Buying Your Home
Buying a new home is one of the biggest and most exciting decisions you will every make both in financial and emotional sense. It is therefore important to make the right decisions for your own particular situation. You should consider the following:
The key thing here is to be realistic because if you are not you will run into problems. The best way of doing this is look at how much you spent over the last 2 to 4 months and how exactly you spent it. From this you can work out how much you can afford on a monthly basis.
If you are buying a home for the first time typical monthly costs on a house will be: | Mortgage | | Life insurance | | Fire insurance | | Maintenance | | Household bills such as ESB / GAS | | Service Charges - In most apartments and in some houses service fees from management companies are payable either monthly or annually |
You should also consider The "Rent a Room" scheme in place from the government which allows owner occupiers to rent out a room and receive in €7,618 tax free rental per year. This is ideal for relieving the financial burden especially in the first few years. Buying a house is not cheap. You will need to build up a level of savings in order to pay for the initial costs such as deposit (8 to 10% of the cost price of the house), stamp duty if applicable, legal costs etc. You may need to put that holiday on hold for a year or two or reduce night outs etc to achieve the required level of savings. See how much you can get and get mortgage in principal before you go any further.
It is advisable to shop around for a mortgage package which suits you. Differences in packages could include: | Interest Rates | | Fixed or Variable rates | | Term of the loan i.e., 25 or 30 years | | Initial deposits required | | Mortgage repayment breaks | | Amount they are prepared to give you | | Use your current account balance to reduce monthly repayments |
There is no doubt that there is a huge financial burden when purchasing a house. This burden can be shared by buying the house with someone else or they act as guarantor for the house. It is advisable that this person be someone close to you such as a parent, brother, sister or very close friend.
Be aware that disputes may take place down the road and the legal implications of settling these disputes. It is best that an agreement be drafted and agreed between all parties from the outset which draws up what is to happen in the case of a dispute and settlement of these disputes. Stamp duty is a government tax levied at purchasers of property within certain categories. It is extremely important that you factor this in, as if it applies to you, sums involved are usually quite large. It is payable on completion of sale and in most cases your solicitor will look after both calculating the amount due and sending the cheque to the Revenue Commissioners.
Stamp duty applies to both Residential and land. Residential is the most popular so we will deal with this first and below you will find details on land and sites:
Residential:
How much Stamp Duty you pay depends mainly on the following factors:
1. Are you a First time buyer, Owner-occupier or Investor
2. Property Type - is it a second-hand or New home
3. Size of the property
Definitions of First time buyer, Owner-occupier or Investor are as follows.
First time buyer:
A first time buyer is a person who has not previously purchased or built a house or apartment anywhere in the world and who is purchasing the property for use as their main residence and not buying the property in order to rent it out as an investor.
Owner-occupiers:
An owner occupier is a person who purchases an apartment or house for use as their principal residence.
Investor:
A person buying a property as investment, examples include a second home, or purchasing a property in order to let it out. This property will not be their principal residence.
Stamp Duty rules for each Group are as follows:
First Time Buyers:
First-time buyers do not have to pay any stamp duty on new homes or second hand houses.
Owner occupiers:
The following rules apply:
- New House: Floor area is less than 125 sq. metres - No stamp duty
- New House: Floor area is greater than 125 sq. metres, stamp duty is payable at the rates below.
- Second Hand House: Stamp duty is payable at the rates below - no allowance is made for size.
Property Value Rate
Up to €125,000 Exempt
Next €875,000 7%
Balance 9%
Investors:
Pay stamp duty at the following rates regardless whether the property is new or second hand:
Property Value Rate
Up to €125,000 Exempt
Next €875,000 7%
Balance 9%
Stamp Duty on Land and Sites
Stamp duty for the purchase of land and sites is based on the price. All groups are treated the same with no special exemptions for First time buyers or owner occupiers
Price of Property: Stamp Duty Rate
Up to €10,000 0%
€10,001 - €20,000 1%
€20,001 - €30,000 2%
€30,001 - €40,000 3%
€40,001 - €70,000 4%
€70,001 - €80,000 5%
€80,001 - €100,000 6%
€100,001 - €120,000 7%
€120,001 - €150,000 8%
€150,000+ 9%
Clawback of Stamp Duty
First time buyers and occupiers be aware that clawback of stamp duty
will apply if the purchaser rents out the home within 5 years of date of purchase. This clawback period is being reduced to 2 years for all deeds of transfer executed on or after 5 January 2007. It is up to you to declare and pay the clawback if your circumstances change.
This is a guide to the rates and rules in relation to stamp duty. For more information go to www.revenue.ie or contact your local Revenue office / financial advisor. Once you know your price region you can start looking for property that suits your requirements. The options are to buy either new or second-hand property. The main pro's and cons are listed below.
Advantages of a new Property
If you are an owner occupier and provided the property meets certain requirements you may not have to pay any stamp duty
Most new buildings come with a 10 year home bond Guarantee
The property is new and therefore should have low maintenance costs for the first few years
There is a certain feel about being the first person to live in a new property and you can put your own stamp on the property straight away. The property will resemble an empty shell and often times quite a lot of money will need to be spent on furniture, carpets etc before you can move in.
If you are an investor you most likely will still have to pay stamp duty.
The new government levy on building of new property has forced the price of property upwards.
If you are waiting for the construction on property to be completed this can sometimes take a lot longer than originally anticipated. Although you may have to pay stamp duty on the property it may come complete with a lot of furnishings such as carpets, curtains etc.
Generally you can move into a second-hand property quite quickly after you make the decision to purchase. Stamp duty puts increased financial pressure on purchasers.
Sometimes if there are structural or other problems with plumbing /wiring etc they may not become apparent until after you move in which had you known you may not have purchased the property.
Higher maintenance charges than new property. While price is an important factor there are other things to take into consideration when purchasing property such as: | 1. What facilities and services are in the area such as schools, shops, public transport etc? | | 2. As an investment property have you checked into the local property market for monthly rent and demand in the area? | | 3. How easy or difficult will it be to carry out your daily life i.e., going to work or dropping children of at school? | | 4. In the major cities such as Cork, Galway or Dublin is there major traffic congestion and how good is public transport in the area as an alternative? | | 5. Have you drove around the area and do you like what you see? | | 6. Have you talked to local people and got from them their pros and cons of the area? | | 7. When everything is considered will you be happy living there / with the property? |
It is of critical importance that you know and ask the right questions about what you are buying. It is essential that you know what comes with and what does not come with the property.
Know when you are buying the property. Get an idea of completion dates of the sale and work towards those dates both in terms of savings and if you are selling property to finance the new one. Get an idea of completion dates of the sale and work towards those dates both in terms of savings and if you are selling property to finance the new one. There are many legal requirements and risks / dangers in relation to buying property. You should have a solicitor and keep them informed of what you are doing. It is best if you sit down with your solicitor and have all these explained to you before you commit to anything. It is advisable that all transactions are handled via a solicitor as this reduces the risk involved. When you find a suitable property for you it is advisable not to rush in but move with reasonable speed. In addition to the steps above it is advisable to get the property surveyed by a professional Surveyor as they might spot things which you would not have.
If everything is OK put in a bid for the property. The bid you put in will depend entirely on the property and current status of other bids put in by other bidders. With most new developments there is a set price usually with no changes permitted.
Keep your solicitor and bank informed of what you are doing.
If your bid is accepted, inform your Solicitor and Bank so that they can start the paperwork, processing of Mortgage and completion of sale. This is the stage that probably frustrates people the most. You can be almost certain that there will be delays caused by any number of things.
Make sure that your solicitor / agent is aware of the closing dates
If things are not happening or are falling behind schedule follow up and see what the problems are.
You can reduce delays in some ways by: | - Make sure you complete and return promptly any paperwork or phone calls | | - Make certain that your mortgage is fully approved ( Mortgage in principal is not an approved mortgage) and that you have life insurance and in most case fire insurance arranged |
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