About 30 per cent of first-time buyers last year bought on their own. Borrowing hundreds of thousands of euro by yourself is a big deal. It is likely to be the biggest financial commitment you will ever make, and paying back this loan may shape your finances for decades to come. If you’re thinking of buying solo, here’s how to weigh up the choice.
You’re not alone
Firstly, if you’re buying a home on your own, you’re not alone. Three out of 10 first-time buyers last year bought on their own. Marriage was once the main trigger for household formation, but this is changing. Fewer are marrying and those who do are marrying later. Plenty of first-time buyers who want to, and can afford it, are buying with just their name on the mortgage.
“I’ve had three enquiries in a row this week, all of them from single applicants, all of them female actually,” says Peter Magee of Mason Mortgages, who is also a director of the Association of Irish Mortgage Advisors (AIMA).
“I find they are in good jobs, earning from €50,000 to €80,000 working in the pharma or technology industries,” says Magee.
Those on higher salaries are looking at houses, but many are looking at apartments which, if properly managed, can be cheaper to run and lower maintenance. “It can suit them better and with good energy ratings, it brings cheaper green mortgages into focus,” says Magee.
Know your limits
Central Bank lending rules can be the biggest hurdle for solo first-time buyers. They can borrow four times their income under the limits. First-time buyer couples can borrow four times their combined incomes.
The combined income of joint buyers gives them more buying clout, or propels them into a higher price bracket, giving them more options, says Magee.
“When you’ve got someone earning €60,000, you are looking at being able to borrow €240,000, whereas if you have [joint buyers] someone on €40,000 and someone on €60,000, all of a sudden they are up to a €400,000 loan, so it is a challenge,” says Magee.
The average first-time buyer loan in April of this year was €304,952, according to Banking and Payments Federation Ireland (BPFI) figures. Indeed, today’s average first-time buyer has an average annual income of some €88,090, either earned singly or jointly by a couple.
This income is typically lower outside of Dublin – for example, €67,000 in Limerick for someone buying a second-hand home; €73,000 in Galway; and €75,000 in Cork.
Compare
Looking at data on mortgages, salaries and the type of properties purchased can give solo first-time buyers an idea of what others at the same stage are earning, borrowing and buying.
For example, 56 per cent of all mortgages in Dublin were first-time buyers buying second-hand homes. This data from the BPFI is from the second half of last year. Some 30 per cent of those homes were apartments, 36 per cent were terraced houses.
Only 13 per cent of all mortgages in Dublin were first-time buyers borrowing for a new home. Some 22 per cent of those new homes were apartments.
The median home value of second-hand properties purchased by first-time buyers in Dublin was €395,000, while the median value of new properties they purchased was €475,000.
For first-time buyers buying second-hand properties in Dublin, the median loan was €312,000. For new properties in Dublin, the median loan was €389,000.
The median basic household income for first-time single or joint buyers buying a second-hand home in Dublin was €88,000. It was €105,000 for those buying new properties.
The median monthly repayment of first-time buyers of second-hand homes in Dublin was €1,568, while the median repayment for those buying second-hand homes was €1,804.
Calculate with caution
First-time buyers love an online mortgage calculator, but some may inflate your borrowing capacity to reel you in. Others won’t factor in important variable sources of income, such as bonuses. A financial adviser or mortgage broker can give you a more realistic steer.
“What we find is that the majority of applicants have got variable income, like bonus or commission, and each bank treats that totally differently,” says Magee. This extra income can be particularly important for solo buyers.
See an adviser sooner rather than later. They will tell you what you can include in your calculations and what you must do differently now to court a lender in six months’ time.
“If a first-time buyer is not doing the right thing now, we put them in a position that they can get into a better habit of saving away,” says Magee. First-time buyers more than most, he finds, know exactly what’s required.
“I have one applicant who is paying €600 a month in rent, but they are saving €2,000 a month. So they are putting away €2,600 which is a very strong figure,” says Magee. “They’ve got their head screwed on, they are building up their repayment capacity so they are able to demonstrate that if rates go up, they can take the hit.”
Government schemes
Many first-time buyers, solo and not, are having to choose between location and grants – in Dublin at least, you can rarely have both. Staying in the city usually means buying second-hand.
For first-time buyers in Dublin wanting to avail of the First Home shared-equity and Help-to-Buy schemes, there are purchase price limits of €475,000 and €500,000 respectively. The schemes are not available to those buying second-hand properties.
Most new properties within the grant purchase price limits are being built further out of the city. This means first-time buyers who want to remain in the capital are having to buy a second-hand property to do so, and these properties aren’t eligible for grants.
With the Help to Buy and First Home schemes incentivising first-timers to buy new builds, it’s no surprise that Kildare, Meath, Laois and Wicklow accounted for about 35 per cent of Help to Buy claims in 2023, according to BPFI figures. Kildare alone accounted for 15 per cent.
Fixed or variable?
Fixed mortgage rates are the rate of choice of more than 80 per cent of first-time buyers. An advantage is that repayments stay the same for the fixed period.
Take a first-time buyer borrowing €304,952 or 90 per cent of the value of a €339,000 home. By fixing for five years with Avant on 4.05 per cent, their repayments will stay at €1,447 a month for five years. These calculations are based on a second-hand home with a building energy rating (Ber) of C.
Bank of Ireland is offering 4.02 per cent with repayments of €1,456. With PTSB, the rate is 4.69 per cent with repayments at the higher amount of €1,527. PTSB’s offer includes 2 per cent of the value of your mortgage back in cash – this would amount to about €6,100.
Whatever rate you opt for, you’ll save most by continuing to shop around over the lifetime of your mortgage. Once fixed rates expire, you are likely to roll on to a higher rate. So in the final year of your fixed rate, start shopping around for a better deal.
The bigger your deposit, the less you will have to borrow and this also means lower mortgage repayments. If you have a bigger deposit, you will have a lower loan-to-value ratio, which means better rates. Homes that are B-rated will also attract cheaper mortgage rates.
What if I get sick?
If you die, who pays your mortgage? Lenders must ensure you have mortgage protection insurance and you’ll pay this premium every month alongside your mortgage. This pays off your mortgage if you die.
You don’t have to buy the mortgage protection your mortgage broker or bank is offering. You may get a better deal elsewhere. Even a €5 per month difference in price could save you more than €2,000 over a 35-year mortgage, says the Competition and Consumer Protection Commission (CCPC).
Illness or losing your job are other matters solo buyers may worry about. There are two ways to protect yourself from illness in the future, says Daniel Hardiman of Hardiman Life and Pensions.
The first is to take out a separate serious illness policy that pays a lump sum if you are diagnosed with a specified illness covered under the policy, he says. The second option is to take out an ‘income protection’ policy.
“For solo buyers who don’t have the comfort of a second income if they are ill, I would prioritise income protection because that insures up to 75 per cent of your salary until retirement age if you are unable to work due to an illness,” says Hardiman.
“With this type of policy, you know your bills would still be paid in the future if you couldn’t work due to an illness,” he says.
“As the benefits under an income protection policy are so strong, insurance companies are really careful who they take on as they will be insuring your salary for the rest of your working life,” says Hardiman. “That’s why it is so important to apply for this cover when you are young and less likely to have health issues.”
You can fix premiums until your preferred retirement age, which means you’ll be paying a lot less for the cover compared with someone 10 years older than you, he says. The premiums qualify for up to 40 per cent income tax relief too.
“When it comes to your salary, it’s accidents and illness that could prevent you from receiving your weekly wages, so make sure you insure your income against these risks.”
Shop around for the best deals. There may even be a group scheme in your workplace.
Those buying a two-bed home will also have a buffer by being able to earn €14,000 tax-free under the rent-a-room scheme.
Solo buyers planning to take an extended break from paid work for caring responsibilities, for example, should try to build up savings to cover the mortgage. This will be cheaper than taking a mortgage payment break.
