A is for Architect
No matter what you're buying, from the smartest new apartment to the most run-down fixer-upper, it's wise to get a professional survey. An architect, surveyor or engineer is the person to call on. The report they put together will detail all the things about the property that could cause you problems or cost you extra money to put right, from the condition of the roof to the presence of damp, whether the extension conforms to planning regulations or if the floorboards are in good shape. Many people get an architect to do the survey, especially if it's a house that obviously needs work or requires an extension. An experienced architect will not only be able to advise if the house suits your lifestyle needs but will also give you an idea of how much fixing the house up is going to cost and the time frame involved. In a new house or apartment, an architect/surveyor/engineer will be able to go through the property spotting details that need to be put right before you finally sign contracts. This is called a snag list.
B is for Building Energy Rating
If you buy a new house or apartment, it should come with a Building Energy Rating - a certificate that gives you an indication how energy efficient the property is likely to be. This in turn will give you an idea how expensive it will be to heat and how comfortable it will be to live in. All homes for which planning permission was applied for on or after January 1st, 2007 must have a Building Energy Rating. After January 1st, 2009 secondhand houses, whether offered for sale or rent, must come with a Building Energy Rating.
C is for Closing
The closing date - the day when contracts are finally signed and there's a handover of keys - is such a moveable date that most buyers are completely confused by it. It can be particularly problematic for people buying older properties. In an ideal situation, the buyer and seller agree, through their solicitors, a mutually suitable day for the closing - enough time for them to move out, and enough time for you to get all your details in order. This could take as little as four weeks from the day the sale is agreed. However, what often happens is that the buyer's solicitor discovers details that he is, in legal terms at least, not happy with. Does that extension have planning permission? Is there a right of way at the end of the garden? Are the service charges for the apartment up to date? He must put these, and often many other questions, to the seller's solicitor and so it goes, back and forth, and all in writing. In new developments, it's up to the builder to deliver on the closing (or completion) date as promised but this too can stretch beyond the agreed timeframe and usually, much to the buyer's frustration, there is little that can be done. As a buyer you should, as soon as you put down your deposit, make your preferred closing date clear to the other side.
D is for Deposits
First for the lender, then for the seller.
You will need a hefty cash deposit. Thanks to the credit crunch your lender will almost certainly not loan you 100% of the purchase price, so you will have to come up with - and show evidence of the origin of - a great deal of cash. If, for example, you are getting a 92 per cent mortgage you will need more than 8 per cent of the purchase price. That's so you can pay your stamp duty (if you are liable) your solicitor and surveyor and have a bit left over for moving-in expenses. For first-time buyers, the deposit usually comes from savings or increasingly, contributions from parents. Those trading up or trading down should be able to come up with a more sizable deposit from the proceeds of the sale of their homes. The bigger your deposit, the best deal you will be able to get from a mortgage provider.
During the actual process of buying you will also need a deposit. If you are buying a new house or apartment, you will first give a fully refundable, non legally binding Booking Deposit - usually a nominal amount of around €5,000. You can still walk away at this stage. Then, usually a month later (but maybe longer, depending on the developer) you will pay a 10% deposit and sign contracts which commit you to going through with the sale. In the case of secondhand properties, once you have agreed to buy, the estate agent will ask for a deposit - the size of which depends on the agent. This is non-binding and can be returned to you if you (or the seller) pull out of the sale.
E is for Equity
If your house is valued at €400,000 and your mortgage is for €150,000 - then you have €250,000 equity in your home. That's the amount you would have left over if you sold your house and paid off the mortgage. How much equity you have is crucial if you want to remortgage or trade-up. In a stable market, buyers build up equity in their homes, over time, through paying off the mortgage - that's one of the long-term benefits of buying over renting. A loan to value (LTV) ratio is based on the amount of equity you own. The higher the LTV, the better deal you can get from a mortgage lender.
F is for First-Time Buyer
A first-time buyer is defined is a person who is buying a property for his or her personal use as a principal residence and who has never, either individually or jointly bought or built on his/her own behalf a house in Ireland or anywhere abroad. If you are buying jointly with someone (wife/husband/partner/friend) who has previously owned a property then you will NOT be considered as a first time buyer.
However, a divorced or separated person is considered a first-time buyer under certain circumstances. Click on the Finance section of Myhome.ie for more information.
G is for ...Gazumping and Gazundering
Gazumping is when a seller withdraws from an agreed sale - but before contracts have been signed - because they got a better offer.
Gazundering is when the buyer withdraws from an agreed sale - but before contracts have been signed - and offers the seller a lower price than previously agreed.
H is for Housing Schemes
There are a number of Government initiatives to help buyers get on the property ladder. They are particularly aimed at First Time Buyers. The Affordable Housing Scheme, for example, permits qualifying buyers (for some schemes there is an upper income limit of €58,000 for an individual and €75,000 for joint buyers) to buy certain apartments and houses at a significant discount. This and other housing schemes, such as Shared Ownership are administered through local authorities and city councils. Contact your local authority for details about application criteria and housing availability.
I is for Insurance
As a home buyer there are three types of insurance you need to know about.
- Mortgage Protection Insurance.
Your lender will most likely insist on this as it pays off the mortgage if you die. It's a policy that runs for the same length of time as the term of the mortgage and your monthly premium is a fixed amount that depends on such factors as the size of your mortgage, your age and your health. If you are over 50, your lender might not insist that you get Mortgage Protection Insurance and if your mortgage is in joint names, the insurance policy will have to be too. - Building Insurance.
Your lender will insist on this as it protects their interest as much as yours. This covers major damage to your property, i.e. fire, storm or floor. Every year the Society of Chartered Surveyors (www.SCS.ie) issues a guide to the cost of rebuilding various types of homes. It's worth checking out when deciding how much Building Insurance you need. - Contents Insurance.
Recommended for peace of mind in case of burglary or accidental damage.
Your mortgage provider may try to sell you insurance - but you can, and should shop around. There are also other insurance products aimed at homeowners such as income protection and serious illness cover but before you consider these, make sure you have the basic three types of insurance covered first.
J is for Joint Purchase
Pooling your resources with a friend to buy a property can be a good idea - it helps you both get on the property ladder and instead of paying rent to a landlord, you are building up equity in your own home. But, and it is a big but, whether you are buying with a friend or a family member you must work out exactly what should happen if things go wrong. Before you sign the purchase contract, sit down and write a separate document that deals with some key issues including:
- What happens if you fall out?
- What if one of you wants to sell up and the other doesn't?
- If one of you wants to sell your share, does the house have to be sold or can you buy each other out?
- Who pays for major repairs? If jointly, should there be a fund set up and how much should go into it?
- What happens if one of you wants to move a partner in?
- Married couples buying together automatically have rights over the property. Couples, even "life partners", are currently in a different, less secure position. Seek legal advice regarding making a Will etc at time of purchase.
K is for Know How
The Myhome.ie site will tell you everything you need to know about buying a house - the more knowledge you have, the better deal you'll get every step of the way.
L is for Legal Advice
You will need a solicitor to make sure that that everything is legally in order and to transfer ownership of the property to you - or, in legal jargon, handle the conveyancing. Solicitor's charges can vary considerably, so it's worth speaking to two or three before you make your choice. A solicitor should guide you through the jargon and help you ensure any ownership issues are sorted out (this is referred to as the 'title' of your house) so you don't have legal problems in the future. On top of your solicitor's fee you should budget for legal searches, registrations fees and the cost of stamping documents. Your solicitor should be able to give you an idea from the outset what these additional charges will be.
M is for Mortgages
A mortgage is, for most people, the biggest loan you'll ever take out in your life so it's important to shop around. Don't commit to anything until you fully understand that all deals offered by lenders are different and what seems the cheapest can often turn out to be most expensive in the long run. Become familiar with the money jargon that makes mortgages so difficult to understand, such as APR, Fixed Rate, Variable Rate, Tracker, Term, Draw Down, Surrender and on and on the jargon goes. Click on the Finance section on this website for all the mortgage information you need.
N is for NewAddress.ie
If you are moving home you should avail of the free change of address service which will save you considerable time, stress and hassle. The service, which is the only one in Ireland, will enable you to change your address details with companies such as Bank of Ireland, Bord Gais, eircom and over 50 other companies. The service, which is part of the MyHome.ie group, is totally free for the mover (the partner companies such as Bord Gais etc pay for it).
O is for Offer
The asking price is just that - an asking price, it's not a price tag. You don't have to offer it the estate agent will expect you to put in an offer below the advertised price, how much below depends on you. It gets down to how much you can afford and how much the house is worth to you. Research the market. Search Myhome.ie for the asking prices of other properties in the area and you'll get an idea of the type of offer you realistically need to make. Don't be too disappointed if your first offer is rejected, it's all part of the bidding process.
P is for Private Treaty
Property is mainly bought and sold in two ways: usually by Private Treaty but sometimes by Auction.
- Private Treaty. The estate agent establishes an "asking price" and negotiates from there. You give your bid to the agent and they take it to the vendor (the seller). It's a longer drawn out process than an auction, you do not know for sure if there are other people interested in the property and how much they are willing to pay and the sale is not a certainty even after the deposit is paid. Either side can pull out of the deal right up until the signing of contracts.
- Auctions are a feature of the top end of the second-hand house market and sellers tend to like them because they are cut and dried. The estate agent will put an AMV (Advised Minimum Value) on the house, which is usually the minimum the seller is willing to accept at auction. As a buyer, you see what others are bidding and if your bid is the highest, the property is yours. Directly after the auction you must hand over a 10 per cent deposit - it's not refundable and you must also sign a sale contract legally committing you to going through with the purchase.
Q is for Questions
The many stages in a property purchase can throw up some complex - and not so complex - queries. As a buyer you will be engaging, and paying for, several professional services, including a solicitor, a surveyor and maybe a mortgage broker. You will have many specific questions relating to your particular purchase, i.e. does the extension have planning permission? How much stamp duty should I pay? When is the closing and can I delay it? Can I change from a fixed to a variable mortgage? These are the people to ask and make sure that when you get the answer, you understand it. There is so much legal and financial jargon involved, it's important you clearly understand every step of the way. If you don't, ask again, you might think it makes you look foolish but better ask now then realise later you've signed for something you don't understand.
R is for Rent-a-Room
Rent-a-room relief is a valuable benefit which allows taxpayers to rent out one or more rooms in their home, and receive up to €10,000 in rental income tax-free each year. If your rental income exceeds €10,000, you will be taxed on the full amount received, not just on the excess over the limit. You can only apply for the scheme if you are living in the house or apartment yourself and that it is your principal residence.
S is for Stamp Duty
The amount of Stamp Duty you pay depends on the value of the property and your status.
- First Time Buyers who intend to be owner occupiers of new or secondhand property do not pay Stamp Duty.
- Owner-occupiers of new houses/apartments are exempt from Stamp Duty, if the area of the house or apartment does not exceed 125 sq. metres and a Floor Area Compliance Certificate has been issued. If the area of the house or apartment is greater than 125 sq. metres, Stamp Duty is payable if the Chargeable Consideration is above the relevant exemption threshold. The Stamp Duty is assessed on either the cost of the site or 25% of the cost of the site plus the building costs (less VAT), whichever is the greater figure. This figure is called the Chargeable Consideration.
- If you are buying the property as an investment, i.e. to rent out, or as a holiday home, you must pay Stamp Duty even if you are a First Time Buyer and no matter what size the property is.
- Stamp Duty is payable on land sites without residential buildings.
- Rates of stamp duty for second-hand houses and apartments for owner-occupiers (and investors buying new or second-hand houses and apartments)
Property value
Up to €125,000 - Exempt
Next €875,000 - 7%
Balance - 9%
- Stamp Duty is payable on sites without residential buildings. However, where a parent transfers a site to a child no Stamp Duty is charged if the site is to be used for the construction of the child's principal private residence and the market value of the site is less than €500,000. There are other rules in relation to parent/child transfer - ask your solicitor.
- Stamp Duty is payable at half the normal rate if there is a transfer of property between certain close relatives, eg, a parent, grandparent, step-parent, child, brother, sister, half-brother, half-sister, aunt, uncle, niece or nephew.
- Your solicitor will advise you on the amount of Stamp Duty you will have to pay and will collect that amount from you and forward it to Revenue.
T is for Tax Relief
Mortgage interest relief is a tax relief on the interest you pay on your mortgage. It's one of the reasons why it makes sense for renters to buy. It is granted at source so your lender does the figures and subtracts it from your monthly payments. Click on the Finance section on Myhome.ie for details on Mortgage Interest Relief.
V is for Viewing
Make sure you view at different times of the day. Apart from getting a feel for the size and number of rooms, you want to know how bright and or noisy it is. When does the garden get the sun? Will your furniture fit? Does it have enough storage? In second-hand houses learn to look beyond the owner's taste in carpets and curtains and imagine what you could do with the space. In newly-built developments, fully fitted-out showhouses are a brilliant way of seeing the apartment or house at its absolute best. But look hard at the rooms to make sure you could live comfortably there.
W is for all What, Where
What to buy? Make a wish list of the type of home you want. House or apartment? Detached or Semi? New build or old? How many rooms? Garden? Parking? Etc, etc.
Where to buy? We all have a dream location but your finances mightn't quite match your dreams. Pick an area you like and that suits your lifestyle, ie your commute, local schools, shops, public transport links. Try to have an open mind as regards location - if you narrow your search down to only one small area, you'll have a harder time. Consider surrounding areas to your dream one.
Y is for Yields
The yield is the key figure to consider then buying a property as an investment. When you are buying to let a property, the rental yield is the rate of return which does not include capital appreciation. The higher the yield, the more profitable the investment. Generally the higher the number of bedrooms the lower the yield (though Dublin city centre is an exception to this).
Z is for Zeitgeist
It's one of those words that's thrown around anytime commentators are trying to get a grip on the mood of the times. It roughly translates as the spirit of the age and you'll hear it included in the never-ending discussion about whether this is the right time to buy a house or should you wait, or would you be better off renting. But ultimately it's all about how you want to live your life and what's right for you.
Related Posts from MyHome Property Blog
- How to spot an area on the up
- Property Deeds: Where are they?
- Affordability is key when choosing a mortgage
