How much of the value of a house do I need to save?

hibby

Sorry if this has been asked and answered before.

My wife and I will be returning to Ireland later this year. We plan to rent for a year or so while we look around for a house to buy. Which would mean buying a house in mid-2014.

Assuming we find a bank willing to lend to us, how much of the value of the house are they typically willing to lend?

Last time we bought a house in Dublin (12 years ago), we borrowed 92% of the value. Is that still normal? Or should we aim to save 20% of the value? Or more?

D3PO

banks will lend you 92% but it goes without saying the larger the deposit you can have the better your changes on a mortgage application

Ritchi

I think it's only AIB that lends 92%, so I'd aim to have 10% if you want to have more options, plus 1% for stamp duty and a couple of grand more for the other costs.

Villa05

This story may provide some hints

Those getting a mortgage from Bank of Ireland typically have a deposit which is around a quarter of the value of the property.

And most of the new buyers are in the Dublin and commuter counties, the bank said.

The average new buyer borrows €153,000, and already has a deposit of 23pc of the value of the property.

http://www.independent.ie/national-news/firsttime-buyers-using-cash-to-pay-off-23pc-of-house-price-3357527.html

killers1

hibby wrote: »

Sorry if this has been asked and answered before.

My wife and I will be returning to Ireland later this year. We plan to rent for a year or so while we look around for a house to buy. Which would mean buying a house in mid-2014.

Assuming we find a bank willing to lend to us, how much of the value of the house are they typically willing to lend?

Last time we bought a house in Dublin (12 years ago), we borrowed 92% of the value. Is that still normal? Or should we aim to save 20% of the value? Or more?

You will 'need' to have at least 8% deposit but the more you have the better choice of lenders are open to you. If you have 20% or more your loan will attract a more favourable interest rate.

makeorbrake

hibby wrote:

Last time we bought a house in Dublin (12 years ago), we borrowed 92% of the value. Is that still normal? Or should we aim to save 20% of the value? Or more?

Those are minimum standards. However, it's worth considering how much YOU feel happy with borrowing. Remember, the ecb rate is historically low even if the banks have uplifted variable rates themselves several times over the last couple of years. You can expect the overall rate to rise considerably. Therefore, the cost of financing is pretty nasty - and will probably get nastier. On that basis, you should be looking to bring as much % of sales price into the equation yourself as you possibly can.


Theres not going to be any major lift in prices so your not going to be missing out on anything any time soon - if it means you have to wait a little longer to accumulate funds.

gaius c

If you don't have 10%, you are wasting your time IMO.

killers1

gaius c wrote: »

If you don't have 10%, you are wasting your time IMO.

I think AIB would beg to differ...

gaius c

killers1 wrote: »

I think AIB would beg to differ...

Is that 92% available to all? My...erm...inside info tells me that it's not.

hibby

Thanks all for your helpful replies.

Based on what I have read in this thread, I will aim to save 20% of the value (or, to put it another way, we can look at buying houses in the price range of 5 x our savings).

This is based on the following:
LTV < 80% may attract a favourable interest rate;
Bringing > 20% to the table may increase the chances of a successful application.

Thanks again,

Dara

hibby

makeorbrake wrote: »

Those are minimum standards. However, it's worth considering how much YOU feel happy with borrowing. Remember, the ecb rate is historically low even if the banks have uplifted variable rates themselves several times over the last couple of years. You can expect the overall rate to rise considerably. Therefore, the cost of financing is pretty nasty - and will probably get nastier. On that basis, you should be looking to bring as much % of sales price into the equation yourself as you possibly can.


Theres not going to be any major lift in prices so your not going to be missing out on anything any time soon - if it means you have to wait a little longer to accumulate funds.

Some very useful advice here, much appreciated. Basically, I am working on the assumption that the "limiting factor" on what we can borrow will be the amount of our savings, rather than income multiples or our ability to repay. However, we will of course need to take all those aspects into account, including the possibility of future interest rate rises.

drunkmonkey

You just need 8% with AIB, no harm to have another 12% in savings just to show them on paper. Your bang on to be looking for a low LTV rate at the moment, current prices a ltv if <60% is quite possible if you pick the right house and use one of AIB's approved valuers (they have none of their own). The low ltv could shave about .3% + off the standard rate.
I think They'll only lend up to 65 just take that into account when your trying to work out payments.

hibby

drunkmonkey wrote: »

I think They'll only lend up to 65 just take that into account when your trying to work out payments.

That's an interesting aspect I hadn't thought of. I'm 41 now - will likely be 43 when we buy - that means a 22 year mortgage term. (Is there such a thing? Or does it effectively mean 20 years?)

sadie9

AIB only lend up to age 65. Bank of Ireland lend up to age 70 so that gives us 'older' people a bit more leeway. AIB's interest rates are slightly better than BOI at the moment but that might have changed by the time you come to buying so you might have more options. They will lend over 23yrs or whatever doesn't have to be multiples of 5.