The Central Bank of Ireland has a series of lending rules in place for residential property which are reviewed on an annual basis. For 2020, these rules remain unchanged. Here’s a reminder of what they are:
Loan-to-Value Limits
The LTV limit requires you to have a minimum deposit before you can get a mortgage. The size of this deposit depends on what category of buyer you are.
- First-time-buyers need to have a minimum deposit of 10%
- Second and subsequent buyers need to have a minimum deposit of 20%
- Buy-to-let buyers need to have a minimum deposit of 30%.
Banks and other lenders have the freedom to lend a certain amount above these limits. In any one calendar year they can give an allowance to:
- Up to 5% of the value of mortgages to first time buyers
- Up to 20% of the value of mortgages to second and subsequent buyers
- Up to 10% of the value of mortgages to buy-to-let buyers.
Loan-to-Income Limits
The LTI limit restricts the amount of money you can borrow to a maximum of 3.5 times your gross income. So for example, a couple with a combined income of €100,000 can borrow up to a maximum of €350,000.
Lenders do have the freedom to lend a certain amount above these limits. In any one calendar year they can give an allowance to:
- Up to 20% of the value of mortgages to first-time buyers
- Up to 10% of the value of mortgages to second and subsequent buyers
- Up to 10% of the value of mortgages to buy-to-let buyers
The measures are designed to ensure that banks and other lenders lend money sensibly. They are also designed to stop house buyers from borrowing more than they can afford and prevent excess credit from building up within the Irish financial system.