Saving For A Deposit To Buy A House

DrBass

Hey Folks,

Need a little bit of advice on this.

My wife and I have been saving for a couple of years for a deposit to buy a house.

We are about 18k off where we need to be to in order to go to banks and get approval in place.

My parents have just finished renovating a house that they own and have kindly offered us to stay their rent free until we have enough for the rest of the deposit.

After working the figures out, it will take us 12 months of living their to save this amount and more. Our rent and childcare at the moment is over 2k a month.

So to get to my question, I am worried about the Bank not seeing a paper trail for rent paid, the last few years we have been paying 1000-1200p/m by DD which I know they like to see.

Is this a big issue for them? How best to work it in my favor? while keeping them happy that we have the means to pay them back the loan.

jlm29

DrBass wrote: »

Hey Folks,

Need a little bit of advice on this.

My wife and I have been saving for a couple of years for a deposit to buy a house.

We are about 18k off where we need to be to in order to go to banks and get approval in place.

My parents have just finished renovating a house that they own and have kindly offered us to stay their rent free until we have enough for the rest of the deposit.

After working the figures out, it will take us 12 months of living their to save this amount and more. Our rent and childcare at the moment is over 2k a month.

So to get to my question, I am worried about the Bank not seeing a paper trail for rent paid, the last few years we have been paying 1000-1200p/m by DD which I know they like to see.

Is this a big issue for them? How best to work it in my favor? while keeping them happy that we have the means to pay them back the loan.

I think if you have a paper trail to show the amount of money you would be paying back monthly if you had a mortgage going into the bank, and not being touched, that would keep them happy!

Glenbhoy

What they want to see is that your monthly rent+savings are more or less equal to your potential mortgage repayments stress tested at current available interest rates +2% (or thereabouts).

My understanding is that in your circumstances the total saved each month should be approximately the amount of the stress tested mortgage repayment. It is important to keep saving this amount monthly.

JuliusCaesar

But don't forget - the bigger the deposit, the less you need to borrow!

Gal2011

Im not hijacking this thread but I actually went about looking for a Mortgage and my Gross Income for the past two years has been €45000-€50000 per year but of that figure, I only get €25000 in a salary and the rest is always commission. Long story short, I cannot get a mortgage because I have to have a base salary of €30000 I have been told. I was looking for €90000 mortgage. The one bank that said they would offer me a mortage gave me the offer of €53000 mortgage. Basically Am I screwed unless I leave my job as although I am always essentially guaranteed commission in my job, technically my salary is below €30000 so I will never get a mortgage in my current job??

Mrs OBumble

Gal2011 wrote: »

Im not hijacking this thread but I actually went about looking for a Mortgage and my Gross Income for the past two years has been €45000-€50000 per year but of that figure, I only get €25000 in a salary and the rest is always commission. Long story short, I cannot get a mortgage because I have to have a base salary of €30000 I have been told. I was looking for €90000 mortgage. The one bank that said they would offer me a mortage gave me the offer of €53000 mortgage. Basically Am I screwed unless I leave my job as although I am always essentially guaranteed commission in my job, technically my salary is below €30000 so I will never get a mortgage in my current job??

So talk to your manager a out restructuring your salary, or find anothr job.

lau1247

Gal2011 wrote: »

Im not hijacking this thread but I actually went about looking for a Mortgage and my Gross Income for the past two years has been €45000-€50000 per year but of that figure, I only get €25000 in a salary and the rest is always commission. Long story short, I cannot get a mortgage because I have to have a base salary of €30000 I have been told. I was looking for €90000 mortgage. The one bank that said they would offer me a mortage gave me the offer of €53000 mortgage. Basically Am I screwed unless I leave my job as although I am always essentially guaranteed commission in my job, technically my salary is below €30000 so I will never get a mortgage in my current job??

I don't think you are screwed or need to leave your job, just got to save more and have those cash ready sitting in the account to show them even though your base salary is 25k you have surplus to cover it. Although one can see the logic of the bank that commission is something that can fluctuate a good bit which is why they won't take that into account.

You said you earn gross of 45k to 50k, let assume 50k, tax rate band is 40% for all amount earned above 32.8k. So that makes it about 17k at higher rate, when you factor in USC etc it is like the equivalent of 52% tax (read that from paper recently). Out of 17k you are bringing home 8.5k only which isn't a lot. Probably better off looking at your income as net income rather than gross. Plus you got to factor in cost of living before paying mortgage.

lau1247

Back to original OP, i think if you have a stable income that is enough to cover cost of living expenses plus the mortgage and other repayment (like car loan) then it should be no problem.

I don't think the trail part will be the issue. If you are that concern about trail, then why not transfer the money to your folks account then get it back off them in cash, that's your trail covered

Glenbhoy

lau1247 wrote: »

Back to original OP, i think if you have a stable income that is enough to cover cost of living expenses plus the mortgage and other repayment (like car loan) then it should be no problem.

I don't think the trail part will be the issue. If you are that concern about trail, then why not transfer the money to your folks account then get it back off them in cash, that's your trail covered

I wouldn't recommend that - too many questions could be asked.

Firstly it may have revenue implications as it could be seen as rental income.

Secondly, they would then need a gift declaration letter from the parents stating that the money is being gifted and that the parents have no beneficial interest in any potential purchase etc.

The simplest thing to do is to lodge the money saved on rent directly (on a monthly basis) into a savings account along with their other regular monthly savings.

Mrs OBumble

OP, I was thinking about this overnight, and whether you or your wife's parents may face tax implications because you're receiving rent-free accommodation.

I don't know the rules here, and in particular whether them being family makes any different, but would strongly suggest chatting to an accountant. It may be that you are liable for tax on the assessed value of the rental accommodation provided for free.

Sunny Dayz

If you need to show a paper trail for the bank maintain a direct debit from your account equivalent to the rent you would be paying, only have it going to your savings account for the deposit.

Gal2011

Mrs OBumble wrote: »

So talk to your manager a out restructuring your salary, or find anothr job.

Unfortunately I can't talk to an International company with offices across all of Europe to change their payroll system just for me.

Mrs OBumble

Gal2011 wrote: »

Unfortunately I can't talk to an International company with offices across all of Europe to change their payroll system just for me.

Do you seriously believe that no one who works for the company receives a salary that would enable them to get a mortgage? Yeah, right ....

There is a way to solve this, you just have to find it.

Gal2011

Mrs OBumble wrote: »

Do you seriously believe that no one who works for the company receives a salary that would enable them to get a mortgage? Yeah, right ....

There is a way to solve this, you just have to find it.

Are you being serious? Obviously there is people in the company getting money above €30000 salary to get a mortgage but they are working in different senior positions with a higher basic salary. If i took on the job which would be my manager jobs for example, I would be on over €30000 basic salary but would be actually taking home less money as very little commission.

Trish56

OP as other posters mentioned you don't have to show rent paid to qualify for a mortgage, it can be rent only, savings only or both. In your case you will not be paying rent but will be increasing your savings so once you can show that you are saving the equivalent of stressed tested repayments you will have no problem in qualifying for a mortgage.

Despite what people are saying, lenders are lending once people qualify by showing a consistent savings record for 6/12 months, a good credit history on present or past borrowings and you need approx. 10% of the purchase price. If you have a short term loan, my advice would be to clear it asap.

Best of luck

DrBass wrote: »

Hey Folks,

Need a little bit of advice on this.

My wife and I have been saving for a couple of years for a deposit to buy a house.

We are about 18k off where we need to be to in order to go to banks and get approval in place.

My parents have just finished renovating a house that they own and have kindly offered us to stay their rent free until we have enough for the rest of the deposit.

After working the figures out, it will take us 12 months of living their to save this amount and more. Our rent and childcare at the moment is over 2k a month.

So to get to my question, I am worried about the Bank not seeing a paper trail for rent paid, the last few years we have been paying 1000-1200p/m by DD which I know they like to see.

Is this a big issue for them? How best to work it in my favor? while keeping them happy that we have the means to pay them back the loan.

DrBass

Thanks everyone for your time and comments.

Sorry I could not reply to each individually, I guess I just needed to hear some other opinions other than my own. Food for thought as they say.

lau1247

Glenbhoy wrote: »

I wouldn't recommend that - too many questions could be asked.

Firstly it may have revenue implications as it could be seen as rental income.

Secondly, they would then need a gift declaration letter from the parents stating that the money is being gifted and that the parents have no beneficial interest in any potential purchase etc.

The simplest thing to do is to lodge the money saved on rent directly (on a monthly basis) into a savings account along with their other regular monthly savings.

Bank and revenue aren't link are they?

To the bank it can be considered rent

To the revenue, it is a son giving fully taxed money to parent

Oral Surgeon

Mrs OBumble wrote: »

OP, I was thinking about this overnight, and whether you or your wife's parents may face tax implications because you're receiving rent-free accommodation.

I don't know the rules here, and in particular whether them being family makes any different, but would strongly suggest chatting to an accountant. It may be that you are liable for tax on the assessed value of the rental accommodation provided for free.

Ahh no.... I lived at home during college, should I have paid some sort of benefit in kind tax on my free accommodation.....???

OP, I wouldn't worry about this imo

Oral Surgeon

lau1247 wrote: »

Bank and revenue aren't link are they?

To the bank it can be considered rent

To the revenue, it is a son giving fully taxed money to parent

No but if your parents ever get an audit, they may have a hard time explaining the regular rental income coming into their account that they are not declaring for tax....

The bank would be suspicious of you paying rent of say e1000/month rent to your parents. The whole idea of moving home is to save money for a deposit. If you are paying the same rent, then why move home???? It'll look like you are double handling your own money, declaring it as rent but then getting it back in cash for day to day expenses....

A son can gift up to e30k approx to a parent tax free. I don't know if it needs to be in one lump sum or not. Multiple payments suggest rent, not a gift.....

Ray Palmer

Renting from family doesn't seem to have any tax implications. The council don't see it as a rented property nor do the tax office. I have direct experience of this from about 15 years ago. They could have changed the rules I guess but I know the council don't see it as a rented property for inspection purposes.

The banks do ignore commission on application in some cases but if you can prove a record of commission over a number of years they will consider it. You may have to talk directly to the bank manager as the general processing will not do it. They same thing happens to the self employed.

Glenbhoy

Ray Palmer wrote: »

Renting from family doesn't seem to have any tax implications. The council don't see it as a rented property nor do the tax office. I have direct experience of this from about 15 years ago. They could have changed the rules I guess but I know the council don't see it as a rented property for inspection purposes.

The banks do ignore commission on application in some cases but if you can prove a record of commission over a number of years they will consider it. You may have to talk directly to the bank manager as the general processing will not do it. They same thing happens to the self employed.

Not sure about that family rental information, it shouldn't really be much of an issue, but the easiest option is just to set up the dd straight into the savings account.

Re the commission issue, talk to a broker, non-straightforward applications are where they really prove invaluable.