This article originally appeared in our popular Property West Cork magazine – subscribers can read it in full by clicking here.
BY CONOR POWER
WHILE trying to buy a new home these days is a daunting task, the positive news is that both house prices and interest rates seem to be stabilising. The ECB are making noises indicating that they've stopped increasing rates, while the latest statistics from property website daft.ie show that house prices on average in Cork increased by just 2% (from the same period in 2022) in Q3 of this year.
More importantly, the Government is finally beginning to provide a little housing supply and a lot of assistance for first-time buyers. Although there are different types of mortgage out there (the Endowment Mortgage, Pension Mortgage, the Current Account Mortgage), the type that almost everyone goes for is the standard Annuity Mortgage. This involves the bank or lending institution advancing you enough money to allow you to purchase your home, with you agreeing to pay back the money in monthly instalments over the term of the mortgage (usually between 25 and 30 years).
Since January 2023, a First Time Buyer may borrow an amount of up to four times his/her gross annual salary as a single person or as a couple, as per the rules laid down by the Irish Central Bank. For example, a couple with a combined income of €80,000 per annum before tax can borrow up to €320,000. That is known as the LTI limit – the Loan-to-Income limit. There is also an LTV – a Loan-to-Value limit and this is set at no more than 90% of the value of the property.
This means that you have to come up with at least 10% of the purchase price as deposit. The higher the amount of savings you have, the lower the interest you normally get from lenders.
It must be noted that the Central Bank rules with regard to lending limits are subject to a certain amount of wriggle room – if you can show a superb savings record, for example, or if your income is classified in the ‘higher earning bracket’ (i.e., over €50k/year for an individual or over €70k/year for a couple).
The other piece of good news with regard to the LTV limit is that amongst the various measures in place to help First Time Buyers, the Help-to-Buy (HTB) scheme greatly assists you in getting over the deposit hurdle – good news in a time of high rents. The HTB gives the First Time Buyer a tax rebate of up to 10% of the price of their home, to a maximum of €30,000. Most lenders nowadays will accept this ‘money-back’ as deposit money.
All other things being equal, choosing the right rate for you is as simple as going for the lowest rate. Nowadays, the fixed rates offer better value than the variable ones. The advantage of fixing the rate is that you can determine what your repayments are going to be for a set number of years. Variable rates should be lower because you take on the risk that they might rise again, but no bank in Ireland is offering lower variable rates than fixed ones at the moment.
The table below offers some sample rates and repayment levels from Irish lenders, using the example of a First Time Buyer who is borrowing €315,000 (90%) to purchase a home costing €350,000.
Extra Costs?
Here is a list of the additional costs you need to provide for when buying a home, covering the essentials that people often overlook when buying a home for the first time.
LIFE ASSURANCE
For the basic level (i.e. a policy that pays the remainder of your mortgage in the event of death), it will be around €350 per year.
SOLICITOR’S FEES
This could be the first time you’ll use a solicitor but it won’t be the last. The main consideration should be trust, with the fee amount being a secondary consideration. All told, something around €2,000-€2,500 should cover you.
SURVEYOR’S FEES
Even though you don’t have to have it done, your solicitor will advise you to have a structural assessment of your home carried out, at a price of around €300.
VALUATION FEE
The lender won’t release the loan cheque until an independent valuation of your home is carried out. That will cost around €180.
STAMP DUTY
Another one you can’t get around, unfortunately. It’s 1% of the property value up to €1 million and 2% on any value above a million.
HOME INSURANCE
Shop around for this one as figures seem to be plucked from mid-air sometimes. You should get it for around €25 or €30/month.
