How to get help with your deposit for a mortgage

2020-01-22

We don’t want to mislead you. Saving for a mortgage is still the most powerful way to get the banks to back you in your quest for home ownership.

But if you’re a first-time buyer without a significant deposit, or without the means to save one, all is not lost. There are some options available to you.

Are there 100% mortgages in Ireland?

The simple answer is ‘No’. In Ireland, lenders really want to see savings of some kind before they enter into a mortgage agreement with an individual.

The reasons why are twofold:

Lenders want to be reassured that you can pay the mortgage back
Lenders want to ensure that you can manage the financial stress of paying a mortgage

Therefore, 100% mortgages aren’t available. However, there are two different ways to get on the property ladder without much of a deposit saved.

The 90% mortgage
The Help to Buy Scheme

While the 90% mortgage can be a big help for some aspiring home buyers, it still needs a 10% deposit. That might not suit everyone.

In these cases, the Help to Buy Scheme run by the government is an option we’d recommend.

The Help to Buy (HTB) Scheme

In January 2016, the government introduced a plan specifically to help first-time property buyers get onto the property ladder. You can make an application for the First Time Buyers Scheme without even having found your new home.

It’s important to note that the scheme does not remove the requirements to get a mortgage. What it does is help first-time buyers raise the funds they need to build a deposit.

Secondly, the HTB scheme does not apply to all houses and apartments in Ireland. It only applies to newly built homes.

Thirdly, first-time buyers who make use of the HTB scheme must live in the house or apartment that they buy. You can’t use the HTB scheme to purchase a property that you let. And once you’ve purchased a house or apartment using the HTB scheme, you have to live in the home for at least five years.

How does the HTB scheme work?

The HTB scheme operates as a tax rebate scheme. In simple terms, you can claim back the tax you have paid on your income (over the last 4 years), and together with your savings use that money towards your deposit.

This can add up. First-time buyers can claim back up to €20,000 in taxes they have paid on their income, but there are some rules.

In general, first-time buyers can claim the lesser of:

5% of the buying price of the house or apartment they want to purchase
5% of the price of the property (or final valuation if self-build)
€20,000

To avail of the HTB scheme, you also have to take out a mortgage of at least 70% of the price of the property you’re buying or 70% of the completed valuation if you are building.

The property you buy needs to be less than €500,000. As the maximum rebate for a property is 5%, up to a value of €20,000, and you can borrow up to 90% of the cost of a new-build, you can purchase your first home with just a 5% deposit.

Please be aware that you will also need funds for solicitor and stamp duties. We can advise on what these fees can be to help you manage them.

There are certain mortgage lenders that also give you a cash incentive if you take out your mortgage with them. These incentives can help pay for your solicitors fees and stamp duty. We can give you full details of these offers before submitting your mortgage application for approval.

More details about the HTB scheme can be found on Revenue.ie.

How will the HTB scheme refund be paid?

Your personal circumstances, depending on where you’re planning to purchase or build a property, will be taken into account.

If you’ve gone the self-build route, you’ll need your solicitor to verify the claim you’re making. To do that, your solicitor needs to contact Revenue to be appointed as a registered HTB scheme solicitor.

Once appointed, your solicitor will then verify the following:

Your name as a first-time buyer
The property address
The valuation or price of the property you’re buying or selling (the price must comply with the lender’s valuation and Central Bank rules)

When all the information matches, Revenue will approve the rebate.

As you can tell from the post above, not having a 10% deposit to purchase a first-time home doesn’t mean home ownership has to remain an unfulfilled dream. But there’s a process to follow.

Contact us if you’d like to know more. We work with first-time buyers every day of the week and we love simplifying the mortgage process.