14 Jul 2017
‘We’ll never save a deposit – it’s sooo hard!’ How many times has an EBS Mortgage Master heard this one? We’ll be honest - countless. But the good news is, we’ve also done our best to prove our buyers wrong. It seems like a giant mountain to climb, but we help home buyers get there.
That’s because the EBS Mortgage Masters have been selling mortgage since before Aer Lingus have been flying planes! Eight decades, to be exact. If you’re reading this, you’re more than likely starting your own mortgage journey. Well done - you’ve come to the right place. We’re here to help give you 6 steps to deposit saving that have been passed down from years of EBS Mortgage Mastery.
The first thing to do? Figure out those savings goals. How much you’ll need to save each month will all depend on the minimum deposit you need, how much you can borrow, and your future house price.
Here’s a little recap: the Central Bank has put a cap (known as a Loan to Income ratio), on first time buyer mortgages. This says that first time buyers can only borrow up to 3.5 times their single or joint income (with some exceptions made). You will need 10 per cent of the house price in the kitty to make up a deposit (the Loan-to-Value ratio). Dems the rules. Check out property websites to get a rough estimate of your house price, then use some handy online mortgage calculators to see how you can expect to repay, and how much you can borrow.
There are a number of government schemes to help first time buyers on their way to their forever home, so make sure you do your research to avail of what you can. If you don’t look, you don’t get! The Help to Buy scheme was launched in October 2016, and offers 5% tax rebate to first time buyers on the price of their home. This can be substituted for part of the deposit; which means first time buyers can get up to a limit of €20,000 for their down payment! Not bad. There is also tax relief on mortgage deposits in the form of DIRT (Deposit Interest Retention Tax), which is a tax credit refunded to you from the tax paid on your mortgage deposit. Another example of a scheme which might come in handy down the line is Mortgage Interest Relief, or TRS (Tax Relief at Source), a tax credit paid on your mortgage interest.
So now you’ve got a rough idea how much you can borrow, and how much house price you can afford. Next step is to check out these figures with a financial advisor. You can get free mortgage advice from most lenders, including your local EBS Mortgage Master (phew). It’s pretty important to get some guidance this early stage, as your lender will make sure you’re on the right track, and that you’re saving enough to meet your future repayment capacity. This any future finances that you’ll be able to use for your mortgage repayments – income, plus your current rent and your savings.
They’ll conduct a ‘stress test’ on this amount too – which many buyers don’t discover until it’s too late. A stress test is 2% added on top of your repayment capacity, to make sure you won’t struggle financially if mortgage rates rise down the line. A mortgage calculator won’t take this bit into account!
Your mortgage advisor will have given you a very clear idea of how much you’ll need to save each month. So your next step is to clear your desk, clear your head, and get your hands on a budget planner so you can map out your budget. Outgoings, incomings, and your future repayments - lay it all on the table. How much do you spend on artisan coffees, or trips to the pub? No wincing! How long it will take you to save your deposit is entirely up to your ability to stick to this plan, so be realistic and factor in birthdays, weddings and everything in between. You mightn’t be able to save the same amount every month, but that’s okay, as long as you’re prepared.
Use online budgeting websites and apps to set up electronic goals. If you have access to online banking tools that break down your bank statments, use them. These will give you an idea of your past spending habits, so you can get to curbing them. Check in with your plan on a weekly basis, and juggle it around if life gets in the way. A lot of people budget by the month, when in fact, a weekly budget will give you more control.
Setting up a semi-restriced savings account from the beginning is really the way forward. We’ve all been there – a night out on the tiles or a moment of weakness in a summer sale is all it takes to set us back a few weeks. To save yourself from yourself, it’s a good idea to set up a direct debit straight into a ‘notice’ savings account, which means you’ll have to give a week or so’s notice before taking money out. Goodbye, impulse buys… If you have a partner, this can be trickier. Sit down with each other at the start and agree an even split or pro-rata savings approach into a joint account. Exchange solemn vows not to touch the account unless there’s an emergency. Probably a good idea to outline your partner’s idea of an ‘emergency’ too (!).
What if your car breaks down, or what if a surprise wedding lands on your lap, or, (more likely) what if house prices jump up and you have to move the goal posts forward? What a to-do. Okay, so you might have to put off your house buying date for a few months. The best solution is a chat with your local EBS Mortgage Master, if this crops up. They’ll help you work out all your options – like looking at different types of properties and locations, and there could also be the possibility of restructuring your provisional loan term or your mortgage amount, if needs be.
If you’re thinking of your own home, you can get some free mortgage master wisdom in your local area. Book a mortgage meeting to suit you with one of our mortgage expert, try out our mortgage calculator or get the ball rolling with our First Time Buyer guide.
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