Buying your first home? How to get what you really want
The roll-out of the new Central Bank rules on mortgage lending mean big changes this month for first time buyers across Ireland.
Are you thinking of buying your first home? Saving a lump sum for a mortgage can be the biggest barrier but the easing of these rules means that your deposit as a first time buyer has now been cut to 10%. The market has been stimulated with the aim of more buyers entering the market in 2017.
The Central Statistics Office has reported that the first-time buyers owner-occupiers share of the market fell from 53.1% in 2010 to just 24.4% of the market in 2015, but there’s now a chance to get on the property ladder faster, as the ceiling on the loan-to-value (LTV) ratio for all first-time buyers is now set at 90%.
Renters will become Homeowners
It’s expected that more people will move in to the property market in 2017 and that more renters will now become homeowners, easing the burdens on the rental sector.
So what does this mean for you in terms of hard cash? If you’re a first time buyer looking at a house worth €400,000, you’ll now need a deposit of €40,000. Previously this would have been a €58,000 deposit.
There’s also the ‘Help-to-Buy’ scheme which was introduced by the Government in the most recent budget which offers a rebate of income tax of 5% of the purchase value of a new-build, up to a value of €400,000. This scheme is set to run until 2019 and translates to a maximum €20,000 cash rebate.
Minister for Finance, Michael Noonan has stressed that the measure will result in increasing the supply of new housing across Ireland. “In all markets, supply increases to meet demand. The Help-to-Buy scheme will increase the demand for newly built houses by assisting first-time buyers to put a deposit together,” he said.
Thinking of making the leap?
If you’re thinking of making the leap into home ownership in 2017, there’s also now a chance of the much-needed opportunity to have access to cash at this crucial time, EBS offers 2% back in cash on new mortgages.
This offer, which gives 2% of the value of the mortgage back in cash, is not just open to first time buyers, it’s also available if you’re moving or switching a mortgage loan to EBS.
So how do you get the home that you really want? Supply of properties still remains tight, so it is important to be armed with the right information. Here are 5 steps to get there:
1. Is it the right time for you?
The first consideration when buying a new property is to consider if buying a home makes financial sense. New homes are costing, on average, €43,000 more than a year ago, so you’ll need to weigh up the benefits. All lenders will look for proof that you have the earnings and the discipline to repay the mortgage. Showing a lender your record of paying rent and savings will demonstrate that you can afford to pay for a mortgage and you’ll have the ability to pass the ‘stress test’ even if interest rates go up.
2. Do your Budget and Background
One of the most important considerations before embarking on buying a new home is to do a household budget and work out how much you have coming in versus what you spend every month. It’s essential to be realistic about this.
Make sure that you are not either overestimating or underestimating your income and outgoings, to ensure that you will be able to comfortably make payments. Check out some of the affordability calculators online to give you an idea of how much you can realistically borrow. You’ll need at least 6 months bank and credit card statements, proof of identity and your loan record and credit rating will be checked with the Irish Credit Bureau.
You’ll also need proof of income if you’re a PAYE worker with a P60 and three consecutive months’ pay-slips. If you’re self-employed, you’ll need confirmation that your tax affairs are in order.
3. Have you a handle on the costs?
When buying a new home, you will need to factor in cash to fund additional costs such as valuation fees for a report on your house which will be given to your lender; legal fees for your solicitor; surveyor fees to look over the house before you buy; funds for repairs, decoration and furnishings and storage and moving fees. Stamp Duty is likely to also be the biggest consideration. It’s unadvisable to get in to a bidding war, but rather to set your budget and what you feel the new home is really worth and most importantly what you can realistically afford. Don’t stretch too far as you can always buy a starter home now and trade up later.
4. Work out your Wish List
Finding the right home takes time and it’s a good idea to get Approval in Principle before starting house hunting to get a sense of how much you can borrrow. Then it’s time to get working on your wishlist and decide whether you want a house or apartment, a new-build or something older and write down the list of important features and checklist in the order of what you want from your new property.
When you’re house hunting and have narrowed down your search, make sure to view your chosen property at different times of day and check out the differences between weekdays and weekends.
Find out what is included in the sale, for example if you’re buying a house or apartment, check if there is a Property Management Company involved and their service fees and check in to parking spaces. Bargain to get the very best deal that you can. Drive and walk around the area and get to know the facilities, shops, pubs, restaurants, schools and parks.
Try to future-proof your decision by looking in to planning applications and what the local authority are potentially planning for the area. An independent, qualified structural surveyor is essential to have on board to assess your chosen property, so that you don’t encounter the unexpected later.
The market is moving again and 2017 is set to be a year that will see the impact of these many new initiatives.
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