Mortgage Advice
BUYING A house and taking out a mortgage can seem a daunting task. It
doesn't
have to be but if you are taking out a mortgage for the first
time - there's a couple of
things you need to know. It's really quite
simple and being informed can make the
experience of buying your home a
lot easier and enjoyable. The following is a list of
frequently asked
questions - as well as some of the answers.
Q. Which comes
first...the mortgage or the house?
This is probably the most
frequently asked question. It's important to know how much you can
realistically afford. The first thing to do is to visit an independent
broker and they will be able to calculate how much you can borrow, based
on your earnings savings, if any.
Q. How much can I
borrow?
This depends on how much you earn. Generally speaking, you
can borrow up to 92% of the value of the property. So if the house is
worth Euro 250,000, you can borrow up to Euro 230,000. If you are buying a
house on your own, you can borrow up to 4 times your annual salary. If
there are two of you buying together, you can get three and a half times
your joint salary. If you have regular bonuses and / or overtime, they
will also be considered.
Q. Now long will it take to repay
my mortgage?
You can normally repay your mortgage over any term
between 5 to 35 years. The longer the term, the less your monthly
repayments will be, however you end up paying back more over the long
term.
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Q. What additional costs are invoked?
You will need
to take out a life policy, which is a mandatory part of the mortgage. You
will also need Insurance on the house and it's contents.
Your broker
will be able to give you advice on the best product options in the
marketplace.
You will have to pay a solicitor who will charge a
professional fee plus outlay. It is wise to shop around and get estimates
from a few solicitors in advance of proceeding with the purchase.
You
will need to get a valuation report carried out to ensure the property is
worth at least what you are paying for it. You should budget for a fee of
around Euro 130 inc. VAT
In many cases it is good advice to get a
surveyors report carried out before you agree to purchase. This is more
usual where the property is old - any structural faults, dampness, dry rot
etc. will be identified.
You may have to pay stamp duty on your home -
see details following.
Q: How much stamp duty will be payable
on my home?
This is tax payable to the Government when you buy a new or
second-hand home. However, in certain circumstances, you might not have to
pay it. It is charged at the following rates:
| STAMP DUTY GUIDE (Second
hand residential property) |
|
1st Time
Buyer |
Owner
Occuper |
Investor |
| €0 to €127,000 |
0 |
0 |
0 |
| €127,001 to
€190,500 |
0 |
3% |
3% |
| €190,501 to
€254,000 |
0 |
4% |
4% |
| €254,001 to
€317,500 |
0 |
5% |
5% |
| €317,501 to
€381,000 |
3% |
6% |
6% |
| €381,001 to
€635,000 |
6% |
7.5% |
7.5% |
| €635,001 and
over |
9% |
9% |
9% |
Stamp duty is not
payable:
If you are buying a new home, where:
(a) The floor space is
equal to or less than 125 square metres (1,346 square feet);
and
(b)
The home is your only, or main, home for at least the next five years and
you will not earn any rent from the property during this time.
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Q. What is the difference between a fixed and
variable rate?
A fixed rate means the interest rate remains
the same for a set period of time - 1,2,3,5 years etc.
This option will
give you the comfort of knowing that your repayments won't go up or down
during this period. No matter what happens with interest rates in the
meantime, you will always pay the same amount. On the other hand, a
variable rate means that your repayments are linked to market interest
rates. These can go up or down during the life of the mortgage. If
interest rates go up you pay more, however if rates go down you benefit
from lower repayments.
Q. What
happens if my circumstances change and I want to pay more or less each
month?
Mortgages can be tailored towards peoples ever changing
circumstances. These options will allow you to pay more, pay less, or
believe it or not, pay nothing at all for a set period! Here are a few
examples of flexible options:
Take a break from your
mortgage
This is a 3-month break from your mortgage and gives you
breathing space when you need it. For example the birth of a child, a
wedding, a career break etc. Once you have made two years repayments, you
can take a 3 month break. You can take up to four of this 3 month breaks
over the term of the mortgage.
Index link your
repayments
This allows you to increase the amount of your monthly
repayment by a certain percentage each year, enabling you to payoff your
mortgage earlier and in turn pay less interest.
Deferred
start
This option is specifically available for first time buyers.
It allows customer make no
repayment at all for the first 1,2 or even 3
months of their mortgage. This allows breathing space in the critical
first few months of the mortgage when outgoings tend to be very high.
These missed repayments are then spread over the remaining term of the
mortgage.
Q. What if I want to
top-up my mortgage, in the future?
More than likely, your
property will increase in value over the life of the mortgage. At certain
times, you may wish to release some of the equity that you have built up
in your home to pay for expenses such as home improvements, school fees
etc. Releasing equity is a cost-effective way of financing these
expenses.
For example: if you have a mortgage of Euro100,000, and your
home is valued at Euro160,OQO - you therefore have Euro60.000 equity built
up in your home. You could therefore borrow up to 90% of the value of the
house eg. Euro144,000 (160,000 x 90%)
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