Buying
a home of your own can be a complicated and confusing process,
involving unfamiliar legal transactions and large sums of
money. But don't despair, click
here to view our guide designed to take you through the
whole process, step by step. NMS - Mortgage Brokers in Ireland, providing
Mortgages and Remortgages in Ireland.
NMS
Mortgage Brokers Dublin - Step by Step Guide to Mortgages
in Ireland
How
much can I borrow from Mortgage Brokers in Ireland?
The amount you can borrow from
a mortgage broker in Ireland 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 in Ireland 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.
How
do I choose the best Irish mortgage option for me?
There are a wide variety of ways
you can repay your mortgage in Ireland. Outlined here are basic
details on the various mortgage repayment options on offer.
Variable Rate Mortgagesin
Ireland
The repayments on a variable rate mortgage in Ireland will fluctuate in line
with general interest rate movements.
If interest rates fall, your monthly mortgage repayments will fall. If interest
rates in Ireland rise, your repayments will increase.
Fixed Rate Mortgages
in Ireland
You may not want to take the risk of a rise in mortgage interest rates in Ireland,
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 Irish interest rates.
Annuity Mortgage in Ireland
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.
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. This method is becoming increasingly important in Ireland.
Endowment Mortgage in
Ireland
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
in Ireland
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 in Ireland
.
Stamp Duty
Rates in Ireland
New homes in Ireland 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.
Solicitor’s Fees
There is a significant amount of
legal work involved in buying a home in Ireland . 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 Irish lender
will require a professional valuation of the property. Some lenders in Ireland
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.
Other costs
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.
First Time Buyers Grant
The Irish Government withdrew the
grant for first time buyers in Ireland in December 2002.
Income Tax Relief
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.
