What is the funds provision for a mortgage?
It's the capital the mortgage applicant must have available to cover the purchase costs and the share of the purchase price the bank doesn't finance.
Basically, it's the part the buyer has to contribute from their own savings to buy the home; the bank provides the rest through the mortgage.
Example:
I buy a flat for €200,000
The purchase costs are €20,000
The bank finances €180,000 (90%)
We're €40,000 short, which we'll have to provide from our savings
That amount, €40,000, is the funds provision
What does the funds provision for a mortgage involve?
It's an amount of money the buyer applying for the mortgage must provide to cover the purchase costs and the percentage of the purchase the bank doesn't finance.
The funds provision covers all the purchase costs, such as the notary, registry, taxes, valuations and all other costs inherent to the purchase.
If the bank doesn't grant you a 100% mortgage but 80% or 90%, you'll need to add the part it doesn't lend to the funds provision.
Without this funds provision, the sale can't go ahead and you can't get a mortgage.
That's why, as we've said, the funds provision must be in the account holder's account before signing.
How much is the funds provision for a mortgage?
The provision is normally 30% of the purchase price, as you'll need to cover 10% in costs and 20% of the home's value, since banks usually lend 80%.
The funds provision depends on how much the bank lends you. The purchase costs also depend on the type of buyer and home, but are around 10%.
If the bank grants you a 100% mortgage, the funds provision will only cover the costs.
If you're granted 90% or 80%, you'll need to add the proportion the bank doesn't lend to the costs.
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When do you get the mortgage funds provision back?
It usually takes 30 to 60 days from signing before the notary, although it can take longer. In that case you'll need to contact your bank to claim the refund.
As funds provisions aren't exact and are estimated on the high side, there's always money left over, and the bank must return it to the client by paying it into their account.
Who pays the mortgage funds provision?
The client applying for the mortgage.
How does the mortgage funds provision work?
The bank will tell you in good time how much you need to have in your account before signing the mortgage. Once signed, the bank will hold the amount to cover the purchase and other costs.
Once all the paperwork and payments are complete, it must return any surplus to the client along with all the original documents, invoices and proof of payment.
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