How do mortgage deposits in Ireland work?
Before you can get a mortgage to buy a home in Ireland you’ll need a deposit. Here’s how they work and how much you’ll need to have saved.
What is a mortgage deposit?
It’s the cash you pay upfront when buying a house. The money pays for your property alongside a mortgage.
All lenders require a mortgage deposit when you buy a residential property in Ireland. It protects mortgage lenders if you fall behind on your repayments, and reduces their risk of lending.
The larger your deposit, the less you have to borrow to cover the cost of your home and a low loan to value (LTV) can often help you secure the most competitive interest rates.
How much deposit do you need for a mortgage?
It’s a proportion of the house value, so the deposit amount will depend on the price of the property you want to buy.
You’ll need a deposit of at least:
The size of your deposit and LTV will also affect the deals for which you’re eligible. A small deposit may restrict how many choices you have when you look for a mortgage.
With a larger deposit, a mortgage is more affordable. You can access the cheapest mortgage rates on the market and get the best deals.
In October 2022, the mortgage lending rules changed. First-time buyers can now borrow four times their income, and second-time buyers now need a deposit of 10%.
What does LTV mean?
LTV stands for loan to value, which means how the loan’s size compares to the property’s overall value. So if the house you want to buy costs €300,000 and you need to borrow €250,000, you’ll have an LTV of 83%.
Most mortgage lenders design their deals based on loan-to-value (LTV), and products are priced by LTV bands.
So, for instance you may see different interest rates for LTVs of 60%, 80% and 90%.
The greater your LTV, the higher the interest rate and your monthly repayments become more expensive.
With an LTV of less than 60%, you’ll likely have the best choice of mortgage deals and the lowest interest rates.
Example of LTV
Here’s an example of how your deposit affects your LTV and the interest rate you’re offered. You need to move to a bigger property and plan to buy a house that costs €350,000. Your deposit is €75,000 (21% of the house value).
The size of your deposit means you need to borrow €275,000, so you’ll qualify for mortgage products that require an LTV of 80%.
Saving for a deposit
It can take a little while to save up enough money for a deposit to buy your first home.
While there is no one best way to save up for a mortgage deposit, some things you could do to speed things up include:
- Downsizing or moving in with friends or family to save money on rent
- Switching your household bills like your energy or broadband to cut costs
- Setting up a standing order each month to get into the habit of saving
- Reviewing your existing borrowing, to make sure it’s not costing more than it needs to
- Reviewing your savings to check they’re earning as much as they can
- Changing your spending habits e.g. fewer takeaways and meals out
It’s also worth considering setting a goal. Work out how much you need to save each month to hit your target and stick to it.
How long does it take to save for a deposit?
Switcher.ie’s Affordability Index reveals the most affordable areas for joint buyers and sole buyers based on how long it would take to save for a deposit in each RPPI region.
- The average time it could take to save for a deposit in Ireland is 4.6 years
- Leitrim is the most affordable place for first time buyers, taking 2.5 years to save for a deposit
- Dún Laoghaire is the least affordable place and could take up to 27.9 years to raise a downpayment
Help with your mortgage deposit
Saving a mortgage deposit can take a long time, but there are some ways to get help towards the cost.
First Home Scheme (FHS)
This is a new government-backed scheme to help first-time buyers get on the property ladder.
The FHS is designed to make up any shortfall between the house price and what you can afford to pay with a deposit and mortgage.
It’s a shared equity scheme that pays up to 30% of your house price in return for a stake in your property. You can buy back the share if you can afford to, but you’re under no obligation to do so.
You can learn more about the scheme in our guide The First Home Scheme explained.
Help to buy (HTB)
If you’re a first-time buyer purchasing a new build home in Ireland, you could qualify for the Help to Buy incentive.
The scheme ordinarily offers a tax rebate worth up to 5% of the purchase price of your property.
However, the value of the scheme has been increased to a maximum of €30,000 or 10% of the purchase price of the property, whichever is the lesser, until 31 December 2029.
You can find out more about the Help to Buy incentive and how to apply on the Citizens Information website.
Help from your family
Many borrowers in Ireland get financial help from their parents or other family members to buy their first home.
If you’re getting money from a family member towards your deposit you’ll also need a letter confirming it’s a gift from the person giving you the money. This letter should be signed and include:
- How much money is being given
- The name of the person giving the gift
- A statement that you don’t need to pay back any of the money
- A statement that the person giving the gift will have no claim on the property
It’s also worth checking if there are any tax implications, as large gifts could potentially fall within the scope of gifts and inheritance tax.
Mortgage savings accounts
Some banks offer savings accounts with a special interest rate for mortgage customers.
For example, Bank of Ireland’s MortgageSaver Account offers a €2,000 Bonus Interest on savings when you draw down a Bank of Ireland mortgage.
You could also consider a fixed-term savings account, which offers higher rates on a lump sum for a set period of time, though access to funds can be more restricted.
Though Ireland had some of the lowest deposit rates in Europe, things have started to improve. Remember, you don’t have to save with your mortgage provider, and shopping around can help you earn the best interest rate possible.
As well as saving with traditional banks, you can also consider other options, like:
- Raisin bank gives Irish savers access to the higher rates on offer elsewhere
- Digital banks like Bunq, N26 and Revolut can also offer competitive savings rates
Always compare different account types and choose one that suits your banking needs - for example, you might need flexibility and quick access to funds, as opposed to an account that locks away savings.
Next steps
Once you have your deposit saved and you know how much you can borrow, you can look at applying for a mortgage. Read our Complete Guide to Mortgages to find out more about applying and securing an offer.
When do you have to pay the deposit?
You usually need to transfer the deposit funds shortly after signing your contracts. At this point you’ve legally agreed to buy the property and are in the process of completing the purchase.
Compare mortgage rates & deals
Find a range of first time buyer and home mover mortgage deals in Ireland using our comparison.
Mortgage deposit FAQs
Can I get a loan for my deposit?
No, the funds being used as a deposit for a mortgage application in Ireland cannot be borrowed.
All lenders in Ireland check the Central Credit Register as part of the application process, which includes all the details of all personal mortgage, overdrafts, loans, and credit cards, so if you’ve taken out a loan to use for your deposit, they’ll decline your application.
Can I get a mortgage with no deposit?
No, you can’t get a mortgage in Ireland without putting down a deposit.
Central Bank rules require both first time buyers and non-first-time home buyers to have a minimum 10% deposit.
Lenders can make exemptions to these deposit requirements, but there is a limit to the number of exemptions they’re allowed to make so they’re not very common.
If you qualify, the Help to Buy scheme could also help towards your deposit if you’re buying your first home.
- In the original Help to Buy scheme: (house bought between 1st Jan 2017 and 22nd of July 2022) the rebate it offers is equivalent to 5% of the purchase price, effectively reducing the amount you need for a deposit to just 5%.
- In the Enhanced Help to Buy Scheme: (for houses bought between 23rd July 2020 and 31st of December 2029) the rebate is equivalent to 10% of the purchases price.
Can I use a gift for a mortgage deposit?
Yes, you can usually use a gift from friends or family towards your deposit, but there are some rules that you’ll need to be aware of.
Many lenders ask for a gift letter if your deposit funds have been gifted to you, you can download a template gift letter from the AIB website.
What’s the best account to use for my mortgage deposit?
It’s a good idea to use a separate savings account while you’re saving for a mortgage, as this can help you earn the best interest rate possible and keep track on how much you have saved.
When it comes to transferring your funds to your solicitor you may need to move it to your current account first.
