Saving for your new home
Shauna McCrudden speaks to Vincent Keogh from KBC about saving for that all-important deposit
Vincent Keogh from KBC answers your questions about saving for that all-important deposit
“Have a savings goal and develop a plan to help you get there,” says Vincent Keogh, Head of Current Accounts, Savings, and Investments at KBC Bank. “Typically, you need to have a deposit of at least 10% of the cost of the property. That’s a good starting point for first-time buyers so they can understand how much they actually need to save.”
Saving for a deposit on a house is one of the toughest parts of the home-buying journey. It requires dedication, sacrifice and an iron will. There can’t be too many nights out on the town, and you might have to pick up a library book instead of paying for a cinema date. But what do the experts say is the best way to start saving for your dream home?
“One of the most important pieces of advice I could give is to be realistic,” says Vincent. “Pick an area where you would like to live, but also think in terms of what’s affordable and what suits your budget.
“At KBC, we help first-time buyers understand how much they can actually borrow. We provide a number of helpful tools that are useful for prospective buyers. These include our online calculators that can be found on our website (www.kbc.ie) where customers can find out how much they can borrow as well as the amount they might need to save over a period of time.”
CUTTING BACK
When starting to save, look at your household income and expenditures to determine if there are any areas you could cut back on.
“The more effort you put into it, the more you’ll get out of it. If you’re honest with yourself and look at all your expenses on a monthly basis, there are areas I’m sure everybody can cut back on. Those extra expenses incurred during the day, like coffee, all add up over a month and over a year.”
But it’s not just the small items that savings can be made on, larger areas of expenditure, such as your utility expenses, can also be looked at with the aim of saving.
“Look at your home insurance, car insurance and broadband supplier. Anything you pay on a monthly basis needs to be reviewed. There are comparison websites which can help find you a better deal on your bills. Another thing to take into account is your bank account fees – this is an area that adds up if you are getting charged monthly or quarterly. At KBC for instance, we offer customers free day-today banking through our extra current account if you lodge €2,500 per month into your account. We don’t require customers to maintain the balance throughout the month, the only requirement is the monthly lodgement, and this is a great addition to your savings goal.”
Vincent adds: “If you start saving early, this will turn into a habit. I saved for a home myself and I know from personal experience that it can be difficult especially at the start, but just look at everything you’re doing and don’t be afraid to say no. You’d be surprised how much you can save by doing that.”
TAKE CARE
When saving, there are a few potential pitfalls which should be avoided. One of these is not taking any extra costs into account. While 10% is usually the minimum amount needed for a deposit, you also need to allow for additional expenses.
“When you’re buying a home there are other things you need to consider, such as auctioneer fees, moving costs, legal fees and any furniture that you need to buy.”
But Vincent says there can be unexpected expenses which will reduce how much you can save that month. “Have a contingency for some unexpected moments that might occur. I would always recommend going into one of our KBC Hubs and talking to a member of our mortgage team. They will be able to provide you with additional information and give you guidance on what’s required.”
SAVING MONTHLY
Vincent says the best savings advice is to have a standing order to move a set amount of money every month between your current account and savings account. This ensures your money is saved before you ever have a chance to spend it. But it also has benefits when applying for your mortgage. A bank will look for evidence that you are able to save regularly as this shows you will be able to pay a regular mortgage payment.
“One of the best options at KBC for a first-time buyer, who is saving monthly or regularly for a deposit, would be our Extra Regular Saver Account. If you have an Extra Current Account with us, and you lodge €2,500 per month, you can receive a competitive market rate on your savings. This gets our customers and first-time buyers into the habit of saving regularly, because that’s key. Once you’re saving regularly on a monthly basis it becomes a habit and you can see your savings grow over time as well.
“Finally, I would always recommend talking to our mortgage specialists at KBC who can go through your financial circumstances with you and point you in the right direction.”