Home-Buying Terminology - Funding Your Home
All these strange words, what do they all mean??
As a first-time buyer, I have suddenly learnt a whole new lingo! Terms and words I may have been vaguely aware of, or not at all, before I dove head-first into this adventure! Snagging, closing, approval in principle...???
So for all of you who are just starting out on your wonderful journey, hopefully this will help make the coming days, weeks, and months, just a little less daunting!
Approval in principle
This is a letter from a mortgage provider (such as a bank), that indicates the amount that they would be willing to consider lending to you, based on information you have provided (but not yet confirmed).
**** Very important **** this is NOT approval, this is merely indicative, but an important letter nonetheless. This will give you a value to keep in mind when looking for your new home, and will indicate to the real estate agents that you are likely to be able to afford the house.
So, this is your very first step, before you fall in love with a house that may or may not be within your range, the very first thing you need to do is find out how much the banks would be willing to consider lending to you. Be honest when answering the questions from the mortgage advisor, as you'll get a more realistic figure. And equally important - don't stretch your affordability to the very limits, leave a little room for savings, for mortgage rate increases over time, for those little emergencies. Remember - when your boiler dies, you no longer have a landlord to fix it, this time it's on you, and you'll need to have some money saved for these little things.
Booking Deposit
A small deposit made to the real estate agent or auctioneer to reserve your house while your mortgage is being processed.
This is essentially putting a hold on your house so that someone else can't swoop in while your papers are being drawn up and snatch away your dream home when you're just a few weeks away from getting your final approval letter.
The booking deposit (often in the region of about €5,000) will form part of the total deposit owed on your mortgage. This deposit is refundable if you change your mind, but do discuss this with the agent before paying the booking deposit.
Mortgage
A mortgage is a large loan from a financial provider such as a bank, for the purpose of buying a home (house, apartment, etc)
Congratulations, by now you've found your dream home, put down your booking deposit, and now it's time to go back to your mortgage provider and start the actual mortgage application. Bear in mind that this process can take a while, so keep in mind the expected timeframe for completion of your house (if it's a new build) or the seller's expectations, and start this process sooner rather than later. Don't be afraid of it expiring (it very much can) as most providers will allow extensions should you face delays (length of the extension could vary depending on the lender), or you can reapply for a new mortgage (it's much quicker and simpler second time round, I had to do this myself due to delays on my own home being built).
The most important piece of advice I can give you here is to get organised - as much as possible as early as possible. Gather all the documents you think may be useful even before starting your application, and your mortgage provide will provide you with a full list of requirements once you start your application. You will definitely need things relating to your personal finances - you need to prove to the lender that you can indeed afford to repay this mortgage. So things like confirmation of employment (salary slips, letter from employer, P60, etc), evidence of savings (you will need to prove that you have sufficient funds on hand to cover the deposit, as your mortgage will typically only cover between 70 and 90% of your home's cost). Your own savings as well as the savings of any other people who will be on your mortgage application. Savings not in your name (are you getting a loan from your parents or a friend?)
Help To Buy
The Help to Buy (HTB) incentive is a scheme for first-time property buyers. It will help you with the deposit you need to buy or build a new house or apartment. You must buy or build the property to live in as your home.
HTB is a huge helping hand by the Irish Revenue service where you are in essence reclaiming a portion of taxes you've paid over the last 4 years to put towards the deposit on your new home. This is for new buyers only, and will only count towards new homes or self-builds.
HTB will cover 5% of your home's value (so half of your 10% deposit) or €20,000, whichever is less, for homes up to a value of €500,000, for homes built between 19 July 2016 and 31 December 2021.
Existing homes do not qualify for HTB, even if you are a first time buyer.
You must live in this home as your family home for at least 5 years, or risk having the HTB clawed back by Revenue.
Homes valued at more than €500,000 do not qualify for HTB
Your mortgage must cover 70%-90% of your home's value
The application process is pretty straight-forward, just ensure that you are fully tax compliant. The folks at Revenue were very helpful in answerwing all of my questions during my application, very quick to respond always. For me, as for so many others, this scheme made the difference between being able to afford the deposit on my new home, and renting for the next 5-10 years to save up the full 10% (current minimum deposit requirement)
I'll add some more home-buy terminology-busters soon, I promise, but these should help you to get started on your journey. Just a friendly reminder that all of this is by no means official definitions nor constitutes legal advice. This is simply me sharing my own experience and understandings of my own home buying process, as a first-time buyer who started this journey woefully unprepared, lost, and overwhelmed, but somehow managed to swim, not sink, in this strange new sea!
As a first-time buyer, I have suddenly learnt a whole new lingo! Terms and words I may have been vaguely aware of, or not at all, before I dove head-first into this adventure! Snagging, closing, approval in principle...???
So for all of you who are just starting out on your wonderful journey, hopefully this will help make the coming days, weeks, and months, just a little less daunting!
Approval in principle
This is a letter from a mortgage provider (such as a bank), that indicates the amount that they would be willing to consider lending to you, based on information you have provided (but not yet confirmed).
**** Very important **** this is NOT approval, this is merely indicative, but an important letter nonetheless. This will give you a value to keep in mind when looking for your new home, and will indicate to the real estate agents that you are likely to be able to afford the house.
So, this is your very first step, before you fall in love with a house that may or may not be within your range, the very first thing you need to do is find out how much the banks would be willing to consider lending to you. Be honest when answering the questions from the mortgage advisor, as you'll get a more realistic figure. And equally important - don't stretch your affordability to the very limits, leave a little room for savings, for mortgage rate increases over time, for those little emergencies. Remember - when your boiler dies, you no longer have a landlord to fix it, this time it's on you, and you'll need to have some money saved for these little things.
Booking Deposit
A small deposit made to the real estate agent or auctioneer to reserve your house while your mortgage is being processed.
This is essentially putting a hold on your house so that someone else can't swoop in while your papers are being drawn up and snatch away your dream home when you're just a few weeks away from getting your final approval letter.
The booking deposit (often in the region of about €5,000) will form part of the total deposit owed on your mortgage. This deposit is refundable if you change your mind, but do discuss this with the agent before paying the booking deposit.
Mortgage
A mortgage is a large loan from a financial provider such as a bank, for the purpose of buying a home (house, apartment, etc)
Congratulations, by now you've found your dream home, put down your booking deposit, and now it's time to go back to your mortgage provider and start the actual mortgage application. Bear in mind that this process can take a while, so keep in mind the expected timeframe for completion of your house (if it's a new build) or the seller's expectations, and start this process sooner rather than later. Don't be afraid of it expiring (it very much can) as most providers will allow extensions should you face delays (length of the extension could vary depending on the lender), or you can reapply for a new mortgage (it's much quicker and simpler second time round, I had to do this myself due to delays on my own home being built).
The most important piece of advice I can give you here is to get organised - as much as possible as early as possible. Gather all the documents you think may be useful even before starting your application, and your mortgage provide will provide you with a full list of requirements once you start your application. You will definitely need things relating to your personal finances - you need to prove to the lender that you can indeed afford to repay this mortgage. So things like confirmation of employment (salary slips, letter from employer, P60, etc), evidence of savings (you will need to prove that you have sufficient funds on hand to cover the deposit, as your mortgage will typically only cover between 70 and 90% of your home's cost). Your own savings as well as the savings of any other people who will be on your mortgage application. Savings not in your name (are you getting a loan from your parents or a friend?)
Help To Buy
The Help to Buy (HTB) incentive is a scheme for first-time property buyers. It will help you with the deposit you need to buy or build a new house or apartment. You must buy or build the property to live in as your home.
HTB is a huge helping hand by the Irish Revenue service where you are in essence reclaiming a portion of taxes you've paid over the last 4 years to put towards the deposit on your new home. This is for new buyers only, and will only count towards new homes or self-builds.
HTB will cover 5% of your home's value (so half of your 10% deposit) or €20,000, whichever is less, for homes up to a value of €500,000, for homes built between 19 July 2016 and 31 December 2021.
Existing homes do not qualify for HTB, even if you are a first time buyer.
You must live in this home as your family home for at least 5 years, or risk having the HTB clawed back by Revenue.
Homes valued at more than €500,000 do not qualify for HTB
Your mortgage must cover 70%-90% of your home's value
The application process is pretty straight-forward, just ensure that you are fully tax compliant. The folks at Revenue were very helpful in answerwing all of my questions during my application, very quick to respond always. For me, as for so many others, this scheme made the difference between being able to afford the deposit on my new home, and renting for the next 5-10 years to save up the full 10% (current minimum deposit requirement)
I'll add some more home-buy terminology-busters soon, I promise, but these should help you to get started on your journey. Just a friendly reminder that all of this is by no means official definitions nor constitutes legal advice. This is simply me sharing my own experience and understandings of my own home buying process, as a first-time buyer who started this journey woefully unprepared, lost, and overwhelmed, but somehow managed to swim, not sink, in this strange new sea!
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