We won't be able to get the 20% deposit together

[EvenStevens]

I'm at the start of saving for a mortgage deposit and that seems such an impossible mountain to climb to get a 20 percent deposit together. House prices appear to be just going up. If I could actually manage to get for example 30,000 together in the first place the chances of getting a place for 150000 by the time I get to that point are slim to none.

 

[Steven Barrett]

I'm at the start of saving for a mortgage deposit and that seems such an impossible mountain to climb to get a 20 percent deposit together. House prices appear to be just going up. If I could actually manage to get for example 30,000 together in the first place the chances of getting a place for 150000 by the time I get to that point are slim to none.

The thing is not to panic. Back during the Celtic Tiger, people were told be beg, borrow and steal in order to get on the property market, '"prices are only going up, you better buy now". Look at the thousands of people now trying to raise a family in a 2 bed apartment with a view of the M50 motorway or a 2 hour commute every day.

Properties in Dublin are going up at an incredible rate at the moment that makes it near on impossible for first time buyers to raise the finance to get somewhere decent.

Take your time, don't be afraid to rent and when you are in a position to get somewhere decent that you are happy to live in for 7-10 years, take the plunge.


Steven
www.bluewaterfp.ie

 

[jathclare]

The need for a 20% deposit will just encourage buyers to borrow to cover any savings shortfall, banks will assess the affordability inclusive of the repayment of this loan.

The loan for the deposit will cost 9% interest over 5 years while the mortgage 4.5% over 30. This means more interest revenue money for the banks. Nothing will change.

 

[Drakon]

You are missing the point. If a 20% deposit requirement is introduced the current growth rates will be stymied. This restriction will affect all mortgage applicants, not just you.

 

[mandelbrot]

Aggggggghhhhhhhh!

we'll only want a mortgage of max 2.75 x combined incomes with both of us in permanent pensionable jobs but due to a couple of misfortunes in the last few years our savings have been seriously diminished. Getting the rest of the way to 20% of a property price, while already paying about 120% of a mortgage repayment in rent, will take AGES. So the fact that we have clear ability to pay, and good savings bar a couple of large but explicable transactions that diminished them, will count for nothing.

Stupid arbitrary rules!! Thanks, previous generation of lenders and borrowers...

 

[Ihana]

Well I am a little fed up to be honest.

Other half and I were hoping to apply next year. Application would have to be based on his salary as I am a contract worker (although I have never been out of work). We have a 10% deposit already, no problem. But with a wedding next year, making a 20% deposit seems like a massive obstacle. And don't talk to me about the frikkin ridiculous variable interest rates at the moment. The mortgage rates are half that in Finland.

 

[Steven Barrett]

Well I am a little fed up to be honest.

Other half and I were hoping to apply next year. Application would have to be based on his salary as I am a contract worker (although I have never been out of work). We have a 10% deposit already, no problem. But with a wedding next year, making a 20% deposit seems like a massive obstacle. And don't talk to me about the frikkin ridiculous variable interest rates at the moment. The mortgage rates are half that in Finland.

No need to fret.

In a 6 month period, 15% of a banks loans can be over the 80% LTV limit. On the multiple of salary limit of 3.5 income, 20% can be over that limit in the 6 month period.


Steven
www.bluewaterfp.ie

 

[Ihana]

Yes, but everyone is going to be trying to get into that 15%.

We aren't in Dublin, but if you are, I reckon you'd need 300,000 now to buy a property. They are asking young couples to get 60K together before making a mortgage application? That seems really tough to me. Added to that, its increasingly difficult for many in their twenties to get a paid job until a few years after they graduate. And it takes a few years after that to earn enough to save. This country seems to be very unfair to young folk.

By the time you'd saved enough, you'd nearly be too old to get a mortgage....

 

[michaelm]

No need to fret.

Do you know if that's a rolling 6 month period (where one might want their application accessed on the 1st of the month) or set 6 month periods?

 

[MrEarl]

Well I am a little fed up to be honest.

Other half and I were hoping to apply next year. Application would have to be based on his salary as I am a contract worker (although I have never been out of work). We have a 10% deposit already, no problem. But with a wedding next year, making a 20% deposit seems like a massive obstacle. And don't talk to me about the frikkin ridiculous variable interest rates at the moment. The mortgage rates are half that in Finland.

Would the two of you qualify for a mortgage approval now ?

If so one might get an approval in principal now, which could be good for 6-months (I think I recall one of the lenders, possibly AIB, suggesting their approvals were good for 6-months in a TV advert) ? I would guess that once approved, it might be easier to retain the credit approval on approved terms (assuming no change in circumstances), even if the borrowers were not quite ready to drawdown coming near the 6-month initial expiry and had to ask the nice bank to extend the duration of the approval ....

Obviously, this is not financial advice and I'd never encourage anyone to try and "outsmart" the system

 

[Ihana]

We probably would. I have been working abroad on contracts (reasonably well paid so I have good savings) and need to get work back in Ireland. We had been hoping to apply on the basis of his income alone but that is going to be out of the question with new rules.

 

[44brendan]

While I have great sympathy for those who are going to have problems getting on the prooperty ladder, there is a sensible rationale behind the CB proposals.
1. On a repayment scenario 3.5x salary is a high bar. I know many clients in mortgage arrears who are under that bar but still have difficulties in meeting mortgage payments. Most of those cases relate to couples with 2 salaries and no family who subsequently find themselves with a 3rd/4th mouth to feed and associated childcare costs which are nearly a mortgage payment in themselves.
2. Rental charges in Dublin are gone crazy. I agree that in many instances it would be cheaper to get a mortgage than continue renting. With the low availability of starter homes in the Capital this is driving up the prices. We are looking at "bubble" prices unless this is addressed. It remains to be seen whether Government strategy will be effective in the commencement of new builds in the commuter belt.
3. I agree that the 20% requirement is a big ask with a starter home at c300K minimum. 60K savings plus paying rent would be impossible for most, unless they get a big dig out from Mammy & Daddy! Borrowing the money from CU or other is a potential time bomb as the payback period is likely to be low and this will quickly put huge stress on net income.
Don't blame the CB for this problem. They have to curtail unsustainable borrowings. What is needed is an effective long term strategy by the Government that will ensure that affordable housing is available in the commuter belt. Remember Dublin is our money generation capital. Most job opportunities will be in or around the capital. If housing is unaffordable or just not available then this will be both a job restrictor and an inward investment restrictor.

 

[cremeegg]

But with a wedding next year, making a 20% deposit seems like a massive obstacle.

What budget have you for the wedding? (rhetorical question) If you are seriously trying to buy a house, you should not be planning to spend real money on a single day out.

 

[Setanta12]

FWIW, I think the new proposals are sensible - but there should be some kind of staggered implementation over about 5 years.

 

[dub_nerd]

Aggggggghhhhhhhh!

we'll only want a mortgage of max 2.75 x combined incomes with both of us in permanent pensionable jobs but due to a couple of misfortunes in the last few years our savings have been seriously diminished. Getting the rest of the way to 20% of a property price, while already paying about 120% of a mortgage repayment in rent, will take AGES. So the fact that we have clear ability to pay, and good savings bar a couple of large but explicable transactions that diminished them, will count for nothing.

Stupid arbitrary rules!! Thanks, previous generation of lenders and borrowers...

Hang on. You've had "a couple of misfortunes" which have swallowed up the better part of 20% of a mortgage. You wanted to spend all that on a house. Wouldn't the "couple of misfortunes" have put you in serious mortgage difficulty? The 20% rule is designed to save people like you from yourself.

 

[phileasfogg]

1. On a repayment scenario 3.5x salary is a high bar. I know many clients in mortgage arrears who are under that bar but still have difficulties in meeting mortgage payments. Most of those cases relate to couples with 2 salaries and no family who subsequently find themselves with a 3rd/4th mouth to feed and associated childcare costs which are nearly a mortgage payment in themselves.
2. Rental charges in Dublin are gone crazy. I agree that in many instances it would be cheaper to get a mortgage than continue renting. .

What about couples with 2 salaries who ALREADY have children. They are paying these childcare costs which are nearly a mortgage in themselves (2 children could easily cost 1700 a month in crèche costs). Rental charges in Dublin are gone crazy. What would a family with 2 children expect to pay in rent a month? Now if this family were on average wages, how long would it take to save 60,000. Counting in rent, crèche, water charges, food for 4, clothes for 4, etc. Will this force families out of the housing market entirely? I am counting myself in this of course, I can see no way in hell could we save 1000 a month so that we could buy a house in 5 years time.

 

[44brendan]

I acknowledge the difficulties but the solution is not getting into a borrowing contract that is unsustainable. However while I am in favour of the salary limitation I do not agree with the requirement for a 20% deposit. There are better ways of protecting against a fall in prices

 

[phileasfogg]

I agree wholeheartedly with having a salary limitation. But I too think that the 20% deposit is not a runner. It will be no problem for young couples who live rent free at home, but for others who have high rent and other commitments its unobtainable. i.e families. And most likely the same families who are now living in tiny apartments they bought before the children and the recession.
There does seem to be a great deal of noise about keeping families in their family homes, but those who bought smaller homes that were well within their means and have had no difficulties paying their mortgages are having their chance at a family home taken away.
Those who didn't purchase before but rented are also in the same boat.

 

[moneybox]

It will be grand for those familes that have the bank of mum and dad to fall back on but dreadful for those paying high rent and childcare cost. It may help to keep house prices stable though. I think it really will be nigh impossible for young couples with child care costs to get on the housing ladder unless they go for one of those 'rent to buy schemes' that's if they're still in existence.

 

[Ihana]

What budget have you for the wedding? (rhetorical question) If you are seriously trying to buy a house, you should not be planning to spend real money on a single day out.

We had budgeted for the wedding and budgeted for the deposit. And could afford both from our savings. Now the goalposts have moved. The wedding is already fairly simple by Irish standards.