We are always banging the drum and spreading the message about saving for a deposit.
In no small way, your deposit is your superpower. A deposit will make your mortgage application much stronger and reassure a lender of your ability to repay a home loan.
Many of our customers are eager to get saving, but have a lot of questions about deposits.
Some of the most frequently asked questions are addressed below.
- How much of a deposit do I need to save?
For first-time buyers, the minimum deposit you need to save is 10% of the purchase price of the house. For buyers who are not first-time buyers, the usual deposit amount required is 20%.
You also need to factor in the legal mortgage fees you need to pay for. And stamp duty, which is 1% of the purchase price.
- How much deposit do I need before applying for a mortgage?
You don’t need to have every Euro of your deposit saved before you apply for your mortgage. When we work with our clients, we guide them every step of the way throughout the entire mortgage process from whatever starting point they begin from.
However, we do advise that you are close to saving the entire deposit amount before you apply for your mortgage. At the most, only be two or three months off of having your full deposit saved.
- Can I include financial gifts in my deposit?
The short answer is yes, you can. But there are some legal obligations you’ll need to fulfil if part of your deposit is made up of financial gifts from loved ones.
As part of your mortgage application process, you’ll need a document that explains that you were gifted with a certain financial amount.
Lenders understand that financial gifts are sometimes part and parcel of the deposit. Most lenders will ask you to complete their own gift form and submit that as part of your application. We also have a gift form template that you can fill in and lenders accept that.
- I’ve been asked for a booking deposit. What is that?
Estate agents often request a booking deposit to take a property off of the market. The deposit requested can typically be between €5,000 and €10,000 and this money will go towards your purchase. It’s important to remember that the booking deposit is completely refundable until the contract stage. Once you sign contracts, if the deal falls through your booking deposit will not be returned.
- What can make up your deposit?
As already mentioned, you can add financial gifts from loved ones to your deposit. Many home buyers in Ireland do. Your deposit can also be made up of the assistance the government provides in the Help to Buy Scheme. This scheme only applies to properties that are newly built. And finally, it’s important to show that your deposit is also made up of your own savings. You want to show the lenders you approach for a mortgage that you are a stable money manager.
- I have money in a foreign bank. Can I use these funds?
Yes, you can use these funds. When you complete and submit your mortgage application, you can still have your money in your foreign bank account. You will be asked to submit a statement to show evidence of these funds.
Once you reach the Loan Offer stage with a lender, you will need to transfer these funds from your foreign bank account to an Irish bank account. And provide evidence that these funds are in Ireland.
- How can the Help To Buy (HTB) scheme help me?
We have a lot of resources on our website that can help you understand how the HTB scheme could work for you. What is most important to realise is that the HTB scheme was increased from 5% to 10% of the purchase price in 2020 as part of the government’s response to the Covid-19 pandemic. However, this increase is only in place until 31 December 2021. In the new year, the scheme will revert to 5%.
We help many of our customers apply for the HTB Scheme. We can help you too.
It’s worth beginning the process for HTB approval before you are ready to submit all of your mortgage application documents. You will need to show that you have the approval all in place once you apply for a mortgage.
- What is a contract deposit?
Your contract deposit is the deposit that goes with your mortgage to buy the house or property you’re interested in. For first-time buyers, this usually amounts to 10% of the purchase price.
The booking deposit you pay an estate agent to take the property you want off of the market counts towards your contract deposit.
Your deposit funds will remain in your account until the signing of contracts. Once you reach this stage, and contracts are signed, your deposit is not refundable. At this stage, you are bound by contract to buy the property.