Sounds easier said than done, but let us round up the current supports available and the best advice for saving to get on that first rung of the property ladder.
Irish people are conditioned to buying and owning their own home which, as we all know, has become more problematic in the past two decades. Apart from our low supply of property that has been pushing up prices, saving for a deposit when paying high rent is the biggest barrier for most people dreaming of getting the keys to their first home.
There are two government home buying incentives to help with the 10% deposit required for first time buyers. The Help to Buy and First Home schemes however are only available on new build properties. So, for the buyer who doesn’t want the typical three-bed semi-detached, and doesn’t have the opportunity to self-build, that 10% deposit needs to be derived from regular savings, which is quite a hurdle, especially if they are already paying a premium rent.
For the homebuyers in this situation, serious financial discipline and a lot of hard work is the prospect, although there are some ways to help get there faster.
Don’t assume you can borrow 90% loan to value, based on your income. Initial assessment calls are free and an independent mortgage advisor will let you know your maximum borrowings, what you need to save, and can give you a brief overview of the local property market and prices, and all the Government incentives and deposit measures available. Or, for handy guides, see www.mortgagenavigators.ie
There’s a lot more you need to factor in than just the 10% deposit. Buying a home also comes with a range of upfront expenses, which runs into thousands of euros, with typical costs, as follows:
Every euro counts when you’re saving for a home, so consider these options to help you get there faster:
Where possible, if renting a house or apartment yourself, or with a partner, would renting the spare room to a student, or fellow saver, help find extra money for a deposit? Or would a different house-share be cheaper than your current rented accommodation?
Sell good clothes or household items you don’t use or need on local buy and sell websites. It all adds up, and do reference the source of the proceeds when lodging the cash or transfer, as a broker or lender may question this out of course transaction.
And, check these apps or websites first, when you do need to buy something, as a handy money saving option.
A car is an expensive luxury, when you take in fuel, tax and insurance. Could you do without for a few years, lodging the proceeds of the sale, and relying on public transport or a scooter?
Use spare change round ups on Revolut to stash the cash in a vault… every cent counts!
For example, if your daily coffee costs €3.50, and your account is debited €4.00, this will direct over one hundred euros a year into your savings account.
There is no easy way to say this… sacrifices are needed! Saving requires good habits, especially for those used to spending all their net disposable income! It is time to relish the virtuous feeling of shopping the discount aisles and brands, and limiting the treats.
Bank Statements
Look through recent bank statements and identify anything that wasn’t essential. The takeaway coffee, new clothes, blow-dry, the monthly entertainment or sports subscriptions, nights out, and so on.
Figure out what you can do without, or look for cheaper substitutions. Can you make a packed lunch, and stick to the instant coffee or tea in the office? And, availing of free fresh air and outdoor exercise cuts back on gym and sports memberships, and saves on wellbeing treatments.
Debt and Taxes
Expensive interest rates on credit card or store card debt eliminates the ability to save effectively. And, too much debt or missed payments negatively affects credit rating when applying for a mortgage loan. Save first to pay off expensive debt, and then start on a dedicated savings account.
If you pay tax, check if you are owed tax back on medical expenses going back four years; and use the Treatment Benefit Scheme, linked to PRSI payments, that allows for some free dental, hearing and eyesight checks. You may also be allowed tax relief on the additional costs of working from home, such as electricity, heat and broadband. Check all, and apply easily on Revenue.ie.
Negotiate Bills
Review recurring bills and negotiate better rates, or switch to more cost-effective services. Utilities and entertainment providers are facing competition from new market entrants, and the savings add up over time.
Utility providers websites have tips on saving on energy other household expenses too.
DIY
If you have help with cleaning, ironing or gardening, could you do more yourself? Google some recipes for your favourite restaurant meals and have a cosy night in on weekends, with a nice bottle of wine. And maybe before booking that beauty treatment, check out the DIY at-home options for facials or manicures on the many YouTube beauty channels.
Open a separate savings account specifically for your house deposit. This separation can make it easier to track progress and avoid spending the allocated funds.
Pick an account that has a notice period on withdrawals, to deter going into it too easily.
Set up automatic transfers from your salary or current account to the dedicated savings account each month, on the day after your pay is credited. Treating savings like a non-negotiable bill helps ensure consistency.
Check if your employer offers any benefits or programmes to help you save money, such as direct deposit to a savings account, or employee assistance like a holiday or Christmas fund, you can use as your property fund.
Review different banks’ savings products. For example, Bank of Ireland has a Mortgage Savers Account that pays €2,000 on the savings account, if the holder draws down a mortgage with them.
The option to temporarily lodge with family or friends, usually parents in most cases, is worth looking at, in the short-term; especially when your savings fund is well underway and could do with a late push for six months to a year.
Lenders will accept up to 100% of the mortgage deposit coming from a family member or loved one, provided it is a gift that does not have to be paid back. They will require a gift letter from the donor, providing details of the sum being gifted, and their name and signature confirming the money gifted does not need to be repaid, so they have no recourse to the property.
Article by Margaret Barrett
Managing Director at Mortgage Navigators,