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Saving for a mortgage

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  • 26-03-2021 4:28pm
    #1
    TylerRyan28
    Registered Users Posts: 114 ✭✭


    Is there a certain amount of time the banks want you to save ? Would a year or two be enough?
    Also what Is a good number to save each year?
    I will be getting a gift from parents so wont need to save as much

    Looking at saving 12k between us for the next two years which will give us 24k to go along with gift from parents


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    #2
    Geuze
    Registered Users Posts: 13,110 ✭✭✭✭Geuze


    I would have thought that 500 pm per worker is a touch low?

    I suppose it depends on the size of the house price / mortgage / future repayments.


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    #3
    Q&A
    Registered Users Posts: 555 ✭✭✭Q&A


    Banks want you to have savings for 2 reasons. 1. As a deposit (stock of savings), 2. A flow of savings to demonstrate your ability to repay your mortgage. Basically current rent + savings (i.e., income less non-housing related living expenses) should be sufficient to cover your potential future mortgage payments.

    On point 1 they don't really care how long it takes. On point 2 they usually want to see a steady flow for 6 months.

    Whether rent +€500 is enough depends on your rent and the size of the mortgage you're looking for.


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    #4
    TylerRyan28
    Registered Users Posts: 114 ✭✭TylerRyan28


    Q&A wrote: »
    Banks want you to have savings for 2 reasons. 1. As a deposit (stock of savings), 2. A flow of savings to demonstrate your ability to repay your mortgage. Basically current rent + savings (i.e., income less non-housing related living expenses) should be sufficient to cover your potential future mortgage payments.

    On point 1 they don't really care how long it takes. On point 2 they usually want to see a steady flow for 6 months.

    Whether rent +€500 is enough depends on your rent and the size of the mortgage you're looking for.



    We dont rent we are back living with my parent to save for a mortgage.
    We will be building on family land lower the mortgage the better we are not looking for a massive house.
    Looking at around 250k with our savings over the next 2 years and a gift from parents we should knock off just under 60k so would need 195k mortgage looking to do it for less then 250k though.

    We did the maths yesterday if we save €32,640 between over the next two years along with gift


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    #5
    Jim2007
    Moderators, Business & Finance Moderators Posts: 10,041 Mod ✭✭✭✭Jim2007


    For a mortgage of around 195k, one would expect an income of around say 60k. Living at home and only managing to save 12k seems very low.

    The figures done seem to stack up, TBH.


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    #6
    jimmycrackcorm
    Registered Users Posts: 14,330 ✭✭✭✭jimmycrackcorm


    TylerRyan28 wrote:
    Is there a certain amount of time the banks want you to save ? Would a year or two be enough? Also what Is a good number to save each year? I will be getting a gift from parents so wont need to save as much

    For Ulster bank the rule is six months savings equivalent to half the amount of a stressed interest mortgage repayment. E.g if your monthly repayment would be 1200 but stressed could be 1600 then you'd have to show size months savings of 800 per month.

    After that it'll be 3.5 times income less deposit to determine how much you can borrow.

    Several other banks also only need six months savings records.
    Of course the real problem is the deposit and 3.5 times income requirement.


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    #7
    External Association
    Registered Users Posts: 1,295 ✭✭✭External Association


    TylerRyan28 wrote: »
    Is there a certain amount of time the banks want you to save ? Would a year or two be enough?
    Also what Is a good number to save each year?
    I will be getting a gift from parents so wont need to save as much

    Looking at saving 12k between us for the next two years which will give us 24k to go along with gift from parents

    Best wishes. You'd probably want to be near 30k in the 2 years. Maybe not..


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    #8
    TylerRyan28
    Registered Users Posts: 114 ✭✭TylerRyan28


    Jim2007 wrote: »
    For a mortgage of around 195k, one would expect an income of around say 60k. Living at home and only managing to save 12k seems very low.


    12k is low yes just a rough idea, we can definitely save more then that .
    If we save 32,640 between us in the next two years which is €16,320 each year. Along with gift from parents we will be in a good position aswell as building on family land which will definitely help us if didnt have that we wouldn't be able to afford a new build.
    Alot of family members have built there own homes so we have a good idea of what we can build.


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    #9
    TylerRyan28
    Registered Users Posts: 114 ✭✭TylerRyan28


    Has anyone used land as a deposit for a mortgage? we are looking into it , will be building on an acre or two of land but will be left over 20 acres in the future.

    We were talking to someone who built a similar design of what we are looking to do and they did it for 208k .

    Here is a 3D video of it
    https://youtu.be/kw9mqoLNt5k


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    #10
    Pinoy adventure
    Registered Users Posts: 985 ✭✭✭Pinoy adventure


    Clean up your finances.have no outstanding loans like car etc.limit any direct debts from both your accounts.
    Make sure you use the small gift limit too its max each year both yourself and partner.


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    #11
    Jim2007
    Moderators, Business & Finance Moderators Posts: 10,041 Mod ✭✭✭✭Jim2007


    TylerRyan28 wrote: »

    Jim2007 wrote: »
    For a mortgage of around 195k, one would expect an income of around say 60k. Living at home and only managing to save 12k seems very low.


    12k is low yes just a rough idea, we can definitely save more then that .
    If we save 32,640 between us in the next two years which is €16,320 each year. Along with gift from parents we will be in a good position aswell as building on family land which will definitely help us if didnt have that we wouldn't be able to afford a new build.
    Alot of family members have built there own homes so we have a good idea of what we can build.


    That is all well and good, but sooner or later you will have to address the level of savings, the salary and the ratio the max. borrowing level.


    If you are earning a salary of around 50/60k to get a loan of 195k, but only saving 12k, is going to be of concern to any lender.


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    #12
    Q&A
    Registered Users Posts: 555 ✭✭✭Q&A


    Gifts and sale of land are all well and good for the deposit. However, the question the bank will have is how will you meet the monthly repayments.

    They look at your monthly income and your regular outgoings, typically over the last 6 months. From this they will see how much spare cash you typically have. From this they will workour what they think you can afford to repay given your current lifestyle. The higher your monthly savings the better you appear in terms of your ability to repay.

    If they are in any doubt that you won't be able to service the mortgage it doesn't matter how big your deposit is they won't risk their money.


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    #13
    Trish56
    Registered Users Posts: 1,256 ✭✭✭Trish56


    Yes you can use the value of the site as a deposit however you also have to demonstrate repayment capacity and the stressed repayments on a mortgage of 195k over 30 years would be €1420 per month so you need to show this as either savings or a combination of savings and rent over a 6 month period.

    If you are first time buyers you should (depending on how much tax you both paid over the last 4 years) qualify for the 'Help to Buy Scheme' which will give you 10% of the value of the property on completion to a max. of 30k up to end of December 2021. You also need to borrow 70% or over of the value on completion as per lenders Valuer.

    You will need joint basic earnings of €55,700 to qualify for 195k however this could be lower i you have dependents, short term borrowings and pension deductions.

    You should contact your Solicitor for advice before transferring the site into your name and probably only transfer max. 1 acre as I think you may pay a higher stamp duty charge for over an 1 acre however check this with your Solicitor.


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    #14
    TylerRyan28
    Registered Users Posts: 114 ✭✭TylerRyan28


    Trish56 wrote: »
    Yes you can use the value of the site as a deposit however you also have to demonstrate repayment capacity and the stressed repayments on a mortgage of 195k over 30 years would be €1420 per month so you need to show this as either savings or a combination of savings and rent over a 6 month period.

    If you are first time buyers you should (depending on how much tax you both paid over the last 4 years) qualify for the 'Help to Buy Scheme' which will give you 10% of the value of the property on completion to a max. of 30k up to end of December 2021. You also need to borrow 70% or over of the value on completion as per lenders Valuer.

    You will need joint basic earnings of €55,700 to qualify for 195k however this could be lower i you have dependents, short term borrowings and pension deductions.



    I'm a apprentice and my partner works full time for the HSE, we have been onto ask paul investment and have been told we would still get a mortgage even if I'm a apprentice.
    We our also considering moving abroad if we decide to hold off on building as the way Ireland is at the moment and how the government have handled Covid situation, compared to Australia & new Zealand we will both find work easy as both in good careers and have family/ friends over there .

    We will decide over the next two years thanks for the advice.


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    #15
    Timmyr
    Registered Users Posts: 369 ✭✭Timmyr


    TylerRyan28 wrote: »
    Trish56 wrote: »
    Yes you can use the value of the site as a deposit however you also have to demonstrate repayment capacity and the stressed repayments on a mortgage of 195k over 30 years would be €1420 per month so you need to show this as either savings or a combination of savings and rent over a 6 month period.

    If you are first time buyers you should (depending on how much tax you both paid over the last 4 years) qualify for the 'Help to Buy Scheme' which will give you 10% of the value of the property on completion to a max. of 30k up to end of December 2021. You also need to borrow 70% or over of the value on completion as per lenders Valuer.

    You will need joint basic earnings of €55,700 to qualify for 195k however this could be lower i you have dependents, short term borrowings and pension deductions.



    I'm a apprentice and my partner works full time for the HSE, we have been onto ask paul investment and have been told we would still get a mortgage even if I'm a apprentice.
    We our also considering moving abroad if we decide to hold off on building as the way Ireland is at the moment and how the government have handled Covid situation, compared to Australia & new Zealand we will both find work easy as both in good careers and have family/ friends over there .

    We will decide over the next two years thanks for the advice.

    I am in NZ now and if you think getting a house deposit is tough in Ireland then this is not the place for you


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    #16
    Pinoy adventure
    Registered Users Posts: 985 ✭✭✭Pinoy adventure


    Timmyr wrote: »
    TylerRyan28 wrote: »

    I am in NZ now and if you think getting a house deposit is tough in Ireland then this is not the place for you

    Doesn't the NZ government have some rule in place where expats can't buy property now ? Or is that just in Auckland


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    #17
    Jim2007
    Moderators, Business & Finance Moderators Posts: 10,041 Mod ✭✭✭✭Jim2007


    TylerRyan28 wrote: »
    We our also considering moving abroad if we decide to hold off on building as the way Ireland is at the moment and how the government have handled Covid situation, compared to Australia & new Zealand we will both find work easy as both in good careers and have family/ friends over there .


    "Is glas iad na cnoc i bhfad uainn"


    First of all, so far Ireland has done no better or worse than most other countries in handling the pandemic. And it's a short term issue that will be under control for the most part in say two years or so. And basing such a decision on one or two issues would not be a good idea.


    Factually you are living in one of only two European countries, the other being German, that are likely to recover quickly coming out of the pandemic. Why? Because they both have a track record of doing so. Ireland reduced it's debt from 124% down to 58%, that's lower than the UK at 87%, France at 105% and in line with Germany at 57%. The country has produced positive balance of trade year on year for over 30 years and even in the current situation the growth rate is predicted to be around 3%. If you think that is miss management, then I know a lot of countries that would be very happy with that mismanagement.


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    #18
    TylerRyan28
    Registered Users Posts: 114 ✭✭TylerRyan28


    Timmyr wrote: »
    TylerRyan28 wrote: »

    I am in NZ now and if you think getting a house deposit is tough in Ireland then this is not the place for you



    Didnt say anything about getting a house in NZ just said we can go abroad more then likely Australia for a year or two then come back and build .


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    #19
    TylerRyan28
    Registered Users Posts: 114 ✭✭TylerRyan28


    Jim2007 wrote: »
    "Is glas iad na cnoc i bhfad uainn"


    First of all, so far Ireland has done no better or worse than most other countries in handling the pandemic. And it's a short term issue that will be under control for the most part.


    Not saying it's going to be greener on the other side but I have family and friends over there a good few years and only speak positive things, there must be something good keeping them happy there.

    some will never come home others are waiting for citizenship. Now I love Ireland but
    option is there to go over to see what it's like for myself and Gf cant pass up not travelling before settling down with a mortgage and kids.


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    #20
    Timmyr
    Registered Users Posts: 369 ✭✭Timmyr


    Pinoy adventure wrote: »
    Timmyr wrote: »

    Doesn't the NZ government have some rule in place where expats can't buy property now ? Or is that just in Auckland

    Yes but once you become a resident you can buy property.
    I have just been approved for a mortgage here


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    #21
    Antares35
    Registered Users Posts: 3,845 ✭✭✭Antares35


    TylerRyan28 wrote: »
    Is there a certain amount of time the banks want you to save ? Would a year or two be enough?
    Also what Is a good number to save each year?
    I will be getting a gift from parents so wont need to save as much

    Looking at saving 12k between us for the next two years which will give us 24k to go along with gift from parents

    You need to show repayability and adequate living expenses..for example with EBS we could borrow max 400k and so repayments on this (and max mortgage term will be dictated by your ages), we were stress tested at I think 6 percent over 28 years so repayments would be 2300. Then we needed to show living expenses for two adults and one dependant which was (1025 X 2) + 250. So, in total, as well as having a ten percent deposit, we also needed to show 1. A joint disposable income of 4,600 and 2. repayability of 2300 (and this can be demonstrated through rent/ savings or both).

    Best of luck


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    #22
    TylerRyan28
    Registered Users Posts: 114 ✭✭TylerRyan28


    Antares35 wrote: »
    You need to show repayability and adequate living expenses..for example with EBS we could borrow max 400k and so repayments on this (and max mortgage term will be dictated by your ages), we were stress tested at I think 6 percent over 28 years so repayments would be 2300. Then we needed to show living expenses for two adults and one dependant which was (1025 X 2) + 250. So, in total, as well as having a ten percent deposit, we also needed to show 1. A joint disposable income of 4,600 and 2. repayability of 2300 (and this can be demonstrated through rent/ savings or both).

    Best of luck




    Thanks for your advice I understand everyone is different when go for a mortgage depending if they are buying or building and if buying a new/old build we wont be getting a massive mortgage so I dont think we would be the same as what you needed .


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    #23
    advertsfox
    Registered Users Posts: 2,699 ✭✭✭advertsfox


    TylerRyan28 wrote: »
    Thanks for your advice I understand everyone is different when go for a mortgage depending if they are buying or building and if buying a new/old build we wont be getting a massive mortgage so I dont think we would be the same as what you needed .
    OP can you provide the following for you and your partner please?

    - Yearly gross salary
    - Monthly net income after tax
    - Amount of fixed expenses per month (car, loan, bills, credit card).

    These are required to get an accurate assessment of what you can afford / should be saving, what bills should be paid off first etc.

    It's great that you have the land and gift pending but 12-16K savings is too low if you want to achieve a 195K mortgage. That would mean that on the combined required wages of e.g 60K (3.5 times rule), which should give at least €4000 after tax (between 2 people), with no rent to pay - saving c. €1300 a month leaves €2700 - what is that being spent on? You could be easily saving €2000 a month (being generous).


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