Why do I need 8% deposit if house is so cheap

shadowcomplex

For example I am in a permanent job, earn 45k a year. I am renting a 2 bed apartment at the moment for 500 pm if I bought a house for 100k my mortage repayments would be less then my current rent so why do I need a deposit?

jhegarty

What if you loose your job tomorrow ?

ShadowHearth

I presume it's to show that you can save money too.

100% mortgages are bad idea.

shadowcomplex

jhegarty wrote: »

What if you loose your job tomorrow ?

whats your point? If i pay the 8% mortage would i not still be liable to pay the rest even if i lost my job

Newaglish

shadowcomplex wrote: »

whats your point? If i pay the 8% mortage would i not still be liable to pay the rest even if i lost my job

Because if the price of the house falls, you're instantly in negative equity if you haven't paid a deposit.

PCPhoto

why not ask the bank if they will give you 100% mortgage ?

you say you earn 45K per annum - how much per year can/do you save ?

(it shouldn't take too long to save up 8K)

not even wrong

The 8% deposit is to protect the bank, not you. It means that, if the worst comes to the worst and you default without making a single payment on your new mortgage, prices would still have to fall by >8% before the bank loses money.

d15ude

if the price is only 100k and you earn 45k you should have been able to
save 8k.
if you are not you don't seem to be a reliable business partner - i wouldn't lend you money either.

Treehouse72

If the house price falls the bank has a built-in buffer on the negative equity.

Slydice

You don't "need" an 8% deposit.

In the past banks actually lent the full 100%.

Back in the Property Bubble building days, Bank of Ireland were desperate to give 100% mortgages. They even advertised "buying a house" as a thing you do to get laid:

https://www.youtube.com/watch?v=T_URy6gEijg

The reason they look for a deposit is usually as a bit of security (i.e. you'll lose if you pull out) and also as a sign that you might have actually been able to put money aside in the past (though, it's not ideal as you could have won the money or been given it as a gift).

Given how badly they screwed themselves because of their reckless lending in recent years, they probably are trying like crazy to avoid any risks on loans they give out. Asking for a deposit is a reasonable way of doing that.

MagicMarker

This is why.:rolleyes:

the groutch

MagicMarker wrote: »

This is why.:rolleyes:

sounds like the OP is still living is 2007, with a bit of restraint 8k of savings could be done in 12-15 months

d15ude

d15ude wrote: »

if the price is only 100k and you earn 45k you should have been able to
save 8k.
if you are not you don't seem to be a reliable business partner - i wouldn't lend you money either.

Completely agree with this, and I'd like to add, especially after seeing the link that MagicMarker posted regarding your situation, even if I was a well-heeled parent/brother/sister of your's with a million in the bank, I wouldn't lend 100k to you either, 'cos you have demonstrated no proof to me that you could pay me back. The taxis to and from work business puts the tin hat on it with how you are with your money.

To be brutally honest with you OP, you have a well paid permanent job, you need to wake up and smell the coffee, while you are still young, at 33 plenty old enough to have more sense, so get your ass in gear show more regard for the money that you earn, and you will sort out your finances and you will aquire a home of your own.

noxqs

Taxi to/from work: 20 days per month * 2 ways * 10 euros = 400 euros.

You have got to be kidding me. I wouldn't lend you a penny.

BostonB

A deposit and a history shows you have the ability to save over time.

If you can't do that, even over a few years. Its very unlikely you'll have the discipline to pay a mortgage over 20~30 yrs.

noxqs

OK I'll bite again:

1. Deposit is to secure the bank from losses and to prevent people who are not financially sound enough to save up for it to apply for mortgages.
2. The bank takes a risk at lending out money, a deposit shows you're willing to put your money where your mouth is.

More crucially, 100k is not "just 100K". As you have said in this post and another, you are incapable of managing your personal finances. Taking a taxi to work to the tune of 400 euros per month and living paycheck to paycheck on 45K euros a year with rent of only 500. That is pathetic. And the bank will be able to decipher that from your bank statements as well.

They will likely ask for a much higher deposit amount in your case as you seem to have no other value except the promise of a future paycheck.

Victor

If there is a requirement for a 20% deposit and you have €10,000, you can borrow €50,000.

If there is a requirement for a 10% deposit and you have €10,000, you can borrow €100,000.

If there is a requirement for a 0% deposit and you have €10,000, you can borrow the whole Celtic Tiger.