Our related article will help you to clarify exactly how much of a deposit you will require to cover the deposit, stamp duty and legal fees. However, many of our clients ask whether it is possible to get an approval in principle (AIP) right now, even if they are still a little short of having the full amount available for the deposit plus associated costs. As with many mortgage-related questions, the answer is “Yes, but…”
What if the Funds are not Needed for a Few Months?
For example, you might be €4,000 short of the total amount required, but you are managing to save €1,000 per month. It is reasonable to ask whether future savings can be taken into account in such a case, especially in the case of buying a property a new development, which may not be completed for a number of months. Also, stamp duty and legal fees are only paid when the mortgage is being drawn down and the purchase is being completed, so it is fair to assume that future savings can be used to bridge the gap required to cover all of the costs. Unfortunately it is not that simple!
Full Deposit & Associated Costs Required Up Front
Even if the property is a new build, and even if you are clearly saving every month, you need to show the bank that you have the funds available at the time of the application for approval in principle (AIP). This is because an AIP can be used to go sale agreed on any property, including one that could be ready to move into within a few weeks. For this reason, the banks require all funding relating to the purchase to be in place at the time that the mortgage application is approved.
Is There Any Alternative Option to Speed Things Up??
Yes! There is one way to get your AIP before you have the full deposit + stamp duty + legal fees in your bank accounts. If you can get a gift letter (preferably from an immediate family member) to cover the shortfall, then the bank will be satisfied that you have the full funding in place. In the vast majority of cases, no funds need to be transferred at this stage, as the gift letter simply shows that the funds are available if and when required. This allows you to go sale agreed, and then to continue to save the balance of funds required to complete the purchase without requiring some or all of the promised gift funds. The bank will have no issue with the fact that you saved the rest of the funds required and you no longer need the gift, as long as you can provide statements to show the build-up of the funds.
MMPI is an award-winning Irish broker offering you free, expert mortgage advice. Our qualified team will advise you on the best options suited to your needs and will manage the process until you put your keys in the door.