Mortgages for emigrants: buying a house at home in Ireland

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Some emigrants plan to come home in the next couple of years and want to buy a home now, before prices rise any further. Or they may have no plans to move back to the State but want to put money into a property here just in case. Whatever their reasons, buying a property back home is something that more and more Irish emigrants are considering.

Liam Ferguson, a mortgage broker, has noticed a rise in interest in doing so over the past six months, he says, mostly from Irish people who are working abroad but plan to return eventually.

But he adds that nonresident mortgages are difficult to get and that he typically has to turn away about half of inquiries. “It’s still an area that the banks we’re dealing with are reluctant to lend on, and the profile of the customer needs to be very strong,” he says.

So what do you need to know if you’re buying from abroad?

A big deposit

Given the outrage that greeted the Central Bank of Ireland's recent proposal to introduce a requirement for a minimum deposit of 20 per cent, it's sobering to consider the difficulties facing nonresident buyers.

Banks typically lend to nonresidents on a buy-to-let basis, which means they will need an even bigger lump sum to buy a property. Take Permanent TSB. It is clear about its requirements: a down payment of 40 per cent of the purchase price. This means that to secure a mortgage on a property that's on the market for €250,000, a prospective buyer will need a deposit of €100,000.

Other banks are vaguer; Bank of Ireland says the maximum proportion it will lend is "dependent on the customer's particular circumstances", and it differs depending on whether the customer plans to return to Ireland in the immediate future or at a later date.

There may be some flexibility, however. KBC Bank, for example, says that it will normally lend up to 70 per cent for nonresident borrowers but that this may rise to 90 per cent. “This is assessed on a case-by-case basis,” it says.

The Irish connection

Some banks, including Bank of Ireland and KBC, want nonresident applicants to be Irish citizens; others, such as AIB, don't specifically require it. But you can be certain that if you want a mortgage, you will have to show a connection with the State and its banks. Ulster Bank will lend to people abroad only if they are existing customers; Bank of Ireland wants buyers to have a banking and savings history, "preferably in Ireland".

Income

Income is also a factor. So if you hope to borrow, choose your lender carefully. Bank of Ireland, for example, says that “standard mortgage-lending criteria apply”; it doesn’t impose a minimum income level, but other banks do.

Permanent TSB wants overseas buyers to be earning more than €100,000 – either jointly or singly – while KBC Bank has a similar requirement for single earners but wants a joint income of €150,000 if a couple are applying.

A person’s job may also be important. Some banks place a greater importance on the potential rental yield of the property, but others focus on whether or not the buyer has a “clear path home”, how transferable their job is and whether they would be able to do that job if they returned to the State.

“We’ve had a number of inquiries from people working in the mining industry in Australia, who are earning great money,” says Ferguson.

“But they’ve been turned down because there is no equivalent job for them to do here, and if there was, it would be paid a lot less.”

Chartered accountants, doctors, lawyers and other professionals stand a better chance of getting approval.

Buyers will probably also need to provide additional information, such as foreign bank statements and a foreign credit check or letter from their existing foreign bank.

They will need to check each bank’s lending criteria before applying too. Bank of Ireland takes a number of factors into consideration, including evidence of repayment capacity on return to the State; applicant qualifications, employment details and history; funds available to contribute to the purchase and evidence of the source of funds; and evidence of a banking and savings history.

The cost of borrowing

You will need to go through the hoops to get your mortgage, and you will have to save a lot more, but you can expect to pay interest on your mortgage at similar rates to Irish buy-to-let investors.

Permanent TSB, for example, offers a rate of 5.4 per cent where the loan is less than or equal to 50 per cent of the purchase price or 5.5 per cent for amounts between 50 and 60 per cent – regardless of whether you are resident or not.

Similarly, Allied Irish Banks imposes standard buy-to-let rates for nonresident borrowers.

Should the buyer decide to move home and live in the property, AIB says, it will cosider offering a standard residential rate, which will save mortgage holders money in the long term.

So although coming up with the deposit may be tough, it will push down the overall cost of the mortgage, as you will end up paying less interest.

MOVING HOME
Different treatment for a UK worker
Michael Ryan, a management consultant who has been working in the UK for 15 years, decided a couple of years ago to move back to Dublin and commute to the UK. He began by renting an apartment in Dublin. After prices started to rise he began to look for a three-bedroom home in the west of the city. As he is tax resident in the UK, Irish banks consider him to be nonresident for mortgage purposes, which means he will be classified as a buy-to-let investor even though he will live in the property.

This means a hefty deposit and a higher interest rate. Last summer one bank said he would need a 40 per cent deposit to buy in the State. This would mean finding €140,000 for a €350,000 house.

For Ryan it’s particularly galling to note the difference between the ways resident and nonresident borrowers are treated, especially given the uproar that greeted the Central Bank of Ireland’s move to increase the minimum deposit to 20 per cent.

“It’s the principle of the thing. We have to set aside such a substantial chunk in comparison with the percentage they’re asking of everyone else,” he says.

Another concern is that the longer he needs to save, the more prices might rise – which may push that 40 per cent deposit increasingly out of reach.

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