AIB: 25 Percent Deposit For One-Bedroom Mortgage

AIB is reportedly asking would-be homeowners looking to purchase a one-bedroom apartment to pay more than a 25% mortgage deposit. As reported in the, the state-owned lender has reduced the level of mortgage funding for one-bedroom properties – a move could hurt first-time buyers.

AIB at one time demanded that persons have an eight percent deposit of the total property value. However today, it wants persons to provide 25 percent of the total purchase price.

According to the Herald AIB’s decision is likely to do two things:

– It’ll make it harder for people to get a one-bedroom apartment loan.
– It will cause a drop in property prices.

AIB’s move could also prove to be a headache for people looking to sell their one-bedroom apartment, which experts have said is becoming the most difficult property to sell.

AIB has executed stricter guidelines on guarantors. For example, the bank is telling young buyers that if they get any kind of financial assistance from their parents, they must place their parents’ names on the mortgage documents as the co-borrowers.

Before, the bank requested expected borrowers to get a parental guarantee should their children be unable to get an approval of a mortgage by themselves. There were thousands of first-time one-bedroom buyers utilized parental guarantees to qualified for a loan.

Irish Mortgage Brokers Operations Manager Karl Deeter said the bank has become leery of the parental guarantee, which has led to the change. He said the bank’s asking parents to become co-borrowers could mean prior guarantee are not being upheld in arrears cases.

Deeter said parents who become co-borrower could be liable if the mortgage goes into default.

Last year, EBS said it no longer provides one-bedroom apartment mortgages in very rural areas.

According to the Professional Insurance Brokers’ Association, most brokers have reported up to 80 percent of all applications submitted are declined.

Since its peak in 2005, mortgage lending is down 94 percent.

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Photo by stevecadman.