Mortgage Savings & Why They Are So Important
by Julie Delaney – Senior Lending Manager | Walsh Group
My thoughts on mortgage savings are very clear, knowing what the underwriters look for when assessing your mortgage case, is for your savings to be consistent, clear, obvious and separated into a specific savings account.
The idea is that we can demonstrate to the underwriters, that you can comfortably afford the mortgage repayments over a 6-month period.
- Use a separate savings account, from your main day to day banking account, solely for your mortgage savings, that your access is limited, where possible. If you need another separate account to budget for other expenses, i.e., car expenses, holidays etc, that is okay, and it will prevent you from dipping into your mortgage savings throughout the year.
- Set up a standing order or transfer a set amount in each month, and do not go below this amount. Doing a monthly budget should help you realise what amount is realistic for you.
- At the end of the month, if you have surplus funds, you can transfer to your savings account, once all your other commitments are met.
- It is always good advice to transfer your savings straight away after pay day, and also pay any other bills you may have, so you know what is left for yourself for your personal expenses.
- Being consistent is the key, showing that you are capable of making your future monthly mortgage repayments for 6 months.
- Be realistic and do not overstretch yourself. Saving for your house deposit is a journey, and in order for it to be realistic, it must fit in with your regular day to day lifestyle. You will still want to spend money on things you enjoy when you have your mortgage, so you can still do it while saving. The lender expects you to have a social life and see transactions for social activities, shopping etc.
- Managing your bank accounts is also very important, especially if you are focusing on a strict savings pattern. There is no point being over optimistic and stretching yourself, only having to withdraw again, at the end of the month. It is better to have a manageable regular savings amount, than having your account under pressure. It would not be looked upon favorably if there are other payments missed, or if your account is reliant on an overdraft facility each month.
- The reason why you are saving and how much is twofold. It is in order to build up your 10% deposit and to cover other additional costs, such as the 1% stamp duty and the solicitors’ fees. You also need to save in order to comfortably demonstrate your ability to prove your repayment capacity over a 6-month period, preceding the mortgage application. When you are ready to submit your mortgage application, you must have your 10% deposit. This can be through savings, a gift or the Help to Buy Scheme, if you are a First Time Buyer and buying a new house.
- If you incur any once-off expenses, make note of this on your account, so they can be easily accounted for. This will make it easier for the lender to see what the money was spent on, and factor it back in, for repayment capacity expenses.
- It is worth noting that you must keep up your level of savings, even if you have your full deposit saved, in order to demonstrate your ability to repay the mortgage. Even if you have received an AIP, there may be a delay from when you find a suitable property to purchase, and the lender may request up to date statements.
If you would like to discuss your mortgage savings in more detail, or need any further mortgage or financial advice, don’t hesitate to get in touch with either myself or any of our friendly team here at Walsh Group.
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