The amount you
can borrow from mortgages is based on your earnings.
In the majority of cases you can borrow between 3.25 and 4.5
times your salary or up to 3.75 times combined gross salaries
in the case of co-borrowers.
Most lenders will lend up to 92% of the property
value or purchase price, whichever is the lower.
In certain circumstances up to a total of 100% can be borrowed.
You can repay a mortgage over any period between 10 and 40
years, provided the mortgage is repaid before age 70.
There are a wide variety of ways you can repay your mortgage.
Outlined here are basic details on the various mortgage repayment
options on offer.
Variable Rate Mortgages
The repayments on a variable rate mortgage will fluctuate
in line with general interest rate movements.
If interest rates fall, your monthly mortgage repayments will
fall. If interest rates rise, your repayments will increase.
Fixed Rate Mortgages
You may not want to take the risk of a rise in mortgage interest
rates, particularly if you are working on a tight budget.
With a fixed rate mortgage, a competitive rate of interest
is fixed for an agreed period which can range from one to
ten years.
This removes any risk associated with fluctuating interest
rates.
Annuity Mortgage
An annuity mortgage is repaid monthly over the term of the
loan.
You simply pay off part of your borrowing each month, plus
the outstanding interest.
In the early years, the capital amount of the loan you
repay is lower - most of each payment being interest.
As the amount you owe reduces over the years, interest
becomes a smaller part of each monthly payment. Tax
relief is available on the mortgage interest. As the interest
you pay is higher in the
earlier years
of the mortgage the benefit of tax relief is greater,
when borrowers
are most likely to be short of cash.
Interest Only Mortgages.
Under this method, you repay the interest only and the
capital is repayed at the end of the mortgage term. This
eases cash
flow and maximised tax relief.
Interest Only Mortgages
With this repayment method you
have the option to just repay the interest each month , thus
giving you a lower mortgage payment and manage your cashflow
a lot easier and at the same time maximising your tax relief.
When the property is eventually sold and provided it has
made a profit you then repay the capital from the proceeds
of the sale.
Endowment Mortgage
Under the endowment method you pay interest on your full
borrowing throughout the mortgage term and this qualifies
for tax relief.
You also pay monthly contributions to an endowment policy,
which includes sufficient life assurance to pay off your
loan in the
event of your untimely death.
By the end of the mortgage term, the value of the endowment
policy should have grown sufficiently to repay the mortgage
in full
and in addition possibly pay you a cash surplus.
Pension Mortgage
Under the pension method you pay interest on your full
borrowing throughout the mortgage term and this qualifies
for tax relief.
You also pay monthly contributions to a pension policy,
which includes sufficient life assurance to pay off
your loan in
the event of your untimely death.
By the end of the mortgage term, the value of the pension
policy should have grown sufficiently to repay the
mortgage in full.
In addition leaves you with a pension for life. You
can also claim tax relief on your pension contribution.
New
homes are subject to stamp duty if their floor area is
greater than 1,346 square feet and it is charged on the
site value only.
For second hand homes the rate of stamp duty is based on the
sale price or market value.
It is charged on a sliding scale, which means that the higher
the price you pay for the property, the higher the rate of tax
that you will have to pay.
Budget
2005 - Implications for the Housing Market
Cut in stamp duty will boost residential property market and underpin house price
inflation in 2005
Move to help First Time
Buyers
The budget will deliver a further
boost to the residential property market. The reduction in
stamp on second hand house purchases for first-time buyers
will favour existing rather than newly constructed houses.
This should boost second hand house price inflation in early
2005 and ensure the property market remains strong through
the coming year.
There will be no stamp duty on
first-time buyers of second-hand houses up to €317,500
in value and reduced rates on such purchases up to €635,000.
There is no stamp duty payable by owner occupiers on new
properties below 125 sq. m. (1345 sq. ft.). The owner occupier
must reside in the property for a minumn of 5 years otherwise
be liable for full repayment of the stamp duty. For new properties greater than 125 sq. m. the duty is payable
on the greater of the site cost or 25% of the total cost
ie. the site and all construction costs.
There is a significant amount
of legal work involved in buying a home. There
are no set fees for this work - and costs vary depending on the
value of the house.
We have a number of solicitor's to choose from.
The guideline figure suggested by the Incorporated Law Society
of Ireland is 1% of the purchase price, plus VAT and outlay.
Valuation report
To check that the property is good security for the mortgage,
your lender will require a professional valuation of the
property. Some lenders insist on organising this for you. The
cost is
normally €127.
Surveyor’s report
Although the valuation report will indicate what the property
is worth, it will not indicate any major or minor faults
in the property.
Therefore it is prudent to obtain a full structural
survey. The cost of the survey is usually around €190
plus VAT.
In addition to the contractual
costs outlined above, don’t
forget the costs of any decoration that you will need to carry
out, particularly in
the case of second-hand property.
Mortgage Protection (Life Assurance)
Life Assurance protection is required in every case when you
take out a mortgage.
The type of policy required will vary according to the
type of mortgage you select, but we can advise you of all
the options
available.
Buildings Insurance
The lender will insist
that you insure the property against usual risks, including fire,
flood and subsidence.
Your home should be insured for what it would cost
to rebuild it, if it was destroyed.
This may be more or less than its market value. The
valuation report that the lender commissions, will
outline the cover
needed.
Contents Insurance
At the same time, it is also advisable to insure the
contents of your new home.
It can be surprisingly expensive to replace anything
that is stolen, damaged or broken.
Contents cover can conveniently be incorporated
as part of your buildings cover.
Mortgage Repayment Cover
It
is also possible to buy insurance to cover your mortgage
payments.
None of us can be sure that we won’t
run into a patch of bad luck, through accident,
illness or
redundancy.
Within certain limits, payment protection insurance
will meet the full cost of your monthly
mortgage payments, if
you become
unable to work for these reasons.
Indemnity insurance was traditionally required
by the lenders if you borrowed more than
70 - 75% of the purchase
price.
Now, in most cases, the indemnity
Insurance (also known as Indemnity Bond
Fee) will be paid on your behalf by the lender, at
no cost
to you.
Provided that the property you are buying will be your main residence,
you will receive income tax relief on the interest you pay on
your mortgage. This relief will reduce the cost of your monthly
repayments. However, not all of your repayment may qualify :
Maximum limits applicable to mortgage interest relief:
· € 6,350
for a married couple
· € 4,570
for a widow(er)
· € 3,175
for a single person.
If you have claimed mortgage interest relief at least
5 years ago, the maximum limits applicable to mortgage
interest relief will be further restricted to:
· € 4,825
for a married person
· € 3,530
for a widow(er)
· € 2,415
for a single person
First time buyers will not be subject to these additional
limits.
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