Mortgage Deposits in Ireland, what are the general rules?
If you are purchasing a home in Ireland and taking out a mortgage then your mortgage lender will require you to have a 10% deposit. This is regardless of whether you are a first time buyer or second and subsequent buyer.
This 10% deposit can be via savings, a gift, equity from the sale of an existing home if you are a second time buyer or the help to buy scheme if purchasing a new home and a first time buyer.
Generally deposits are paid in two stages a booking deposit and a contract deposit.
What is a booking deposit?
A booking deposit is paid when you go sale agreed on a home. The booking deposit is paid to take the property off the mortgage and so you can progress to formal contract and purchase the property.
The selling agent will confirm the amount of the booking deposit but we would generally see these ranging from €5,000 to €15,000 (value of home influences deposit level in most cases).
This booking deposit should be fully refundable until you sign contracts, confirm this with the agent and get a receipt for payment (mortgage lender will need this).
The booking deposit forms part of your 10% deposit requirement.
Being sale agreed and paying a booking deposit is not legally binding on either party, it is just the first step in the process.
Unsure what happens when you go sale agreed on a property – check out our sale agreed checklist
The selling agent will ask for your solicitors details and the vendor (sellers) solicitor will start the process of preparing contracts to be sent to your solicitor.
What is a Contract Deposit?
In almost all contracts stated deposit is 10% of the purchase price less the booking deposit already paid.
In general it will always be noted that contracts need to be signed and contract deposit paid within 28 days. In reality your solicitor will only allow you to sign contracts once they have received contracts and worked through due diligence re same and once you have received your loan offer. Your solicitor will liaise with the vendor (sellers) solicitor on any queries re title, boundary issues etc before calling you to sign contracts.
Your solicitor will also set out any amount they require from you for deposit.
Once you sign contracts and countersigned contracts are received then it is binding so before you sign contracts you need to be clear that you want to progress or could be at risk of losing all deposit amounts.
Can I use the Help to Buy as part of my 10% deposit?
If you are purchasing a new build property and are a first time buyer eligible for the help to buy scheme then you can use the help to buy scheme towards or as your contract deposit, depending on the amount. Example property purchase price €450,000 deposit €45,000, booking deposit paid €5,000, help to buy €30,000, then €10,000 more to be paid by you.
If the purchase price was €300,000 and you were eligible for the full €30,000 then you would not have to pay any amount over at time of signing contracts and any booking deposit you would have paid would be available for transaction costs such as stamp or legal fees on completion,
Can I use a gift as part of my deposit?
If you are fortunate enough to be in receipt of a gift then yes it can go towards your mortgage deposit. Some lenders still require you to have 5% of the deposit funds saved but others allow full deposit to come from a gift. The gifted funds will need to be in your account prior to draw down and a gift letter or deed of confirmation will need to be completed. If the sum is a large amount then you will need to close out on any potential gift tax liability.
Other transactions costs to be aware of?
Your 10% deposit is required to purchase but also at the time of closing out on your mortgage you will need to have stamp duty (1% of purchase price up to €1,m and 2% above that level), legal fees (we partner with Beam who offer a flat fee for our clients) including search fees budget €3,000, valuation and survey c. €500 so in addition to the 10% deposit we would always advise clients that they should budget for 2% of the purchase price in savings/deposit to fund transaction costs at time of completion.
What if I have more than a 10% deposit available?
If you have more than 10% deposit available then that’s great, you just borrow a lower mortgage amount and use deposit to cover difference between purchase price and mortgage. Depending on the level of deposit e.g. if you have a 20% deposit you can get a better rate from some lenders.
How doddl can help
Starting the mortgage process? Already sale agreed and looking for advice? Contact our team, we offer market based advice from all major lenders, offer lowest market rates, cashback offers, deferred payment periods, overpayment options, everything you could need. And our service is Free.
Contact our team at doddl today and let us help you with your home purchase – Get Started!
