Category Archives: General

What Lenders DON’T Want to See

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Securing a mortgage in Ireland can sometimes feel like a convoluted process, and let’s be honest, a stressful one. Understanding what lenders consider “no-nos” can help not only improve your application but also shorten it and make it less nerve-wracking. Here are some key factors lenders don’t want to see:

1. Poor Credit History

 

Late Payments and Defaults

Lenders scrutinise your credit history for late payments or defaults. Keeping a clean record by paying bills on time is crucial. If you are not able to keep up with your monthly payments, be upfront with whoever the service provider is and discuss adjusting your monthly payments.

High Credit Utilisation

Using a large portion of your credit limit may suggest financial instability. Lenders want to see that you’re living within your means and will be well able to pay a mortgage each month. Aim to keep your credit utilisation below 30%.

2. High Debt-to-Income Ratio

A high debt-to-income (DTI) ratio means a significant part of your income goes towards debt repayment, leaving less for mortgage payments. Lenders typically prefer a DTI below 40%.

3. Unstable Employment History

Frequent Job Changes

Stability is key. Frequent changes in employment can raise concerns. Lenders prefer consistent employment within the same industry. We by no means suggest you stick at a job you hate or put your dreams on the long finger. What we would recommend is figuring out what your priorities are as changing jobs right in the middle of a mortgage application would be a messy business. Plus, you need to be in a permanent role for 6 months as far as the banks are concerned.

Gaps in Employment

Unexplained gaps between jobs may be a risk. Take this with a pinch of salt. This sentiment has come a long way in recent years. There are so many reasons you might have employment gaps; starting a family, travelling the world, illness etc (all of which are valid reasons). It is just something to be aware of, in case a lender questions it.

4. Insufficient Savings

Generally speaking, 10% of the purchase price is what is expected as a deposit. However,  a larger deposit reduces the lender’s risk, thus making you more favourable to a lender. With the cost of nearly everything skyrocketing, you can only do what you can and 10% is a sufficient saving in many/most cases.

5. Unverifiable Income

Lenders require verification through payslips, tax documents, or bank statements. Inconsistent or unverifiable income sources can complicate your application. Make your payment and income history as simple to dissect as possible!

6. Unresolved Financial Issues

Inaccurate Information

Providing conflicting details can harm your credibility. Ensure all information is accurate and consistent.

Outstanding Debts or *Liens

Unresolved debts or legal issues can impede your mortgage application process.

*A lien is a claim or legal right against assets that are typically used as collateral to satisfy a debt

7. Recent Large Purchases

Making significant purchases before applying for a mortgage can negatively impact your credit score and increase your DTI ratio. Lenders prefer financial stability. This is why planning as far ahead of your mortgage application as possible is best.

8. Excessive Credit Enquiries

Multiple credit inquiries in a short period can suggest financial stress and may lower your credit score.

9. Spending After Approval in Principle 

You have just received an approval in principle. You breathe a huge sigh of relief that you’re that much closer to your new home. However, you aren’t all the way there yet. It can be tempting to let your spending increase and your savings decrease at this milestone. It’s absolutely vital that you continue in the same vein as before until you draw down.

The bottom line 

Securing a mortgage requires careful preparation and understanding of what lenders prioritise. By avoiding common pitfalls such as poor credit history, high debt-to-income ratio, unstable employment, insufficient savings, unverifiable income, unresolved financial issues, recent large purchases, excessive credit inquiries, and overspending after approval, applicants can enhance their chances of success. Planning and maintaining financial discipline can significantly ease the stress of the mortgage application process and lead to a smoother path towards homeownership! For more advice on mortgage applications or to get started with us today; contact the Smart Mortgages team today: 01 2393220 | info@smartmortgages.ie

Top Financial Mistakes and How to Avoid Them

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Making smart decisions is crucial for financial stability and growth. However, even the most financially savvy individuals can stumble. Here, we outline some common financial mistakes and practical advice on how to avoid them.

1. Neglecting to Plan for Retirement

The Mistake: Many delay or neglect planning for retirement, assuming it’s too far off to worry about now.

How to Avoid It: Start contributing to a pension fund as early as possible. The government offers tax relief on pension contributions, which can significantly boost your savings. Utilise employer pension schemes, and consider consulting a financial advisor to create a retirement plan tailored to your needs.

2. Over-reliance on Credit Cards

The Mistake: Credit cards can be convenient, but relying too heavily on them can lead to mounting debt and high interest payments.

How to Avoid It: Use credit cards responsibly by paying off the full balance each month to avoid interest charges. Create a budget to track your spending and stick to it. If you have existing credit card debt, focus on paying it down as quickly as possible, starting with the highest interest-rate cards.

3. Ignoring the Importance of an Emergency Fund

The Mistake: Life is unpredictable, and many Irish households are unprepared for unexpected expenses due to a lack of emergency savings.

How to Avoid It: Aim to save at least three to six months’ worth of living expenses in an easily accessible savings account. This fund will provide a financial cushion in case of emergencies such as job loss, medical issues, or urgent home repairs.

4. Failing to Invest

The Mistake: Some people refrain from investing because of a lack of knowledge or fear of losing money, missing out on the opportunity for their money to grow.

How to Avoid It: Educate yourself about different investment options. Consider speaking with a financial advisor who can guide you based on your risk tolerance and financial goals. Remember, investing is a long-term strategy that can significantly increase your wealth over time.

5. Not Taking Advantage of Tax Reliefs and Credits

The Mistake: Ireland offers various tax reliefs and credits that individuals often overlook, leading to higher tax payments than necessary.

How to Avoid It: Familiarise yourself with available tax reliefs and credits. Regularly review your tax situation and consult a tax professional to ensure you’re maximising your tax benefits.

6. Overlooking the Cost of Insurance

The Mistake: Under-insuring or over-insuring can both lead to financial strain. Many Irish residents neglect essential insurance or pay too much for unnecessary coverage.

How to Avoid It: Evaluate your insurance needs carefully. Ensure you have essential coverage, such as health, home, car, and life insurance, but avoid overlapping policies. Shop around and compare quotes annually to get the best rates. Don’t forget to review and update your coverage as your life circumstances change.

7. Failing to Seek Professional Financial Advice

The Mistake: Many people try to manage their finances without professional guidance, which can lead to suboptimal decisions and missed opportunities.

How to Avoid It: Consider hiring a financial advisor, especially when making significant financial decisions like buying a home, investing, or planning for retirement. A good advisor can provide personalised advice, help you set realistic goals, and create a comprehensive financial plan.

Conclusion

Avoiding these common financial mistakes can significantly improve your financial health and prospects. By planning for retirement early, using credit responsibly, building an emergency fund, investing wisely, maximizing tax benefits, carefully managing insurance, and seeking professional advice, you can achieve greater financial stability and security. Remember, the key is to be proactive and informed about your financial decisions.

Get in touch with Shankill Financial Services today: info@shankillfs.ie or 01 239 3220

Is It More Difficult to Buy a House as a Single Person?

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Your first home is without a doubt one of the most important decisions you can make. Whether you’re a couple wishing to start a family or a solo professional seeking to settle into a space to call your own, the moment you finally get the keys is a day you won’t forget in a hurry. Getting a mortgage in Ireland as a single person follows the same steps as those for couples or multiple applicants. If that is you, let us take you through the process from start to finish. We understand that the prospect of getting your mortgage can be daunting- but it doesn’t need to be!

Did you know that almost 30,500 First Time Buyer mortgages were approved in 2023? If it can happen for them, it can happen for you, too.

Step-by-Step Guide to Mortgage Approval

Step 1: Evaluate Your Finances

Before applying for a mortgage, review your finances. Calculate your income, expenses, and any outstanding debts. Determine how much you can afford to borrow and repay each month. As early as possible, start to be mindful about your outgoings and the way you manage your account/s. Lenders evaluate the way you handle your finances including the type of purchases you make, how often and the amount spent.

Step 2: Save Your Deposit

Lenders in Ireland require a deposit, typically 10% of the property’s purchase price. As a single person, we would recommend that you try to save more than the required deposit to reduce the amount you need to borrow. Ultimately, the longer you can save, the better. Remember that the bank will lend you 4 times your gross income. For example, if you make €50,000 per annum, you can borrow €200,000.

Step 3: Check Your Credit Score

Your credit history plays a crucial role in mortgage approval. Although the banks will routinely carry out these checks when they receive your application, it might be worth doing yourself, especially if you have concerns about a past debt. You can receive a credit report from the Central Bank of Ireland.

Step 4 Reach Out to a Broker

Using a mortgage broker, like SMART Mortgages, has several advantages over directly approaching a bank for a mortgage. Brokers work with multiple lenders, providing access to a broader range of mortgage products and rates. They offer expertise, guiding you through complex mortgage options and offering personalised advice. Brokers save time by gathering quotes from different lenders and presenting the best options. They have negotiation power with lenders, potentially securing better terms. For more information on working with us, visit us here.

Step 5: Research Schemes

Always take advantage of any additional help you can get by researching the schemes available in Ireland. Here are two that are worth looking into, but bear in mind, they are for newly built houses or apartments.

Help to Buy Scheme: The Help to Buy Scheme gives a refund of the income tax and Deposit Interest Retention Tax (DIRT) you have paid in Ireland for the 4 years before the year you apply.

First Home Scheme: The First Home Scheme (FHS) is an affordable housing scheme, which supports you in buying a new home or building your first home.

Step 6: Get Mortgage Approval in Principle 

Before house hunting, it’s advisable to get a mortgage approval in principle (AIP). This indicates how much you can borrow based on your financial situation. It’s not a guarantee of a mortgage, but it helps when making offers on properties.

Planning for the Future

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Planning for the Future

For some of us, retirement feels like something in the distant future. However, planning and saving for retirement is a crucial step that can significantly impact your financial security and quality of life later. Most of us understand the importance of managing our pensions, but that’s not all. This guide aims to provide clear and actionable advice on what you can do to effectively save for retirement

Understanding the Irish Pension System

Ireland’s pension system is composed of three pillars:

  1. State Pension (Contributory and Non-Contributory): The State Pension (Contributory) is based on your Pay Related Social Insurance (PRSI) contributions, while the State Pension (Non-Contributory) is means-tested. As of 2024, the full-rate Contributory State Pension is €277.30 per week.
  2. Occupational Pensions: These are workplace pensions provided by employers. They come in two main types: Defined Benefit (DB) schemes, which promise a specific retirement income, and Defined Contribution (DC) schemes, where the retirement income depends on the amount contributed and the investment performance of those contributions.
  3. Private Pensions: These are personal retirement savings plans that you set up independently. Personal Retirement Savings Accounts (PRSAs) and Retirement Annuity Contracts (RACs) are the most common forms of private pensions in Ireland.

Starting Early: The Power of Compound Interest

One of the most effective strategies for building a substantial retirement fund is to start saving early. The principle of compound interest means that the earlier you start, the more your money can grow over time. Even small, regular contributions can accumulate significantly over decades. For instance, if you start saving €100 per month at the age of 25, with an average annual return of 5%, you could have nearly €155,000 by the time you turn 65.

Maximising Tax Relief

The Irish government encourages retirement saving through generous tax reliefs on pension contributions. The amount of tax relief you can claim depends on your age and income:

Source: Revenue- Tax Relief Limits on Pension Contributions

Diversifying Your Investments

When saving for retirement, it’s important to diversify your investments to manage risk and maximise returns. Consider a mix of assets such as equities, bonds, property, and cash. Each asset class carries different levels of risk and return, and the right balance can depend on your age, risk tolerance, and retirement goals. Professional financial advice can help tailor an investment strategy that suits your circumstances.

Regularly Reviewing Your Pension Plan

Life circumstances and financial goals can change, so it’s crucial to review your pension plan regularly. Ensure that your contributions are on track to meet your retirement objectives. Reassess your investment choices and adjust them to align with your changing risk tolerance and time horizon.

Planning for Healthcare and Long-Term Care

Healthcare costs can be a significant burden in retirement. In Ireland, while you may be eligible for the medical card or the GP visit card based on your income and circumstances, it’s wise to plan for potential out-of-pocket healthcare expenses and long-term care. Consider options like health insurance and long-term care insurance to protect your retirement savings.

The Role of Additional Savings

While pensions are a primary source of retirement income, additional savings can provide a valuable cushion. Building an emergency fund and investing in savings accounts, property, or other assets can offer extra financial security and flexibility in retirement.

Conclusion

Saving for retirement requires careful planning and disciplined saving. By understanding the Irish pension system, starting early, maximising tax reliefs, diversifying investments, and regularly reviewing your pension plan, you can build a secure financial future. Remember, the sooner you start, the more time your money has to grow, ensuring a comfortable and worry-free retirement!

For more advice on retirement planning and pensions, contact the Shankill Financial Services team today: 01 2393220 | info@shankillfs.ie