Key Post: Raising the dreaded deposit

D

donieh1975

Guest
Hi there,
I'm currently in a very stable semi state job earning a fairly good salary plus expenses. I'm thinking of buying a house in the next year or two but the deposit is my big stumbling block. I have just finished paying off a fairly big loan and I'm starting to save €400 to 500 per month. I'm thinking of putting the money in to the credit union so that when I have €5000 to €8000 I can borrow the extra money required. Is this the best solution or does anybody have any better ideas. I'm thinking about buying a secondhand house for 180,000 to 230,000.
 
Raising the dreaded deposit

Most mortgage lenders will be reluctant to lend if they know that you had to borrow to raise the deposit. Many will look for accounts over a period of time to verify your accumulation of the deposit. Of course you can get around this.

For a deposit of 180,000, you are looking at a deposit of 18K, so if you have a mortgage of 162K you are also going to have payments of 12K to the CU.

Evidently if you are getting a 180K mortgage, you will be earning in excess of 50K per year, biut beware of getting in too deep.

Regards,
Dan
 
I wouldn't worry to much about, from my experience, many people do exactly this. For my deposit, i told the lender parents would be gifting me the money. They simply asked for a letter to that effect. I was told that i shouldn't worry, the letter wasn't going to be scrutinised - i reckon they knew exactly what we were doing. After approval was granted, i immediately got a loan for the required amount.
 
What about the EBS's family first loan? I know it has received a lot of bad press but it doesn't have to cost your parents anything. They can raise the deposit based on the security of their own home and suspend all repayments for three years, after which you take over the loan.

With the government commited to bench marking in the public service, your earnings are likely to be a lot better in three years than they are now.
 
Loan

But don't the Credit Union scrutinise u re; what u want the loan for in the first place?

By the way. if u find a house in dublin for €180 k then fair play to u!
 
Re: Loan

Thankfully I don't live in Dublin so I can expect to buy a 3 or 4 bed semi for €180,000 to €200,000.
I went to my bank (BOI) today to set up a smartsave account to save for the deposit. I spoke to the mortgage advisor and he told me, "off the record", that if I need to raise extra money for the deposit, I can borrow from the credit union and when my bank scans all the financial institutions to see if I have any other loans, the credit union loan won't show up because it's not part of some irish banking bureau.
At least it's an option.
 
Re: Loan

I went to my bank (BOI) today to set up a smartsave account to save for the deposit.

There's no need to tie yourself to your own bank when saving for the deposit or borrowing for the mortgage - go wherever you get the best interest rate/deal. See .
 
Re

Yep, credit union amount won't show up, as ur capital detials will not show up on th eusual computerised system as under the data protection act... however, I thought that credit unions were pretty insistent on finding out what you want your loan for … how do you explain what u need €10k for without telling them it’s for a mortgage?
 
House Deposit

I'm about to put an offer on a house for 550K. Without selling my current home first (and closing the deal), where am I supposed to come up with a 10% deposit? 55K!!! Surely most vendors must appreciate this 'catch 21' situation? I am able & willing to put down about 15K - not an amount I can afford to lose....surely this will suffice?
 
Re: House Deposit

Hi Joe,

You have three options;

1. Negotiate a lower deposit with the vendor/estate agent - however the vendors solicitor may not be happy with this.
2. Get a top up on your existing mortgage which will be repaid from the sale
3. Ask your bank for a short term overdraft - they may only do this if you take your new mortgage from them

Kind regards,

Sarah

www.rea.ie
 
Re: House Deposit

1. I know that the Credit Union loans don't show up when the bank does its credit history check, but I also thought that no current loan you have anywhere will show up either, i.e. that the credit check will only show up loans that you've defaulted on. Is this not the case?

2. If you wanted a €20,000 deposit from the Credit Union, how much would you need to have saved in there already, or is more to do with combined salary as is the case for getting a mortgage off a bank?

3. Once you've enough saved/earning enough, is it a formality to get the deposit off the Credit Union, i.e. will their attitude be, "If the bank is willing to give them a mortgage for €200,000, then I guess its Ok for us to give them €20,000"?

4. Is there any engineer's report/life insurance/fire insurance needed when borrowing the deposit from a credit union?

5. Won't it show up on your bank account that the €20,000 deposit came from a Credit Union account, rather than your parents account, and so making your lie "I'm getting the deposit from my parents" looking fairly threadbare?
Or even more so, when money gets directed debited from your bank account into the credit union account, which could occur before the buying of the house has gone through.
 
Re: House Deposit

1. I know that the Credit Union loans don't show up when the bank does its credit history check, but I also thought that no current loan you have anywhere will show up either, i.e. that the credit check will only show up loans that you've defaulted on. Is this not the case?

I suspect that the ICB credit rating record may indeed contain details of outstanding loans that are not in arrears/default although I'm not 100% sure on this. Maybe the [broken link removed] clarifies the situation in this regard?

I think the answers to your other questions depend on the specific CU branch in question as each CU may have its own criteria/rules for evaluating loan applications. I don't think the CU offer loans secured on property so I assume surveys/insurance/etc. are not relevant.
 
Re: House Deposit

ClubMan's right - the ICB records all loans of an individual from participating lenders, whether or not there have been payment problems. Arrears and other payment problems will be noted as well as prompt payments.
 
In Reply

Joe Nonety,
Ø&nbsp &nbsp &nbsp &nbsp As stated previously, any loan you have out except credit union loans will show up because your credit record will be stored on computer under the aforementioned data act – regardless of whether you have defaulted or not! However, you can check your credit record and you can make any amendment if you feel that there may be a mistake in your record.

Ø&nbsp &nbsp &nbsp &nbsp The size of the loan you get from a credit union is not based on salary as the banks do – it is to do with your savings and your credit history with the credit union. For instance in my union you can only take out a first loan of 3 times what u have saved to a max of €6,000 … it goes up slightly after that but depends on your record with them. Plus, when you have a loan with them, your savings are frozen (so as to ensure that you pay back).

Ø&nbsp &nbsp &nbsp &nbsp Given the above, you are not going to get your deposit but may a few grand towards it!

Ø&nbsp &nbsp &nbsp &nbsp In my credit union there is already insurance at no extra cost– I think it’s a basic package of twice whatever you have saved with them….but contact your own credit union for details or the Irish league of credit unions at 614 6700 / www.creditunions.ie

Ø&nbsp &nbsp &nbsp &nbsp The money won’t show up as coming form your credit union account because you are given it as a lump sum (as amounts are far less than what a bank would loan) so you can take out as cash, put into your account & pretend it was from you parents! – the bank will ask you for a letter from your parents sometimes to verify!
 
Re: In Reply

Thanks Weathergirl. That's all I need to know. I guess I'd better start saving. My first costcutting measure is to switch to Beamish - God help me!
 
Credit Union Loan

I thought everyone borrowed from the credit union for their deposit!

If you want to borrow more than 3 times your savings, you should save for a few months, and borrow a small amount and pay it off asap (no penalties for early repayment). That way, you can borrow up to 5 times your savings (in most credit unions) on your second loan.
 
Re: Credit Union Loan

Obviously the prudent thing would be to avoid taking on the burden of more debt than one can comfortably service particulary in the worst case scenario of a few percentage points interest rate increase.
 
credit union?

my credit union has been known to be very flexible regarding loans to members,but i'm anxious to know the following:

1)does the credo have a set max it can lend you and
2)are the loan terms the same as personal loans i.e. five years.
obviously the length of term will determine the affordability of my monthly repayments,so ten years would be ideal
 
Re: credit union?

I'm not sure if there is a set maximum that CUs will loan to members but as far as I know the maximum loan will be dictated by your shareholding/savings with the CU (e.g. some multiple dependent on ability to service the loan). The criteria may even vary from one CU to another. Apart from that you agree a particular term and repayment schedule with the CU when taking out the loan. Ideally you stick to this but CUs are generally flexible in accommodating members who, for whatever reason, need to vary this schedule at some point. Note that it is often difficult to compare CU loans with loans from other financial institutions (particularly on real cost/APR). This topic contains a lot of useful reading on this and related issues:
 
re:credo

thanks O, found the cu debate very interesting,not to mention an eyeopener!
 
You must log in or register to reply here.
Back
Top