Buying a home is one of the biggest dreams of any person in Ireland today. The governments have been trying since years to tackle the housing issue but no measures have not found effective yet. The new government’s ‘Housing For All’ plan is believed to become a game changer though it faces a lot of criticism before even put to start.
A roof on top will give you a feel of security and protection and any human in the world might be craving for it. It will be a Herculean task to buy a house from this crisis hit market today, but you can have a home without much difficulties if you keep some simple things in mind before committing. Let’s see what are they.
- Your savings and property value in the market
As we all know, money is very important in buying a house. Being one of the most expensive country to live in, property market also demands certain amount of money, which is not cheap.
If you think you have some savings and that can be used to purchase a property, before jumping to a broker or property website, just have research on the current market and see whether the money on your hand complies with the value of available properties which you will be satisfied to live in. If your savings are not enough to buy a house that you wish for, then it is always good to wait some more. Otherwise, you may feel it was a hasty decision to buy some home with your limited budget where you can’t feel comfortable.
If you are a first-time buyer
For first-time buyers in the country, they get 90% of the property price as mortgage. This means you have to have 10% of the property price as deposit.
For example, if you can afford to buy a house of €200,000, the lenders may lend you up to €180,000 and you must have the remaining €20,000 yourself.
There are also many schemes by the government and lenders to help first-time buyers.
Help-to Buy (HTB) scheme
The Help-to Buy (HTB) scheme by the government helps first-time buyers of newly-built homes to buy a new house or apartment. It also applies to once-off self-build homes. It is applicable to properties costing a maximum of €500,000. The scheme gives a refund of income tax and Deposit Interest Retention Tax (DIRT) paid in Ireland over the previous 4 tax years.
To know more about HTB: https://www.gov.ie/en/service/bc9df-help-to-buy-htb-scheme/
If you are not a first-time buyer
Generally, non-first-time buyers get up to 80% of the property value as mortgage. Means you need to have 20% of the deposit money on yourself.
2. Costs involved in buying a home
Other than just the value of property, there are some other expenses involved while buying a home, like stamp duty and survey costs.
Below is a list of costs involved in buying and maintaining a home:
- Stamp duty (1%-2% of the price of the house)
- Legal fees (€2,500 – €5,000 including conveyancing)
- Survey costs (€200)
- Engineers report (€450)
- Moving costs
- Repairs, decoration, furniture
3. Mortgage repayments and daily expense
Though the lender will check your eligibility and affordability to pay back the mortgage, you must check it yourself before approaching a lender. The repayments are usually monthly and you should be able to carry out your daily needs even after the repayment of each month.
Once you have cleared all the papers and ready to live in your future home, the following costs are there to run the home every day:
- Electricity and heating – BER rating will have a significant impact on this
- Home insurance
- Maintenance and repairs
- TV
- Broadband
- Property tax
- Bin charges
- TV licence
- Management fees, if you buy an apartment or house in a managed complex
So, it is recommended to make a budget plan with all these expenses which will hep you in future. Also, if these expenses are more than affordable, you can buy a property of lesser value which will make your monthly repayments low.
4. Apply for mortgage
There are a lot of mortgage lenders in Ireland. But whenever you apply for a mortgage, do thorough research and see whether the plan complies with your income. For example, you may get mortgage for a lesser interest, but the repayment tenure might be short and repayment amount might be huge. So, if you are excited by seeing a low interest rate, just check this side too.
While talking with lenders, keep in mind that you can always say a big ‘NO’ if you are not fully satisfied with the offer. After talking to some of the lenders, you can review each offer to see which fits best for you. You can also get help from a broker (this may cost you an amount). Make sure which type of mortgage you are applying, fixed or variable and how it would affect your monthly budget plan.
Another thing to keep in mind while applying for mortgages is, like we said above, lenders may offer you a wide variety of benefits like cash back, incentives, gifts etc. which you feel very appealing. But before signing the agreement, do a calculation and find out the overall cost of mortgage after full repayment on each offer. May be an apparently high interest rate without any cashback will save you more money than a cash back mortgage, when considered the whole repayment amount.
Don’t panic and take the first mortgage you are offered. Apply to a number of lenders and if you are offered more than one mortgage, compare the rates carefully. Use our mortgages shopping around checklist to help you (Recommended by The Competition and Consumer Protection Commission, Ireland).
5. Mortgage Protection insurance
Once your mortgage application is approved, you should look for mortgage protection cover which is the insurance that will pay off your mortgage if you die within the term of the policy. Keep in mind that, this process can take some time and you may have to apply for the insurance before reaching an agreement to buy house or apartment. Otherwise, it will be a havoc in the last hour. And if you have a poor health or health issues in the past, this can further delay the approval. You will get the mortgage approved only if you are covered by the insurance. But the lender will give you a mortgage without the cover if:
- you are over 50
- you are buying an investment property
- you have enough life insurance in place already or
- you cannot get cover
But keep in mind that the lender has the authority to refuse mortgage if you are not covered by insurance. Also, the lender will usually offer you protection insurance while you apply for mortgage. But you can apply for insurance from other companies too and the lender can not insist you to avail it from them only.
6. Help from a solicitor
While buying a house, transferring the ownership from the seller to the buyer is important. To do this, a process known as conveyancing, you will need the help of a solicitor. It is recommended to find one before reaching an agreement with the seller. After reaching the agreement, the seller’s solicitor and your solicitor will do the paper works. Your solicitor will also make sure the legality of the property and the credibility of ownership that nobody else could claim to own it.
You have to pay a fee for the solicitor which varies from person to person.
You can see the guide to find a solicitor by CCPC here: Finding a solicitor (PDF 130Kb)
7. Finding a house
You can go and see houses directly or with the help of brokers. Many websites also offer property viewing. Look for some before reaching agreement by viewing one or two.
There may be a property you like well and there may be pressure from the seller to give an advance and block the sale. Even if you like the property, don’t pay the advance all of a sudden because scams can be expected. Also, if you are paying, avoid to pay in cash, debit card, wallet or accounts like PayPal. Do it with a credit card for effectively tracking the account if any issue arises in the future. Also, make sure the seller is legitimate before paying.
CCPC offers check list and more details while looking for a property. You can find them here:
Looking around for a property (PDF 130Kb)
Finding out more about a property (PDF 230Kb)
BER Rating
A Building Energy Rating (BER) certificate is required by anyone advertising a home for sale or rent, or before a new home is occupied for the first time. It shows how energy efficient the property is and checks energy use for space heating, water heating, ventilation and lighting. A home is rated between A and G, with A-rated homes being the most energy efficient. A higher energy rating can have a significant impact on reducing the ongoing cost of running your home. (Source: CCPC Website)
8. Making and accepting an offer
Make an offer always which does not exceed your limit. You have to look the house well to see whether expensive maintenance is needed. Also check the average price of properties in the area before accepting the offer from the seller (Property Price Register will help you for that).
While making an offer, it is better to be able to show the letter from your lender about mortgage approval in principle and bank statement showing your ability to make the deposit.
9. Agreeing Sales
If everything ok, you can move on to signing agreement. Here, you have to pay a booking deposit to block other potential buyers. It can be a small percentage of the offer you have made.
The booking deposit is refundable up until you sign the contracts.
Once your offer is accepted, the estate agent will prepare a document of sale details and send this to the seller’s solicitor and to your solicitor. This document contains details of the price, conditions of the sale, the estimated closing date – the day you will be given the keys of the property – and the names and addresses of all those involved in the sale.
Once the seller’s solicitor receives the sale details from the estate agent they will send the contracts for the sale of the property, along with a copy of the Title Deeds of the property to your solicitor. Title deeds are legal documents showing the ownership of a particular property. Each time the ownership changes a new deed is drawn up to show the change.
10. Purchase Completion
Before purchase completion, check these:
Survey
A survey with a surveyor, engineer or architect should be carried out before finalizing the deal. This will highlight any issues you may not have been aware of when you made your offer.
If you are buying a property at an auction, you would usually have your survey completed before the auction. Ask the auctioneer for the terms and conditions of the auction, which will be available before the auction date.
Snag List
A snag list is a list of incomplete work or things that you want put right. Examples of items for a snag list include:
- cracks in ceilings or walls
- skirting boards not correctly placed
- doors that don’t open and close properly
- uneven plaster work
- broken light switches
- loose wiring
- leaking pipes
It is better to hire an architect to make a snag list. Then you can hand over a copy of it to the builder or seller to fix them. You can make sure all these works are done on a later time before final buying.
Think about agreeing a defects liability period with your builder before you sign any contracts. This means that you agree that the builder will fix any further problems that arise within a certain period of time free of charge. Sometimes you can withhold a small percentage of the purchase price of the property until the end of this period. Discuss this with your solicitor first to see if it is possible.
11. Disbursing mortgage amount
Valuation
Before disbursing the mortgage money, the lender will conduct a valuation of the property. The valuer will send their valuation to your lender who will base their formal loan offer on this valuation.
Home Insurance
Before your mortgage cheque is issued, you will need to have home insurance (Know more: home insurance) in place. Once the property is sale agreed you should start looking for insurance so that the house is covered by the time the sale is closed. If you are buying an apartment, buildings insurance should be part of your management fee, so you don’t need to arrange this yourself. However, you may still want to arrange contents insurance before you move in.
12. Mortgage approval
If everything is well, you will get a formal ‘letter of offer’ from the lender which contain details such as:
- The value, length, cost and repayment schedule of the mortgage
- The address and description of the property to be bought
- Any terms and conditions which apply to the offer
- Expiry date of the mortgage offer
The bank will send a copy of your letter of offer to your solicitor, along with other legal paperwork, so you should arrange to meet with your solicitor as soon as possible after getting your letter of offer.
Signing contracts
The solicitor will help you to understand each document and you have to sign them if everything is convincing. The solicitor will also check that the contracts are in order. You have to sign two copies. Your solicitor will return both of these copies to the seller’s solicitor. At this point you have legally agreed to buy the property.
You will then need to pay your deposit, usually 10-20% of the purchase price depending on whether you’re a first-time buyer or not, less any booking deposit you have paid. You pay your deposit to your solicitor, who will arrange to have it paid to the seller through their solicitor.
The seller’s solicitor will check the documents and send the copy back to you after the seller’s signature on it. Now, the property is legally agreed for sale.
Both solicitors will arrange for a final closing date and time at which stage you will be given the keys to the property. Before this, the remainder of the money must be paid, which means all the paperwork and approval for your loan must be completed and returned to your lender by your solicitor.
Once your lender is happy that they have all the paperwork and it is in order, the mortgage cheque will be issued to your solicitor. Your solicitor will arrange to have these funds transferred to the seller through their solicitor.
Stamp Duty
Stamp duty is the tax you pay when you buy a property. The rate is 1% of the purchase price for properties valued up to €1 million, and 2% on any amount over that. Your solicitor will arrange to pay the stamp duty for you, but bear in mind you will need to pay the money to your solicitor when they are closing the sale.
Local Property Tax – LPT
When buying or selling a property you may have to pay some or all of the Local Property Tax (LPT), which is charged on all residential properties in Ireland, depending on the time of year you buy or sell. The LPT currently falls due on 1 November each year. Visit Revenue’s website for more information on the LPT.
Registration Fees
Registration fees are the costs associated with registering the title with either the Registry of Deeds or the Land Registry. Fees can range from €400 to €800, depending on the value of the property. Get information on fees here. www.prai.ie
13. Collecting keys and moving in
Once the balance of the funds has been transferred to the seller by the agreed closing date and time, the estate agent will call you and explain that everything is in order for closing. The estate agent will also remind the seller of the closing date and time.
Well, all is done. Now just collect the keys from the seller/builder and just step in to your dream home. Changing the locks is recommended, as the sellers or previous owners may have spare keys. Happy life!
Source: The Competition and Consumer Protection Commission website (https://www.ccpc.ie/consumers/housing/buying-home-step-by-step-guide/)