There are certain milestones in life that you’ll cling to as proof that you are an actual adult – even though “adult” can feel like a state of mind as your age slowly and not-so-assuredly creeps up.
Meeting the other half who you’re serious enough about that you’re happy to sit in and watch Love Island or whatever sportsball they’re into. Sustaining said relationship, even through wobblers about wet towels and whose turn it is to load the dishwasher. Finding the first few grey hairs. Having very serious discussions with your friends in the pub about mortgages and personal finances and babies.
Very strongly considering applying for a mortgage.
It’s a big step – whether you’re going it alone or you’ve enlisted the saving power of the poor soul you’ve somehow convinced to stick around.
It’s all so exciting until you consider what’s involved. Then the dawning horror of deposits, and how bloody bonkers the housing situation is, hits home – especially if you’re looking to buy in Dublin.
No one ever thought that being an adult might involve moving back in with your ma, but for many of us, it’s now the first step in buying a house.
So just what do you need to know about buying during a housing crisis? And how do you go about asking your ma if you can have your old room back?
Despite all the overly-complicated jargon, buying a house – or getting a mortgage as a firt-time buyer – isn’t actually as tricky to understand as it seems.
As with all matters of finance, the banks thrive on your confusion. Thank you very much, Mr QFA.
Mortgages are based on how much you earn. In most cases, it’s 3.5 times your salary – or joint salaries, if you’re going to be buying with the aforementioned wet-towel dropper. Personally, I’d reconsider that one, but I suppose there are worse things in the world than being a filthy-rotten-no-good-depositor-of-soggy-towels.
Look, it’s your call, that’s all I’m sayin’.
For the deposit, the banks require all first time buyers have a deposit of 10 percent of the cost of the house.
So, let’s look at a scenario.
Dave and Sarah are together five years and Dave is a consummate dropper-of-soggy-towels, while Sarah leaves teabags on spoons around the kitchen.
Neither of them is perfect, but sure who is?
Dave makes €35,000 and Sarah makes €45,000 – at a combined salary of €80gs. They want to buy in Dublin, the poor pets, and are looking at a combined maximum mortgage of €280,000. If they were to buy a house in that price range, let’s say a solid two-bed in Crumlin, they’d be looking at a deposit of €28,000.
Them’s big numbers.
Sarah and Dave will look at each other across the sofa one night and they’ll realise they’re gonna have to save a serious wedge of spondoolies to make it happen.
However, it is possible. Plenty of people are doing it now.
Some couples get gifts towards their deposit. All their friends pretend to be happy for them, but secretly they’re seething with rage because they’ve had to save their deposit the old-fashioned way – by giving up everything they love and living on rice and beans for a year and a half.
If you are lucky enough to get a gift, it’s a fairly straightforward process: your lender will require a gift letter from the donor (your ma and da, or whoever) saying they’re gifting you the money, that it’s x amount and that they don’t expect you to repay it.
Now, there may be tax implications because the government love to squeeze the already-squeezed-middle, unless of course said person is a TD who’s claiming expenses to cycle 2km into work, or they wanted a new telly for each of their three flats.
The rules say that you have to pay gift or inheritance tax at a rate of 33 percent on any gifts or inheritances received past a certain threshold depending on the relationship to the kindly donor. Under the parent-to-child tax-free threshold for inheritance and gift tax, a child can get gifts of up to €310,000 tax-free from their parents over their lifetime.
How and ever, there is a small gift exemption wherein each parent can give a gift up to the value of €3,000 per year without triggering the tax.
What we’re saying is this: take smaller gifts over a couple of years and you can avoid the tax. It’s a bit of a pain in the arse but it’s better than handing a third of it over in tax.
You can read more about the ins-and-outs of inheritance tax on Revenue.ie.
Look, saving the deposit is probably the hardest part of the “how to buy a house” puzzle. Most people won’t be lucky enough to a) have parents/friends/whatever to gift them the money or b) an inexplicable pile of cash stockpiled in an account/a shoebox under their bed to pay the deposit.
Houses are more expensive than they’ve ever been. Demand is through the roof. People are having to queue overnight or even for several days to see a house.
Research from EY recently found that nearly half of all counties in Ireland are unaffordable for first-time buyers and that many people are taking upwards of 15 years to save a deposit.
That’s grim reading – and it is, I stress, bonkers. It’s untenable and it’s unfair and it’s putting so much pressure on 20 or 30-somethings.
If you have the option, moving home with your folks or your other half’s folks isn’t a bad shout. You won’t have to pay as much rent – prices of which are as high as they’ve ever been – and you’ll be much more able to save.
It’s probably not ideal. I’m sure your folks are lovely people, but they likely thought they’d done their rearing too.
If you do move home, follow some basic guidelines:
I’m bank-agnostic when it comes to picking a lender for a mortgage. Go with your regular bank or whoever you like the look of. Just make sure you check the rates and that you look into the differences between mortgage terms (how long the mortgage is for) and interest rates (fixed vs variable).
A mortgage advisor will give you some useful hints, help you out with the paperwork and the actual house-buying bit. It’s also a good idea to have a paper trail, so make sure you’re showing that you can afford rent and your outgoings.
Ultimately, all your bank wants is proof that you’re a responsible saver. Clear any loans or debts. Don’t decide that now is the perfect time to blow a wedge on a €3,000 holiday to Ibiza. And stop trying to win the deposit by sticking a cheeky tenner on the 310 at Chepstow…or if you do, at least bet in cash.
If you’re getting a mortgage, the bank will insist you take out Life Insurance/Mortgage Protection to repay the mortgage if you check out early.
That’s not the end of the world if you’re in perfect health, but it can get hairy if you have a health issue and you leave it till the last minute.
Especially if you don’t have a Subject to Loan Clause:
As a very final tip, I will tell you this: you don’t have to get Mortgage Protection from your lender. In fact, you shouldn’t.
Always shop around for the best value and best policy – which is especially true if you have any health issues as you’ll want to make sure you’ve got the best deal you can. And remember, you don’t want to be stuck with a mortgage that isn’t the best because you bought Mortgage Protection from your lender and they’re being tricky about moving it.
In the meantime, hang tight. Saving for a deposit is hard. You might have to move home; you might not have that option.
Whatever way it plays out, know that it’s possible and that finally getting the keys to a house that is actually kind-of-sort-of yours is a massive buzz.
It’s glorious and, I promise you, it’s so, so worth it.
Whether you’re in the haze of deposit-land, figuring out how to buy a house or you’re ready to buy, I can help you out with the insurance-y side of things.
Complete this short questionnaire and I’ll make a recommendation on the most suitable level of cover for your current stage in life. It’ll be quicker and easier than doing it yourself.
If you have a couple of questions you’d like me to answer first, call me on 05793 20836 for a quick chinwag.
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