The cash you need up front
You will usually need a deposit (the part of the price you pay yourself) plus buying costs such as taxes, notary or legal fees, valuation and lender fees. What these costs are, and how large, depends on your country, so get real figures for where you are buying. Ask a lender early what deposit they would expect from you, since that sets your savings target.
For example, on a €250,000 home with a 10% deposit and buying costs of 5%, you need €25,000 + €12,500 = €37,500 in cash and borrow €225,000. If you have €20,000 saved and can add €700 a month, the remaining €17,500 takes 25 months. Add €150 a month for insurance and upkeep when you look at the monthly cost.
The monthly cost – and a stress test
The loan repayment is only part of owning a home. Owners pay for the boiler and the roof, so build the full picture before you decide what you can afford.
Then stress-test it. Run the mortgage calculator at the rate you are offered, then again at a rate two percentage points higher. If the higher payment would leave you unable to save or pay essentials, consider a cheaper home, a bigger deposit or waiting. This matters most with a variable rate or a fixed rate that ends during the loan.
Rates in this example are only for illustration. Use the figures from your own offers.
- Loan repayment (interest plus capital).
- Home and any required loan-related insurance.
- Building or service charges, if you buy a flat.
- Property taxes, where they apply.
- Energy, water and heating.
- A monthly amount set aside for repairs and maintenance.
Don't drain your emergency fund
It can be tempting to put every euro into the deposit. But the first months in a new home can bring costs you didn't plan for, and a mortgage payment still has to be made if your income drops.
Keep your emergency fund separate and intact, and size it for your new essential costs, including the mortgage. How big should your emergency fund be? helps you set the target. While saving for the deposit, remember that bank deposits are protected up to €100,000 per depositor per bank under EU rules – details depend on your country.
Comparing mortgage offers
Under EU rules, a lender must give you a personalised European Standardised Information Sheet (ESIS) in good time before you are bound by a credit agreement or offer. It sets out the loan's key features and costs in the same format for every lender, so offers can be compared side by side. The annual percentage rate of charge (APRC) is calculated with one formula set in EU law, which makes it a useful number to compare.
Your country must also give you at least seven days to compare offers and think it over, either before you sign, as a right to withdraw afterwards, or both. The lender must also assess whether you can afford the loan – but you should do your own check too, since you know your plans best.
Don't let anyone rush you past this time. Use it to read the full offer, ask questions and compare at least one alternative.
Compare the APRC, the total amount you would repay, fees, whether the rate is fixed or variable, and the conditions for paying early. How interest and APR work explains the terms.