buying a property

How to get financially ready for buying a property

Buying a property is one of the most important financial decisions of your life. You should therefore carefully plan it. Before you start looking for the property of your dreams, check your savings, calculate your budget and contact your banker. You will know if you have to pay cash for your new property or ask for a mortgage.

Accumulate savings

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Buying a property is a project that works and matures. You cannot land overnight in your bank to ask them to lend you money.

Also, you should think about putting money aside early, using the right investments for the best return on your deposits. Some banking products are for example dedicated to real estate purchase. They allow to obtain more favorable rates when borrowing.

In all cases, these savings will give you more benefits. Having a contribution, especially if you want a mortgage is still pledge seriously.

Some figures when buying a property

In Ireland, if you are a first time buyer and want to purchase a home with a mortgage, you need some savings equal to 10% of the sales price. That is the new rule, if a property costs up to €220,000. It is costs more, the savings must be 20% of the difference. For example, if the price is €300,000, you will need 10% on €220,000 and 20% on the balance of €80,000. This is a total of €38,000.

If you are not not a first time buyer, you need a deposit of 25% for buying a property.

As a first time buyer you need to have some saving equal to 10% if the sales price is up to €220,000.

Anticipate the hidden costs

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Before buying a property, you need to assess all costs you will have to bear as an owner. Indeed, it is not enough to pay the amount requested for the purchase by the former owner to enjoy your future home.

There is a set of related costs to purchase a property that you need include in your budget:

  • Deposit: to reserve the property, you will probably have to pay a deposit. This is a sum of money which is generally about 10% of the sale price.
  • Bank cost : these are sometimes some costs related to the preparation of your financing.
  • Record and legal fees: all costs related to the purchase of a property, solicitor fees, registration fees of land, etc.
  • Investigation costs: if you are considering buying a property, including second-hand, it is important to conduct a survey with surveyors to verify that there are no hidden defects.
  • Insurance banking costs : if you borrow money from the bank, you will have to take out a protection insurance designed to pay the balance of your loan if you die before repaying the entire loan.
  • Home insurance costs: most banks insists that you purchase a home insurance, in order to protect your home against damages. You are not required to take out this insurance with your banker. Others may have better rates.
  • Stamp duty: a one-off tax based on the value of the real estate transaction.
  • Property tax: a yearly tax based on the value of your property.
  • Property management fees: they range from €1,000 to €3,000 per year. This apply to apartments and houses situated in a development.

To determine your budget, make an appointment with your banker to help you estimate,  your resources.

Determine all costs related to a property purchase: deposit, bank costs, legal fees, investigation costs, insurance banking costs, home insurance, stamp duty, property tax, property management fees. 

Should I pay a property cash or borrow?

Buying a property cash means that you have sufficient resources to pay all costs related to the purchase of the property you dream of, without using a loan.

Few people can claim to have sufficient savings to pay cash. But if this is the case, good for you.

There are several benefits to pay cash:

  • No bank paperwork involved.
  • No deadlines.
  • No debt.
  • No compulsion or anxiety to repay.
  • Possibility to better negotiate the selling price.

However, you may have no more cash for your other projects.

If you choose to borrow, you will benefit of:

  • Availability of cash.
  • Insurance on your loan that protects your family.
  • Possible placement.
  • Purchase of goods at a higher price.
  • Can earn credits under certain conditions.

The flip side is that you need a good bank record and honor your monthly payments over several years. A loan is also more difficult to obtain because it usually depends on the salary received.

From a financial point of view, choose one or the other solutions can cause you to gain or lose money. It must indeed take into account the credit leverage.

In other words, it is interesting to borrow (even if you have the funds) when the yields on savings are greater than the mortgage rates.

And you, do you plan to buy a property in Ireland? Do you prefer paying cash or with a mortgage? Tell us in a comment!

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