Are you dreaming of owning your own home in Ireland? For first-time buyers, Taking the leap into homeownership in Ireland is an exciting yet complex journey, especially for first-time buyers. The key to a smooth experience lies in preparation and understanding the nuances of the property market. Here are essential steps to get you started on the right foot.
Essential Steps to Start Your Journey
1. Start Early
Begin saving for your home purchase at least two years in advance. Banks value consistency and will look for a six-month savings record when you apply for a mortgage. With the average age of first-time buyers approaching 40 and the necessity for quicker loan repayments, early saving is more crucial than ever. Banks value consistency and will look for a six-month savings record when you apply for a mortgage. Early savings will not only help with your down payment but also position you as a strong mortgage candidate.
2. Assess Your Finances
In light of recent data showing a continuous climb in property prices, it’s imperative to examine your debts, expenses, and credit score to gauge how much you can realistically afford for a down payment. This financial clarity is crucial for setting realistic savings goals and determining your borrowing capacity where a modest-sized house requires a salary—or combined salary—of more than €100,000.
3. Consider Additional Costs
Beyond the down payment, remember to account for moving expenses, closing fees, and any immediate home repairs. These additional costs are often overlooked but are essential for ensuring you’re financially prepared for all aspects of buying a home.
4. Get familiar with Government Schemes available:
The Help to Buy scheme helps first time buyers purchase newly built homes. You must be a first-time buyer who buys or self-builds a new residential property between January 1, 2017, and December 31, 2025. To qualify as a First Time Buyer you can’t have had a mortgage before. If you have taken out a mortgage under your name either in Ireland or overseas, you are no longer a First Time Buyer. Importantly if there are two people going on the mortgage, both must never had a mortgage before to qualify as a First Time Buyer.
The The Help to Buy allows first time buyers to claim 10% of their property value to help them pay a deposit on newly built homes. It’s a Government tax refund scheme and in order to claim, you must have paid the equivalent amount of 10% of your property value in tax in the previous 4 years before moving into your new home. The HTB Scheme provides a refund of the income tax and Deposit Interest Retention Tax (DIRT) you’ve paid in Ireland for the 4 years before the year you apply. In order to claim from this scheme, your home must be valued at €500,000 or less. The most you can claim is €30,000, so if your home is valued at more than €300,000, you still can only receive €30,000 max.
In addition, The First Home Scheme, which is a newer initiative that acts as a shared equity scheme, filling the gap between a buyer’s mortgage and the total cost of the home. It’s aimed at buyers who find the property they wish within reach but just out of grasp financially.
For example, you find a property that cost €250,000, but with your deposit and mortgage, you can only raise €200,000. The FHS scheme would pay the extra €50,000 and then have a 20% share in your property.
You will need to fit the eligibility criteria, but there are no income limits, so your earnings are not considered when you apply.
Now, Budget Wisely
1. Annual Budget:
By conducting an annual budget is more important than ever, with property prices climbing by an estimated 4.4% last year and likely more this year. This ensures you are aware of what you are earning and spending, helping to set aside more than €1,250 monthly to keep pace with rising prices. Check out Alpha Wealth’s complimentary financial budget calculator here
2. Prioritise Saving:
Adopt a “save first, spend later” approach to ensure you’re consistently setting money aside for your home purchase. It is really important that you are saving your money in the most appropriate accounts with the highest returns to ensure your money is working for you. This is why it is vital to consult an impartial financial advisor to ascertain what the best account is for you in terms of your saving goals and time to purchase. Click here to discover the best savings options for your monies
3. Develop Saving Habits:
Focus on the habit of saving regularly, whether weekly or monthly, rather than initially focusing on the amount. By adopting early saving habits, you can demonstrate repayment capacity to lenders. The key is to start as early as possible, ideally tow years before your purchase date. The banks will look for a savings record for at least six months before your mortgage application. Example: So if you are borrowing €400,000, you would need to show a repayment capacity of circa €2,000 per month but this can include your rental payment if applicable.
4. Avoid Short-term Debt:
Clear any short-term debt before embarking on your homeownership journey to maximize your saving capacity. If you have short term debt, its best pay it off as quickly as possible. Credit card companies thrive on high-interest rates, often around 22%. Don’t fall into this trap. Strategy to pay off debt: Start with your smallest loan. Pay it off as quickly as possible, then move to the next smallest. This ‘Snowball Effect’ creates momentum in clearing your debts.
5. Seek Independent Advice:
Consult with a financial advisor for unbiased advice tailored to your financial situation, helping you avoid pitfalls and adopt the best saving practices. You can book an appointment with one of our financial advisors here or contact us via info@alphawealth.ie
Conclusion
By cultivating a habit of saving, making informed decisions, and seeking the right professional advice, you can turn your dream of homeownership into reality. With the right preparation and mindset, stepping into Ireland’s property market as a first-time buyer can be a fulfilling and successful journey.