As you take your first steps onto the property ladder, one of the fundamental aspects of your mortgage journey is preparing for your deposit. We know that the mortgage process may seem complex but don't let the jargon overwhelm you. In this article we will address your frequently asked questions and clarify deposit-related terms, empowering you with the knowledge you need while saving for your mortgage deposit.
Why is a mortgage deposit important?
A mortgage deposit is an essential requirement set by all lenders. It is the money you pay upfront when buying a house. Having a substantial deposit significantly strengthens you mortgage application and assures lenders of your ability to afford your mortgage.
How much deposit do you need?
If you are a first time buyer, the minimum deposit required is 10% of the home's purchase price. Since January 2023, second and subsequent buyers also need a minimum deposit of 10%.
In addition to the minimum deposit requirement, you will also need to take into account the mortgage costs that you will incur. These costs include your solicitor's fees, stamp duty, land registry and search fees, fees for the valuer's report and the surveyor's report, insurance and property tax.
In addition to the minimum deposit requirement, you will also need to take into account the mortgage costs that you will incur. These costs include your solicitor's fees, stamp duty, land registry and search fees, fees for the valuer's report and the surveyor's report, insurance and property tax.
Can I include financial gifts in my deposit?
Yes. If you are fortunate enough to receive a gift from family or friends, this can be included in your deposit. It's a fairly straightforward process - all your lender requires is a gift letter specifying the amount given, confirming it is a gift and that it is given without expectation of repayment. Our mortgage specialists will provide you with a template gift form that lenders accept.
What else can make up my deposit?
Besides personal savings and gifts, your deposit can also consist of government assistance. The Help to Buy (HTB) Scheme is a tax refund initiative that helps first time buyers raise the deposit for a new build house or apartment. The HTB allows you to apply for a refund of income tax and Deposit Interest Retention Tax (DIRT) paid over the previous four years, up to €30,000. It is advisable to begin the process for HTB approval before you are ready to submit your mortgage application as you will need to show that you have the HTB approval in place once you apply for a mortgage.
- Funds in a foreign bank account
If you have funds in a foreign bank account, they can also contribute to your mortgage deposit. Upon completion of your mortgage application, you can retain the funds in your foreign bank account. You will need to provide a statement as evidence of these funds. However, when you reach the Loan Offer stage, you will need to transfer the funds to an Irish bank account and show proof that the funds are in Ireland.
What is a booking deposit?
When you find a home and you make an offer that is accepted by the seller, you will need to pay a booking deposit to the seller's agent. The booking deposit is a percentage of the purchase price of the house and it is a fully refundable payment which serves as proof that you are a serious buyer. If the purchase of the house is not completed, the full booking deposit will be refunded.
How do I save for a mortgage deposit?
Now that you understand the terminology, and you know the type and cost of the home you want to buy, you can work out roughly how much you need to save for a deposit. Saving for a deposit may seem challenging, but there are a few tips you can follow to help you save with minimal stress:
- Reduce monthly expenses by comparing energy and broadband costs, switching to better deals, and cancelling non-essential subscriptions.
- Cut down on regular minor expenses like takeaways, as they can have a significant impact on your overall savings.
- Set a monthly savings goal and set up a standing order to ensure consistent saving.
- Consider adjusting your living situation, such as moving back home, relocating to a more affordable area, or house-sharing, to free up additional funds for savings.
Partnering with Which Mortgage
Saving for your deposit is a crucial step in preparing for homeownership. Starting early will ensure that you have enough for the deposit and mortgage fees, and perhaps even extra to buy what you need to make your house a home.
Book an appointment with us today – we’d be delighted to partner with you as you embark on your homeownership journey.
Book an appointment with us today – we’d be delighted to partner with you as you embark on your homeownership journey.
Robyn Jacobs
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