Affordable Housing

For many years, the first rung of the property ladder has been beyond the reach of many low and middle-income earners. With house prices often at least several times their salary, their chances of getting a mortgage were grim.

However, recent changes to the government's affordable and shared ownership schemes mean more people are now eligible for local authority mortgages. Last week, the Minister for Housing and Urban Renewal, Noel Ahern, said that about 11,000 new houses will be available under the affordable housing scheme between 2005 and 2007.

 

         

 

Furthermore, as larger loans are available from local authorities, applicants have a better chance of buying a desired property in a desired location.

One of the main advantages of the shared ownership and affordable housing scheme is that houses sold under these schemes are sold at cost price rather than market value. In addition, you do not have to pay any stamp duty. However, you will normally have to pay about €2,000 to cover legal fees and administration costs.

Under the affordable housing scheme, you can usually get a mortgage of up to 97 per cent of the sale price of the property. The maximum mortgage varies, depending on your local authority.

For example with Fingal County Council, the maximum mortgage is €165,000 and with Cork City Council, the maximum mortgage is €130,000. If the sale price of the property is greater than the maximum mortgage you can get under the scheme, you must pay for the difference with your own resources.

Under the shared ownership scheme, you buy at least 40 per cent of the property using a mortgage from your local authority. You then rent the remainder of the value of the property from the local authority.

 

           

You can buy out the rented equity portion of the loan from the local authority at any stage. This is advisable as it will reduce your monthly rent repayments which otherwise, could increase substantially each year. A minimum deposit of €1,300 is required with this type of loan.

The size of the loan you get under the affordable housing scheme will be determined by your household circumstances - in most cases, your monthly repayments should not be more than 35 per cent of your household income.

The standard loan term under the shared ownership and affordable housing scheme is 25 years but this can be extended to 30 years.

In general, repayments on a shared ownership loan will be initially lower than on an affordable loan.

For example with Fingal County Council, repayments on the maximum shared ownership loan are generally between €700 and €750 a month. This payment includes the mortgage repayment, the monthly rental and mortgage protection payment.

With Fingal County Council, repayments on an affordable loan are between €800 and €850 a month. The repayments include your mortgage repayment and mortgage protection insurance.

To be eligible for the affordable housing and shared ownership scheme, you cannot earn more than €36,800 a year if applying on your own or €92,000 for joint applications. Under a joint application, the qualifying limit is two and a half times the main income plus the second income.

Only first-time buyers can apply for the scheme. Applicants must be in full-time employment for at least six months before their application and must be earning enough money to meet mortgage repayments.

Applicants must also have evidence of savings. For example with Fingal County Council, you must be saving between €650 to e 750 monthly over a three month period before applying for the loan. This level of savings must be maintained until you get final loan approval.

If you are living at home and paying for “keep'‘, this is not considered as savings.

Rent may be taken into account as part of a savings record as long as there is proof of rent, such as through a standing order or lease agreement.

Only earned income is considered when calculating an applicant's income. Long-term social welfare payments may also be included in addition to earned income.

Each local authority has different allocation priorities when deciding who is eligible for affordable housing.

For example with Waterford City Council, one-third of all new houses are initially designated for existing tenants of the council, qualified applicants for local authority housing and general applications.

Your housing need normally determines the priority given to your application.

Some of the things taken into account when assessing the housing need of an applicant include the household size, the adequacy of existing accommodation, the length of time on the list and the ability to afford accommodation.

When applying for an affordable housing loan, you must provide your local authority with specific documents - otherwise, your application is likely to be unsuccessful. These documents include your P60, an employer certificate or social welfare payment, three most recent payslips and evidence of loans, including the amount of money you owe and the repayments due.

You must also provide statements for all bank, building society, credit union and credit card accounts held, showing transactions over the last year. If you are self-employed, your application must be accompanied by audited accounts for the previous tax year and an agreed tax assessment.

If renting accommodation, you must include your latest rent receipt as well as a copy of your rent book and a letter from your landlord confirming your rental payments and that rent is paid regularly and in full.

You must also provide proof of previous address, such as utility bills and birth certificates for each applicant and dependent.

 

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For more information call 1850 700 777.