It was great to see the Central Bank relax the rules for first-time buyers of property.
The lending rules (Applicable for January 1st 2017) apply to self-build mortgages as well as to the purchase of new homes and are summarised below (previous rules in italics):
• First time buyers for mortgages need to secure a deposit of 10%. For a house this is the purchase price; for a self-build it is typically calculated as either the site purchase cost (if applicable) plus build costs or the final valuation upon completion. Typically, the lower of these two figures applies.
Previously this was 10% for properties up to €220,000 and 20% of the difference for properties over €220,000
• There is also a Government Help-to-buy scheme (which at the time of writing is still in place but could be dropped), A couple who can raise 10pc of the purchase price of a new home can get 5pc back for free from the taxpayer (up to a maximum of €20,000). Self-builders can also claim the relief on their house. In that case, the relevant date is when the first tranche of the mortgage was drawn down.
• Borrowers can still borrow only 3.5 times their annual income
• Second time buyers are still at the higher deposit of 20%
Example:
A couple are looking to self-build their house at 2000 square feet. The site is a gift from the parents.
A typical construction cost (at time of writing for a main-contractor led project) at €135 per square feet equates to a total build cost of €270,000 (excluding professional fees etc…)
The couple will need therefore to raise a deposit of 10% = €27,000
5% of the this can be refunded under the ‘Help-to-buy scheme’. Currently (at time of writing) this effectively reduces your the deposit by €13,500 (5% of €270,000).
This additional 5% saving could be spent on a beautiful, elegant, architect designed home!
Read why you should use an architect to help with your new home HERE and HERE.
Watch this space for our new ‘First Time buyers – Architect Design Service’…
UPDATES – the information below has been added since the post was written:
THIS ARTICLE concludes by asking if the 10% figure should be available to all – not just first time buyers – AGREE!
If you’re interested in the economics of the flip-side of this Central Bank decision then THIS ARTICLE by David McWilliams would be of interest – I would read the Comment(s) and replies first though below:
Disclaimer:
All advice online is remote from the situation and cannot be relied upon as a defence or support – in and of itself – should legal action be taken. Competent legal and building professionals should be asked to advise in Real Life with rights to inspect and issue reports on the matters at hand. Correct at time of writing e&oe.
The actions of the Central Bank in pandering to Builders who want to sell for more is little short of criminal. We have seen where this kind of pumping up the market led to in the Noughties – massive overvaluing of property, unsustainable mortgages and eventually destruction of the Irish Economy, which everybody living in Ireland is still paying for through VAT income tax and hidden taxes. The ‘you’ve never had it so good’ mentality looks like its making a comeback. Really, as architects should we not frown upon it rather than cheerlead it?
Hi Michael
I’ve updated the post with a couple of links giving the flip-side of the argument.
A drop to 10% is a realistic amount for couples to save; the Help-to-buy scheme is probably making it too easy and is muted to be dropped anyway.
No disrespect but I think you’re not taking into account the difference between Dublin & rural Ireland – it’s a different universe here
Mark
No offense taken Mark, and likewise no disrespect from me, but I have seen the feeding frenzy before in the Noughties. The government, the reckless and unaccountable Central Bank and the corrupt Builders are setting the taxpayer up for another fall. There will be no winners in this. All this will do is push the price of housing up again.
No offense taken Mark, and likewise no disrespect from me, but I have seen the feeding frenzy before in the Noughties. The government, the reckless and unaccountable Central Bank and the corrupt Builders are setting the taxpayer up for another fall. There will be no winners in this. All this will do is push the price of housing up again.