Saving for a deposit on first house - complete novice need advice!

leahyl

Hi everyone well i've made a decision that i want to start saving for a deposit on a house and i have a number of questions since i know absolutely nothing when it comes to the property market, money matters etc so perhaps someone can answer some questions for me

I'm 25, working in the public sector, permanent job, earning 25k per annum.

I have already quite a lot saved and it's all in one account so there's something i need to sort out right away! I was looking at the 35 day notice saving account with Permanent tsb as they are my bank and was going to put a lump sum from my current account into that and then keep adding every month from my pay - but how much should i be putting into that account? I earn 1800 a month so would 500e pm be enough?! I have a car and give the parents money every month (as i'm living at home) and other than that i just need some money for luxuries like clothes, holidays and going out (which i don't do too often) so i reckon 500 would be a good amount or is this crazy? I really have no idea!

What price range should i be looking at for a house/would i be approved for a mortgage?

Please try to put answers in 'layman's terms' - i'm quite thick when it comes to these things lol:D!

Obviously i'm not looking to do this straight away but don't want to be there in 5 years time with house prices going up again. Are house prices expected to go lower then they are at the moment???

Thanks:)

wicklowwonder

leahyl wrote: »

Hi everyone well i've made a decision that i want to start saving for a deposit on a house and i have a number of questions since i know absolutely nothing when it comes to the property market, money matters etc so perhaps someone can answer some questions for me

I'm 25, working in the public sector, permanent job, earning 25k per annum.

I have already quite a lot saved and it's all in one account so there's something i need to sort out right away! I was looking at the 35 day notice saving account with Permanent tsb as they are my bank and was going to put a lump sum from my current account into that and then keep adding every month from my pay - but how much should i be putting into that account? I earn 1800 a month so would 500e pm be enough?! I have a car and give the parents money every month (as i'm living at home) and other than that i just need some money for luxuries like clothes, holidays and going out (which i don't do too often) so i reckon 500 would be a good amount or is this crazy? I really have no idea!

What price range should i be looking at for a house/would i be approved for a mortgage?

Please try to put answers in 'layman's terms' - i'm quite thick when it comes to these things lol:D!

Obviously i'm not looking to do this straight away but don't want to be there in 5 years time with house prices going up again. Are house prices expected to go lower then they are at the moment???

Thanks:)

I was actually thinking along the same lines today! going be saving a grand a month for a deposit what bank would be the best to go with, what would would be most likely give me a mortgage is next two years?

Freddie59

Log onto www.thepropertypin.com and www.irishhousehunter.com before you do ANYTHING!

leahyl

wicklowwonder wrote: »

I was actually thinking along the same lines today! going be saving a grand a month for a deposit what bank would be the best to go with, what would would be most likely give me a mortgage is next two years?

Great minds eh?! hehe! No but seriously lately i've been thinking more and more about moving out - which i never thought i would to be honest because i do love it at home also but it would be nice to have a kitchen to myself! ha! I was even thinking of renting but then none of my friends could afford to move out at the mo and sure they mightn't want to live with me:P Also my mum is always saying the age old phrase 'rent is dead money'!

I just need to know if what i suggested - 500e pm is enough to be putting away.

accensi0n

leahyl wrote: »

Also my mum is always saying the age old phrase 'rent is dead money'!

If paying rent doesn't get you anything then why are you giving your parents any?

leahyl

accensi0n wrote: »

If paying rent doesn't get you anything then why are you giving your parents any?

That's true!! HAHA! Well it's not dead money for her i guess as she's family! She doesn't think i should be paying it out to someone else i guess! Paying someone elses mortgage! I mean i wouldn't feel right not giving her anything when i'm in a full time job!

cojomo2

leahyl wrote: »

Great minds eh?! hehe! No but seriously lately i've been thinking more and more about moving out - which i never thought i would to be honest because i do love it at home also but it would be nice to have a kitchen to myself! ha! I was even thinking of renting but then none of my friends could afford to move out at the mo and sure they mightn't want to live with me:P Also my mum is always saying the age old phrase 'rent is dead money'!

I just need to know if what i suggested - 500e pm is enough to be putting away.

Is 500 enough? Well, how much have you saved so far?How much deposit in total do you want to save, and when do you want to have it saved by?

If you know the answers to those questions then you should be able to figure out if 500 is enough pretty fast.

Regards how much of a mortgage you would be granted, use one of the many online mortgage calculators.

Hope that helps.

coffee_cake

leahyl wrote: »

I was even thinking of renting but then none of my friends could afford to move out at the mo and sure they mightn't want to live with me:P

You don't have to rent with friends, in fact I think I probably WOULDNT want to live with friends

Also my mum is always saying the age old phrase 'rent is dead money'!

It puts a roof over your head
As well to say going shopping is dead money when you could grow the food yourself

Anyway good luck with saving

leahyl

cojomo2 wrote: »

Is 500 enough? Well, how much have you saved so far?How much deposit in total do you want to save, and when do you want to have it saved by?

If you know the answers to those questions then you should be able to figure out if 500 is enough pretty fast.

Regards how much of a mortgage you would be granted, use one of the many online mortgage calculators.

Hope that helps.

Well i'd prob be putting 10 grand from my current acc into a deposit acc and then add to it each month

To be honest i haven't looked at how much deposit i want to save - i mean i'm not even sure what price range house i should be looking at. Is a deposit usually 10% of the cost of the house?

As you can see - CLUELESS!

Can you give me a link to good online mortgage calculator?

leahyl

bluewolf wrote: »

You don't have to rent with friends, in fact I think I probably WOULDNT want to live with friends

It puts a roof over your head
As well to say going shopping is dead money when you could grow the food yourself

Anyway good luck with saving

Ya i know i don't have to rent with friends but i'd prefer to - wouldn't want to live with people i didn't know - wouldn't be comfortable with that.

Ya i see your point about the rent but still at the end of the day you don't own anything - at least if you're paying a mortgage you own something to an extent...

Treehouse72

Do any posters looking for advice on buying not work in the public sector?

Sorry, not having a go at PS at all - it's just a very noticable pattern that I think shows how unwilling banks are to lend to anyone else.

leahyl

Treehouse72 wrote: »

Do any posters looking for advice on buying not work in the public sector?

Sorry, not having a go at PS at all - it's just a very noticable pattern that I think shows how unwilling banks are to lend to anyone else.

Woah hang on i haven't been near the banks yet! Don't have a clue if they would lend to me! I am hoping that they will however when the time comes:D

Jo King

the 10% deposit is only the start of the funds necessary. There are legal fees and stamp duties and kitting out expenses. In the recession of the 80's it was necessary to have 30% of the purchase price. As house prices fall the lenders will be reducing the percentage of the purchase price they will lend.

cojomo2

leahyl wrote: »

Well i'd prob be putting 10 grand from my current acc into a deposit acc and then add to it each month

To be honest i haven't looked at how much deposit i want to save - i mean i'm not even sure what price range house i should be looking at. Is a deposit usually 10% of the cost of the house?

As you can see - CLUELESS!

Can you give me a link to good online mortgage calculator?

http://www.bankofireland.ie/personal/borrowing/mortgages/howmuch.html

According to this BOI mortgage calculator, on a salary of 25k, a single person can borrow a maximum of 125k...

Yeah a deposit is usually a least 10% ..

So say you are looking at a place that costs 200k, you will pretty much have to finance 75k of it yourself....

Give it a while though, save as much as you can and hopefully you will be earning a bit more too ,which will enable you to borrow more...

The other option is buying with someone else, such as your future partner..with 2 salaries it will be so much easier

johndaman66

bluewolf wrote: »

As well to say going shopping is dead money when you could grow the food yourself

I find getting my hair cut is dead money as it grows back again! Seriously though the first thing I would suggest to you OP is that you set up a deposit account and move that 10k you have in your current account into it as its doing absolutely nothing for you in your current account. I have a deposit account with Ulster Bank which has a gross rate of 3.50%. That is on a sum in excess of 25k so no doubt you would not get as favourable a rate on 10k. Worth checking all options out though. I know banks are looking to get money in at the moment so they will give pretty good rates to regular savers, in particular if you are going to commit to a certain monthly amount. There is quite good advice in this regard over on ask about money. I'm actually quite surprised you weren't advised to set up a savings account in the TSB any time you were in the branch given the sum you have just sitting there in your current account.

Its quite alarming that this "rent is dead money" notion is still alive and well given whats happening at the moment. If you were to buy now at 230k for argument sake (picking a figure out of the sky which I think is close enough to what the average house price is outside the capital at the moment) and the house is worth 200k in a years time (which could conceivably be the case) then is that 30k not well and truly dead money? Also if you borrowed 200k at 6.50% (a rate which you may well be looking at a few years down the road) then you would be paying almost 13,000 in interest in year one alone...that looks like dead money to me. Now you may well argue that you will have to bite the bullet eventually but my point is that you should consider saving for as long as possible in order to reduce the amount you need to borrow as much as possible. Furthermore you should try to get yourself into a position where you can pay off your mortgage as quickly as possible in order to pay as little interest as possible over the term of the mortgage. I am totally at odds to this idea of 35/ 40 year mortgage terms. Being a slave to a bank for 35/ 40 years to put a roof over you and your families head and your likely almost 6 feet under towards the end...what the hell is that all about?

I would make the point also that being 25 you are still pretty young in the scheme of things. I'm 29 and have had 3 different jobs in completely different parts of the country since I left college. By buying as oppossed to renting you are committing yourself to one area and you do not have the freedom of moving on a whim which you much more likely would have with renting. If a good job opportunity was to present itself elsewhere in the country or you needed to move for family/ relationships reasons you would have this added mobility when renting/ living with parents.

leahyl

johndaman66 wrote: »

I find getting my hair cut is dead money as it grows back again! Seriously though the first thing I would suggest to you OP is that you set up a deposit account and move that 10k you have in your current account into it as its doing absolutely nothing for you in your current account. I have a deposit account with Ulster Bank which has a gross rate of 3.50%. That is on a sum in excess of 25k so no doubt you would not get as favourable a rate on 10k. Worth checking all options out though. I know banks are looking to get money in at the moment so they will give pretty good rates to regular savers, in particular if you are going to commit to a certain monthly amount. There is quite good advice in this regard over on ask about money. I'm actually quite surprised you weren't advised to set up a savings account in the TSB any time you were in the branch given the sum you have just sitting there in your current account.

Its quite alarming that this "rent is dead money" notion is still alive and well given whats happening at the moment. If you were to buy now at 230k for argument sake (picking a figure out of the sky which I think is close enough to what the average house price is outside the capital at the moment) and the house is worth 200k in a years time (which could conceivably be the case) then is that 30k not well and truly dead money? Also if you borrowed 200k at 6.50% (a rate which you may well be looking at a few years down the road) then you would be paying almost 13,000 in interest in year one alone...that looks like dead money to me. Now you may well argue that you will have to bite the bullet eventually but my point is that you should consider saving for as long as possible in order to reduce the amount you need to borrow as much as possible. Furthermore you should try to get yourself into a position where you can pay off your mortgage as quickly as possible in order to pay as little interest as possible over the term of the mortgage. I am totally at odds to this idea of 35/ 40 year mortgage terms. Being a slave to a bank for 35/ 40 years to put a roof over you and your families head and your likely almost 6 feet under towards the end...what the hell is that all about?

I would make the point also that being 25 you are still pretty young in the scheme of things. I'm 29 and have had 3 different jobs in completely different parts of the country since I left college. By buying as oppossed to renting you are committing yourself to one area and you do not have the freedom of moving on a whim which you much more likely would have with renting. If a good job opportunity was to present itself elsewhere in the country or you needed to move for family/ relationships reasons you would have this added mobility when renting/ living with parents.

thanks for the advice - yes someone did say it to me in the bank before about the amount I have in my current account I just haven't got round to it yet...but must def sort it out soon now!

KP81

Hey OP,
I'll have a crack at answering your question which IMO was on savings and not the to buy or not to buy question.

The 35 day deposit saver is a good rate at 3.1%AER. Put your lump sum here. Then open a regular saver in which you can save a max of e1000 per month but at the better rate of 3.75%AER (to absolutely max this lodge 1K first as the 3.5%AER rate applies to savings over 1k.

Banks do like to see a regular history of savings for mortgage applications these days so start asap. e500 per month will build up nicley over a year or two. I wouldn't hurry as cash is king at the moment.

Also, be ruthless. If a bank comes along with a better rate switch (unless it's in Iceland:)). It's dead easy with online banking (please say you do have online banking?). First Active used to have the best regular saver rate going at 7% but now UB have taken them over and the rate has dropped to 3.5%:(. I'm a bit of what is called a rates tart.

Also bear in mind that you will get killed on DIRT which is 25% at the moment and this comes off your interest earned.

Whatever you do good luck AND NEVER HOLD SAVINGS ON DEPOSIT, 0%AERARRRGH

Eglinton

Hi OP.

First off, well done on saving 10K to date.

Where are you considering buying?
If in Dublin, what areas are you considering?
What type of property would interest you? (e.g. 3 bed semi)
Do you mind a commute? If so, how long is you max (distance, one way)

You say you're on 25K.
€500 a month is a good whack of this. However at present for a reasonable property in Dublin for instance, a mortgage repayment would be considerably more. As you live at home, I think you could save a bit more. A lot of people rent and save €500 a month meaning they could afford perhaps close to a €1000 a month for a mortgage.


So let's do the math.

Assuming 5 year savings and a salary of 30K in 5 years time.

Start: 10,000
5x500x12 = 30,000
Total available - €40,000
Assume you'll need 5K at least for basic furnishings, legal fees etc.

Deposit available €35,000

Assume this is 10% of house purchased -> house value of 350,000

HOWEVER, if you're on 30K in 5 years time, the max mortgage you'll likely get is 30K x 5 = €150K

So along with your deposit, this means a max spend of 185K.

That would go a long way outside Dublin, not so far in Dublin.

Good luck with your saving.

leahyl

Eglinton wrote: »

Hi OP.

First off, well done on saving 10K to date.

Where are you considering buying?
If in Dublin, what areas are you considering?
What type of property would interest you? (e.g. 3 bed semi)
Do you mind a commute? If so, how long is you max (distance, one way)

You say you're on 25K.
€500 a month is a good whack of this. However at present for a reasonable property in Dublin for instance, a mortgage repayment would be considerably more. As you live at home, I think you could save a bit more. A lot of people rent and save €500 a month meaning they could afford perhaps close to a €1000 a month for a mortgage.


So let's do the math.

Assuming 5 year savings and a salary of 30K in 5 years time.

Start: 10,000
5x500x12 = 30,000
Total available - €40,000
Assume you'll need 5K at least for basic furnishings, legal fees etc.

Deposit available €35,000

Assume this is 10% of house purchased -> house value of 350,000

HOWEVER, if you're on 30K in 5 years time, the max mortgage you'll likely get is 30K x 5 = €150K

So along with your deposit, this means a max spend of 185K.

That would go a long way outside Dublin, not so far in Dublin.

Good luck with your saving.

Hi eglinton thanks for your response. I'm living in Cork City suburbs at the moment and would be looking to stay in the suburbs - would like to be close enough to the family home.

I didn't even save the 10k intentionally! It just built up:)

Yes a 3 bed semi is something along the lines i would be thinking of - ideally in a lived in area - not a new estate.

I have a car and am learning to drive at the moment so by the time i take the plunge so to speak i will hopefully have a full license and work in the city also so commuting wouldn't be a problem

Well i make 1800 a month so i reckon i could manage 500 - i'd have to cut back on certain luxuries of course but i am willing!

Yes i should be around the 30k mark in 5 years time presuming i stay at the level i'm at.

I know the house prices in Dublin are quite expensive but they ain't so cheap in Cork either - esp in the suburbs - they don't seem to have gone down as much as i thought they would.

Eglinton

leahyl wrote: »

Hi eglinton thanks for your response. I'm living in Cork City suburbs at the moment and would be looking to stay in the suburbs - would like to be close enough to the family home.

I didn't even save the 10k intentionally! It just built up:)

Yes a 3 bed semi is something along the lines i would be thinking of - ideally in a lived in area - not a new estate.

I have a car and am learning to drive at the moment so by the time i take the plunge so to speak i will hopefully have a full license and work in the city also so commuting wouldn't be a problem

Well i make 1800 a month so i reckon i could manage 500 - i'd have to cut back on certain luxuries of course but i am willing!

Yes i should be around the 30k mark in 5 years time presuming i stay at the level i'm at.

I know the house prices in Dublin are quite expensive but they ain't so cheap in Cork either - esp in the suburbs - they don't seem to have gone down as much as i thought they would.

Sounds good. Well let's say what I've detailed holds true and you find the house of your dreams for 185K and get your mortgage of 150K.

This means a repayment of about €960 euro a month (assume 5% interest - could be higer in 5 years!!) over 20 years. Can you afford that?

The reason I'm saying 20 years is that I believe that's a more reasonable term. Terms longer than that were fueled by the Celtic Tiger and are ultimately way too expensive and unfair. Who wants a mortgage well into their 50s and 60s!

leahyl

Eglinton wrote: »

Sounds good. Well let's say what I've detailed holds true and you find the house of your dreams for 185K and get your mortgage of 150K.

This means a repayment of about €960 euro a month (assume 5% interest - could be higer in 5 years!!) over 20 years. Can you afford that?

The reason I'm saying 20 years is that I believe that's a more reasonable term. Terms longer than that were fueled by the Celtic Tiger and are ultimately way too expensive and unfair. Who wants a mortgage well into their 50s and 60s!

I'm not sure could i manage that with everything else (960e i mean) - bills, car etc. plus i can't seem to see any house for 185k around the city at the moment! Well not one that doesn't need a lot of work and is in a good area:) But then it's not like i'm going to be buying the house tomorrow! Unfortunately all the ones i'm looking at seem to be in the 250k price range....:D

Eglinton

leahyl wrote: »

I'm not sure could i manage that with everything else (960e i mean) - bills, car etc. plus i can't seem to see any house for 185k around the city at the moment! Well not one that doesn't need a lot of work and is in a good area:) But then it's not like i'm going to be buying the house tomorrow! Unfortunately all the ones i'm looking at seem to be in the 250k price range....:D

I'm not familar with Cork house prices and the reductions being seen (i.e. I don't know how this compares to Celtic Tiger peaks in 2006) but 185K is approx 25% lower than 250K. It's not unreasonable to assume that prices couldn't fall further over 5 years. As it stands if you do want to buy anything more than 185K, you'll need a bigger salary or a partner with a 2nd income or look at something smaller/reaslistic/further away.

But as you say, you're not buying tomorrow so just keep saving and see how it goes.

P.S. I just checked and a 20 year mortgage of 150K is 990 a month at 5% rising to 1075 a month at 6%. It's about 100 less a month on a 25 year mortgage in each case but you ultimately pay much more gross.

LeahK

Hi Op,

Im 27 and thinking of doing the same only I have only just started saving!

I know some people are quoting you what you could get approved but my advice would be to talk to your bank about it and get an idea. I was quoted appx 30K more than any of the mortgage calculators!!? I was shocked. Im not on a whole lot more then you either... Maybe you could sign up for affordable Housing too if it interests you.

If I were you, I would try and save about 600-700. This is a more likely mortgage payment and once the bank see that you can save this, you shouldnt have a problem getting approved.

Plus for my research I would'nt advise buying for another year or so, I dont think prices will drop much more but they certainly wont go up. Ive set up an account with daft and marked about 20 houses just above my price range. Over the next year Ill be keeping an eye on how quickly they move etc. From the ones I picked, in two months none of them have sold and 3 have reduced their prices significantly.

Renting is an option, I did for a year and had great fun. I had to move home to save which is NOT advisable once you have had your freedom.:o

Best of luck!

Tech3

OP great work on saving the 10K. I would advise you to put that lump sum into the Permanent TSB 35 notice deposit account. €230 a year is better than having it stuck in a current account earning close to 0% interest. I would setup a regular savers account in a seperate bank for increased safety to your deposit, Ulster Bank regular saver has an interest rate of 3.5%.

On general information about houses look at the propertpin website and property vultures to view decreases in the market lately. It gives you a good idea on how the market is going around the suburbs of Cork city. Also worth reading the eventual increases in interest rates which are at an incredibly low level at the minute and property tax increases in the future. So many expenses to look at in buying a house that having maybe 30-40% deposit would be more safer to cover eventual interest rate hikes.

leahyl

Thanks so much everyone for all the advice! I just have a question though - it has been suggested by one or two people here that I should set up one account where I put the lump sum that I have already saved and then another regular savings account for the saving each month - could I not just do this all in one account?

That's a good idea also about registering with daft - there is a house I have been looking at for quite a while - near the family home - only down the road actually! And it went down 100k in price in the last 6-8 months! Still 250k - I wonder is it still liable to drop further in price? It has been on the Market a while so who knows:)

AARRRGH

leahyl wrote: »

my mum is always saying the age old phrase 'rent is dead money'!

Be careful who you take advice from. (Rent isn't dead money).

As someone else said, spend a few months reading www.thepropertypin.com before you do anything.

To answer your question: you should aim to save between 1/3 and 1/2 or your salary every month. That's what I do.

AARRRGH

leahyl wrote: »

Still 250k - I wonder is it still liable to drop further in price? It has been on the Market a while so who knows:)

Come on now, you are thinking of buying a house 10 times your salary?

House prices are still about 50% overpriced. Wait a few more years...

jimpear

Im a full time student and I also have a job neting me around 19k, I have been in and out of the bank recently trying to get tings in order to buy a place of my own. One thing you have to take into account is that the bank may require you to have a certain amount left over each month for your own living expenses. In my case they said I had to have 1200 per month left over after my monthly outgoings were deducted from my monthly income. I'm not sure they like the idea of lending to a 20 year old student. I'm going to remain hopeful.

AnonoBoy

jimpear wrote: »

Im a full time student and I also have a job neting me around 19k, I have been in and out of the bank recently trying to get tings in order to buy a place of my own. One thing you have to take into account is that the bank may require you to have a certain amount left over each month for your own living expenses. In my case they said I had to have 1200 per month left over after my monthly outgoings were deducted from my monthly income. I'm not sure they like the idea of lending to a 20 year old student. I'm going to remain hopeful.

If you earn 19k a year you won't be getting any decent sized mortgage any time soon.

jimpear

I'm not looking for a biggie I hopefull will be approved for 90k and I have the deposit saved already, fingeres crossed! I'll post how my meeting goes later on in the week. Any good tips?

Dermotsull13

This thread is of interest to me aswel.

If i have approx 10k in a lump sum to deposit where would I find out who is offering the best rate.

Also I currently have a regular savings account with BOI but its not worth a f**k as far as I can see. Dont think the interest rate is great.

If i wanted to open a new saving regular saving account is there any that would be recommended. Ulster bank seem to have a rate at 3.5% for their regular saving and Permanent TSB have a rate of 3.75%.