government incentive schemes can help, it makes sense to try to maximise the amount you can borrow while still remaining within Central Bank guidelines as well as your means.
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“Having that extra buying power of €10,000-€50,000, it seems like a lot of money today but over the life of a mortgage it’s not,” says Margaret Barrett, managing director of Mortgage Navigators. She notes that such a scenario will work out about €5 more a month in repayments over a 30-year term.
So how do you give yourself a bit of an edge to access extra money? Here, we take a look at how you might be able to boost what you can borrow.
Exceptions
Under the Central Bank’s mortgage-lending rules, first-time buyers can only borrow four times their income. Other buyers are even more tightly constrained, at 3.5 times income, though they may have the advantage of equity in their existing home.
So a couple earning €100,000 can borrow €400,000, which, with a 10 per cent deposit, would allow for a maximum purchase price of about €440,000.
However, the Central Bank rules do give lenders some scope for grant exceptions to those rules, meaning some borrowers will be able to borrow up to about 4.75 times their income. That turns the aforementioned €400,000 into €475,000 – a significant uplift.
There are restrictions on this: no more than 15 per cent of first-time buyers and 15 per cent of other buyers can avail of an exemption.
In practice, banks don’t tend to be as generous as they can be with their exemptions. Latest figures from the Central Bank, for 2024, show that just 5.3 per cent of all first-time buyer loans were offered at an income multiple in excess of four last year. (This is up on the 3.8 per cent offered in 2023, likely reflecting rising house prices.)
Only 7.7 per cent of other buyers availed of an exemption (ie borrowing more than 3.5 times their income) in 2024, although this was up from 5.2 per cent the previous year. Most of the 2024 cohort – over 70 per cent of them – still borrowed four times their incomes or less.
“Lenders never get to the limits that are available to them,” says Michael Dowling of Irish Mortgage Brokers. “Some will argue that’s a good thing, others will argue it’s not.” He adds that the process can be difficult for lenders to manage.
It might be because, at the start of the year, a potential borrower is granted an exception but never actually draws down the loan, or they might not draw it down for another year. So, “that exception has been lost”, says Dowling. Another issue is that borrowers can apply for an exception with multiple lenders, but of course they won’t draw them all down.
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Lenders do take different approaches. Bank of Ireland, for example, will give you approval in principle at four times income and indicate you are eligible for an exception. But they won’t formally approve this until you can show a copy of the booking receipt for your property.
“You have to have found a property to [formally] apply for an exception,” says Barrett.
PTSB typically is not offering loan-to-income exceptions for first-time buyers, while newer lenders may not yet have a pipeline of completions and so aren’t offering exceptions either.
To be in with the best chance of getting an exemption, brokers advise that you should apply early in the year.
“Banks are starting generally with a clean slate at the beginning of the year,” says Dowling, although he added that he had just signed off on two exceptions for borrowers last week.
In addition, lenders will cherry-pick the best borrowers for an exception. So think about your credit history, how secure your job is in the context of a downturn and your ability to pass repayment and stress tests.
Sources of income
Another way to boost your borrowing capacity, particularly if you have alternative sources of income in addition to your salary – such as overtime, bonuses and commission – is to consider going to a lender that takes a more flexible view on income.
However, Dowling counsels people to keep their expectations in check. “There’s no bank will give you 100 per cent of additional income unless it’s guaranteed,” he says.
For public servants, such as a doctor, a nurse or a garda, taking overtime into consideration can help you boost your income multiple. For people in other careers, lenders will typically look back and take two or three years of additional income into consideration, to work out an average figure based on this.
“Some will give you 100 per cent of it, some will give you 50 or 75 per cent of it,” advises Dowling.
And some of the newer lenders can be more flexible when working out what counts as income. Nua Money, for example, will look at what you’ve earned in the year to date and don’t necessarily need to see what you earned in variable income a year or two ago.
It might also take some social welfare payments/maintenance payments into consideration when calculating how much you can borrow. It is the only lender that will take on board Child Benefit as income.
“I think it’s correct,’ says Dowling. “With two children, you’ll get more money from Nua than from another lender.”
So, if you have three children under the age of 18 for example, that means a payment of €420 a month, or €5,040 a year. Multiplied by four, this means an extra borrowing capacity of €20,160. Even a single child translates into additional borrowing capacity of close to €7,000.
It’s not the only welfare payment Nua will consider, says Barrett, adding that the invalidity pension, the domiciliary allowance and carer’s support grants may also be considered as income.
The lender will also take 100 per cent of maintenance payments into account if there is a legal agreement. “That has been a game changer for us,” says Barrett.
Nua Money will also give a 10 per cent income uplift for professionals, such as accountants and solicitors. And, along with AIB, they are one of the few lenders that might include income from a second job. So if you have a nixer or an additional part-time job in the summer, for example, this can be used to boost what you can borrow.
If you’re a public servant, you can also expect a more generous approach. As Barrett points out, most lenders will go up two points in the income scale, while some will go as far as three or four on the basis of job security and guaranteed future income increments.
“That can help,” she says. It could amount to as much as €10,000 extra in income which translates to an additional €40,000 someone will be able to borrow.
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ICS is even more generous. According to Dowling, it will go three points up on the salary scale and, where there are two civil servants applying together, it will go three points up for the higher earner and five points for the lower earner.
“It’s a significant benefit,” says Dowling. “I’ve had a number of clients where it’s made a significant difference in terms of what they can borrow.”
Another recent entrant to the Irish mortgage market, Austrian-owned lender MoCo, might also appeal to some as it will take up to 75 per cent of a two-year average of rental income into consideration, and may also include a percentage of restricted shares as income.
Interest rates
The downside, however, is that improving your income multiple might come at a price. According to itsyourmoney.ie, for example, the cheapest rate on a €360,000 loan and a loan-to-value of 90 per cent over 30 years for a property with an A Ber is 3.1 per cent with Bank of Ireland, fixed for four years.
At MoCo, the best rate is 3.95 per cent fixed for three years; ICS offers 4.1 per cent fixed for three years; and Nua offers 4.75 per cent, fixed for five years.
But then you may not have got approval for the €360,000 with a cheaper lender. As such, the extra cost might be worth it to some people who otherwise may not be able to find a home in their borrowing range. And you can always switch to a better rate down the line.
