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.
In Ireland you’ll need a deposit of at least:
The size of your deposit and LTV will also have an effect on the deals you’re eligible for. A small deposit may restrict how many choices you have when you look for a mortgage.
With a larger deposit, you can access the cheapest mortgage rates on the market and get the best deals.
In October 2022, the mortgage lending rules changed. From January 2023, first-time buyers can now borrow 4 times their income (vs 3.5) and second-time buyers now need a deposit of 10% (vs 20%).
What does LTV mean?
LTV stands for loan to value, which simply means how the size of the loan compares to the overall value of the property. 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%.
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.
- On the other hand, if you have an LTV of less than 60% you’ll likely have a greater choice of mortgage deals and lower interest rate.
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. You have a deposit of €75,000 which is 21% of the house value.
Your deposit means you need to borrow €280,000, 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.
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 temporarily increased to a maximum of €30,000 or 10% of the purchase price of the property, whichever is the lesser, until 31 December 2024.
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.
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.
Compare mortgage rates & deals
Find the best 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. The rebate it offers is equivalent to 5% of the purchase price, effectively reducing the amount you need for a deposit to just 5%.
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.
When do I 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.
