Irish Mortgage Guide

Our Step by Step Guide to Mortgages in Ireland

1. How much can I borrow?
2. How do I choose the best mortgage option for me?
3. Stamp Duty Rates
4. Solicitor's Fees
5. Valuation Report
6. Surveyor's Report
7. Other costs
8. Irish Mortgage Protection (Life Assurance)
9. Buildings Insurance
10. Contents Insurance
11. Irish Mortgage Repayment Cover
12. Indemnity Insurance
13. First Time Buyers Grant
14. Income Tax Relief

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1. How much can I borrow?

The amount you can borrow is based on your earnings.

In the majority of cases you can borrow between 3.25 and 4.5 times your salary from Irish Mortgage Brokers or up to 3.75 times combined gross salaries in the case of co-borrowers.

Most Irish lenders will lend up to 92% of the property value or purchase price, whichever is the lower through a mortgage broker. In certain circumstances up to a total of 100% can be borrowed.

You can repay a mortgage over any period between 10 and 40 years, provided the mortgage is repaid before age 70.

Click here to view best irish interest rates

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2. How do I choose the best mortgage option for me?

There are a wide variety of ways you can repay your mortgage in Ireland. Outlined here are basic details on the various mortgage repayment options on offer from Irish Mortgage Brokers such as NMS.

Variable Rate Mortgages
The repayments on a variable rate mortgage will fluctuate in line with general interest rate movements. If interest rates fall, your monthly mortgage repayments will fall. If interest rates rise, your repayments will increase.

Fixed Rate Mortgages
You may not want to take the risk of a rise in mortgage interest rates, particularly if you are working on a tight budget. With a fixed rate mortgage, a competitive rate of interest is fixed for an agreed period which can range from one to ten years. This removes any risk associated with fluctuating interest rates.

Annuity Mortgage
An annuity mortgage is repaid monthly over the term of the loan. You simply pay off part of your borrowing each month, plus the outstanding interest. In the early years, the capital amount of the loan you repay is lower - most of each payment being interest. As the amount you owe reduces over the years, interest becomes a smaller part of each monthly payment. Tax relief is available on the mortgage interest. As the interest you pay is higher in the earlier years of the mortgage the benefit of tax relief is greater, when borrowers are most likely to be short of cash.

Interest Only Mortgages
With this repayment method you have the option to just repay the interest each month , thus giving you a lower mortgage payment and manage your cashflow a lot easier and at the same time maximising your tax relief. When the property is eventually sold and provided it has made a profit you then repay the capital from the proceeds of the sale.

Endowment Mortgage
Under the endowment method you pay interest on your full borrowing throughout the mortgage term and this qualifies for tax relief. You also pay monthly contributions to an endowment policy, which includes sufficient life assurance to pay off your loan in the event of your untimely death. By the end of the mortgage term, the value of the endowment policy should have grown sufficiently to repay the mortgage in full and in addition possibly pay you a cash surplus.

Pension Mortgage
Under the pension method you pay interest on your full borrowing throughout the mortgage term and this qualifies for tax relief. You also pay monthly contributions to a pension policy, which includes sufficient life assurance to pay off your loan in the event of your untimely death. By the end of the mortgage term, the value of the pension policy should have grown sufficiently to repay the mortgage in full. In addition leaves you with a pension for life. You can also claim tax relief on your pension contribution.

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3. Stamp Duty Rates in Ireland

New homes are subject to stamp duty if their floor area is greater than 1,346 square feet and it is charged on the site value only. For second hand homes the rate of stamp duty is based on the sale price or market value. It is charged on a sliding scale, which means that the higher the price you pay for the property, the higher the rate of tax that you will have to pay.

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Budget 2005 - Implications for the Housing Market

Cut in stamp duty will boost residential property market and underpin house price inflation in 2005

Move to help First Time Buyers

The budget will deliver a further boost to the residential property market. The reduction in stamp on second hand house purchases for first-time buyers will favour existing rather than newly constructed houses. This should boost second hand house price inflation in early 2005 and ensure the property market remains strong through the coming year.

There will be no stamp duty on first-time buyers of second-hand houses up to €317,500 in value and reduced rates on such purchases up to €635,000.

Note for owner occupiers of new property:

There is no stamp duty payable by owner occupiers on new properties below 125 sq. m. (1345 sq. ft.). The owner occupier must reside in the property for a minumn of 5 years otherwise be liable for full repayment of the stamp duty. For new properties greater than 125 sq. m. the duty is payable on the greater of the site cost or 25% of the total cost ie. the site and all construction costs.

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4. Solicitor's Fees

There is a significant amount of legal work involved in buying a home in Ireland. There are no set fees for this work - and costs vary depending on the value of the house. We have a number of solicitor's to choose from. The guideline figure suggested by the Incorporated Law Society of Ireland is 1% of the purchase price, plus VAT and outlay.

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5. Valuation report
To check that the property is good security for the mortgage, your lender will require a professional valuation of the property. Some lenders insist on organising this for you. The cost is normally €127.

6. Surveyor's report
Although the valuation report will indicate what the property is worth, it will not indicate any major or minor faults in the property. Therefore it is prudent to obtain a full structural survey. The cost of the survey is usually around €190 plus VAT.

7. Other costs

In addition to the contractual costs outlined above, don't forget the costs of any decoration that you will need to carry out, particularly in the case of second-hand property.

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8. Mortgage Protection in Ireland (Life Assurance)

Life Assurance protection is required in every case when you take out a mortgage. The type of policy required will vary according to the type of mortgage you select, but we can advise you of all the options available.

9. Buildings Insurance

The lender will insist that you insure the property against usual risks, including fire, flood and subsidence. Your home should be insured for what it would cost to rebuild it, if it was destroyed. This may be more or less than its market value. The valuation report that the lender commissions, will outline the cover needed.

10. Contents Insurance

At the same time, it is also advisable to insure the contents of your new home. It can be surprisingly expensive to replace anything that is stolen, damaged or broken. Contents cover can conveniently be incorporated as part of your buildings cover.

11. Irish Mortgage Repayment Cover

It is also possible to buy insurance to cover your mortgage payments. None of us can be sure that we won't run into a patch of bad luck, through accident, illness or redundancy.

Within certain limits, payment protection insurance will meet the full cost of your monthly mortgage payments, if you become unable to work for these reasons.

Click here for details of our Redundancy Cover

12. Indemnity Insurance

Indemnity insurance was traditionally required by the lenders if you borrowed more than 70 - 75% of the purchase price. Now, in most cases, the indemnity Insurance (also known as Indemnity Bond Fee) will be paid on your behalf by the lender, at no cost to you.

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13. First Time Buyers Grant

The government withdrew the first time buyers grant in December 2002.

14. Income Tax Relief

Provided that the property you are buying will be your main residence, you will receive income tax relief on the interest you pay on your Irish Mortgage. This relief will reduce the cost of your monthly repayments. However, not all of your repayment may qualify :

Maximum limits applicable to mortgage interest relief:

• € 6,350 for a married couple
• € 4,570 for a widow(er)
• € 3,175 for a single person.

If you have claimed mortgage interest relief at least 5 years ago, the maximum limits applicable to mortgage interest relief will be further restricted to:

• · € 4,825 for a married person
• · € 3,530 for a widow(er)
• · € 2,415 for a single person

First time buyers will not be subject to these additional limits.

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