First Time Buyers
Many first time buyers tell us how difficult they find the process of dealing with mortgage brokers, estate agents, insurance brokers, solicitors. There is a lot of paperwork to be filled out and phone calls and meetings to attend. Having spent thirty years dealing with property purchase, we have simplified the legal process so that much of the stress and hassle is removed. The result is that you save time and money and you can focus on the important things such as fitting out and moving in to your new home.
How do we save you time, money and hassle?
- Process explained in plain English;
Which means you will not be baffled by the jargon
- 6 Critical Mistakes to Avoid Guide;
Which helps you to avoid the common pitfalls;
- Simplified Steps to buying a property guide;
Which sets out each step of the process for you to tick off as we progress.
- Regular contact to keep you up to date;
Which means we work as a team;
- Fixed fee quote in advance;
Which means you know where you stand with your budget;
Which means you get the benefit of added efficiency;
- Experienced friendly conveyancing Solicitor;
Which means you are not passed on to juniors or legal executives;
- Professional Indemnity insurance;
Which means you have the guarantee of getting good title to your new house;
Which means we are regularily audited and comply with the Solicitors Regulations.
Which means we care about providing you with the best service.
- City centre location beside Luas;
Which means easy access if you need to drop in for a chat.
What is the difference between ‘Outline Loan Approval’ and ‘Full Loan Approval’.
When you start out looking for a property to buy you should applyfirst for outline approval to ascertain how much the lender will allow you to borrow. This will issue in writing from the lender fairly quickly.As soon as you agree a purchase price with the selling agent you must then apply for the actual loan approval to proceed with the purchase of your chosen house. This approval may take several weeks to obtain and will be subject to several conditions which must be satisfied before your solicitor will be allowed to draw down the loan cheque. You will have to delay signing the contract to purchase until you have received the actual loan approval as only then can you determine if you can satisfy the preconditions.
What is Tax Relief for Mortgage Interest on a Home Loan?
Tax relief for mortgage interest on a home loan is tax relief given to mortgage holders based on the interest paid on a qualifying mortgage on your home i.e. a new mortgage for a home, a top up loan used for the purposes of developing or improving your home, a separate home improvement loan, a re-mortgage or a consolidation of existing qualifying loans [i.e. loans used for the purchase, repair or improvement of your home], secured on the deeds of the home. Since 1 January 2002 the relief is paid at source by your mortgage provider. This system of giving relief at source rather than the relief having to be claimed back at the end of the year is called tax relief at source [TRS]. The mortgage interest relief is given at source, by your mortgage provider, either in the form of a reduced monthly mortgage payment or a credit to your funding account.
You do not have to be earning a taxable income to qualify for mortgage interest relief.
What is a Qualifying Mortgage?
A qualifying mortgage for the purpose of interest relief is a secured loan, used to purchase, repair, develop or improve your sole or main residence, situated in the State. You can claim tax relief in respect of the interest paid on this loan or mortgage.
You can also claim tax relief in respect of the interest on a mortgage paid by you for your separated/divorced spouse or former partner in a dissolved civil partnership, and a dependent relative (i.e. widowed parent or a parent who is a surviving civil partner or elderly relative) for whom you are claiming a dependent relative tax credit.
Tax relief is only available up to the maximum allowance.
Switching lender or mortgage type to achieve a better interest rate is not the same as taking out a new loan. However, a new mortgage where you move home and take out a mortgage with a new or existing lender is eligible for relief.
Mortgages taken out from 1st January 2004 to 31st December 2012, subject to qualifying mortgage criteria, are eligible for mortgage interest relief until 31st December 2017 (see rates/ceilings chart).
Mortgages taken out after 31st December 2012 will not qualify for mortgage interest relief.
Mortgages taken out prior to 1st January 2004 are no longer eligible for mortgage interest relief. However, top up loans/equity release loans taken out since 1st January 2004 on these pre-2004 loans may be eligible for mortgage interest relief, provided they adhere to eligibility criteria as listed above.
What changes have arisen for Budget 2012?
From 1st January 2012 the rate of mortgage interest relief for first time buyers who took out their first mortgage between the years 2004 to 2008 and are residing in the property increases to 30% until 2017. If you took out a loan outside of these dates the existing rules remain unchanged.
What is my position if I took out a loan after 2008?
The situation is unchanged and the existing rules apply. (see rates/ceilings chart) You are not entitled to any increase in mortgage interest relief arising from the Budget 2012 changes in mortgage interest relief.
How do I claim mortgage interest relief?
Mortgage interest relief must be claimed online. A married couple or couple in a civil partnership may submit their details online on the same application. In all other cases of joint borrowings, each claimant should submit their details online separately. If you cannot use the online facility, please contact the TRS Helpline on 1890 46 36 26 or email firstname.lastname@example.org for assistance.
When should I apply for mortgage interest relief?
You should apply online as soon as you have commenced repayments on your loan. In addition, if there is a material change to your loan [for example if you take out a top up mortgage on your home] you need to advise Revenue using the on-line system
How long does it take after I apply before I get my mortgage interest relief?
It can take a period of up to 8 weeks for mortgage interest relief to be applied to your mortgage by your lender, as your mortgage details have to be processed by Revenue and advised to your lender in advance. Please note that it may take longer to apply mortgage interest relief if you have switched or consolidated loans. (Where you apply during the year in which you take out the loan, your lender will pay any arrears due to you in that year.)
Do I need to apply for mortgage interest relief every year?
No. If your mortgage remains the same, your lender will continue to apply the relief automatically each year. However, if you take out a Top Up mortgage on your existing property you will need to inform Revenue. Also, if you move home and take out a new mortgage on your new property, you will need to inform Revenue.
Where there is a change to your mortgage and you are uncertain as to your continued eligibility there is an onus on you to notify Revenue of the change. Failure to do so will result in you having to repay any relief to which you were not entitled and where failure to notify has been done knowingly it will constitute a prosecutable offence.
What type of loan does NOT qualify for mortgage interest relief?
Mortgage interest on a loan taken out for investment, rental, secondary or any properties other than your main residence does not qualify for interest relief. Mortgage relief for rental properties as part of your business is available through the tax system and you should contact your local Tax Office.
Mortgages taken out prior to 1st January 2004 are no longer eligible for mortgage interest relief.
Can I claim mortgage interest relief on an Investment property?
No. Mortgage interest relief only applies to a loan in respect of your main residence. If the property you have is an investment property and you are receiving mortgage interest relief you should advise Revenue immediately using a TRS 4 form (PDF, 47KB) or by contacting the Revenue TRS Helpline 1890 46 36 26.
What are the implications for my mortgage relief if part of my mortgage is used to finance non-house expenditure i.e. holiday, car, education etc?
The full interest incurred by you is not eligible for relief in this instance. You must calculate the proportion of the mortgage that is applicable to your home, and insert this percentage on the space provided on the on-line system.
For example, assume you borrowed €200,000, and €30,000 is being used for non-house purposes, the percentage of your loan that qualifies for TRS can be calculated as follows:
Total amount borrowed = €200,000
Amount used on main residence = €170,000
Percentage of loan eligible for TRS = €170,000 divided by €200,000 x 100 = 85%
You must insert 85% in the 'percentage used on mortgaged property' space on the online application. TRS is only payable on the qualifying 85%.
Living or Working in the United Kingdom
Am I eligible for mortgage interest relief if I live and/or work in the U.K.?
If you are living in the State and paying a mortgage to a qualifying lender in the State but working in Northern Ireland, you can claim mortgage interest relief in this country, provided you have a PPS number. If you do not have a PPS number, you must apply for one from the Department of Social Protection.
Other loans, such as loans in UK currency, are not eligible for relief through the Tax Relief at Source Scheme but may be eligible for relief from your Local Inspectors Office.
You should contact your Local Tax Office for further information.
What does Annual Percentage Rate (APR) mean?
A lender is always required to quote the Annual Percentage Rate (APR) when advertising a loan or the borrowing rate and its purpose is to help you compare the true cost of borrowing. The Annual Percentage Rate (APR) calculates the total amount of interest that will be paid over the entire period of the loan.
What is a Top-up Mortgage?
This involves releasing some of the equity built up in your property if you're planning to remain in your home...
What is an application fee?
For years now mortgage lenders have priced their products by using a combination of an interest rate and a product fee.
While this is a pain in the neck when it comes to comparing mortgages and finding the cheapest home loan for your circumstances, don’t automatically dismiss products with a larger fee, as they are not always a bad deal.
The larger the mortgage, the more important the interest rate becomes and the less impact the fee has.
The array of mortgage price and fee variations doesn’t make life easy, but if you make use of the services of an independent mortgage broker, they can crunch the numbers for you.
Never base your choice of mortgage on interest rates or fees alone as your own circumstances, including the number of years left on your mortgage term and the amount you want to borrow, must be added to the mix to find the best deal for you.
Beware the Exit Fees
Most of us who take out a fixed-rate mortgage will naturally focus on the interest rate and fee as we look to keep the upfront costs and ongoing monthly repayments to a minimum.
However, it is just as important to check the costs of ending a fixed-rate deal ahead of schedule, particularly when you realise the potential costs involved. An Early Repayment Charge (ERC) will be detailed in your mortgage agreement and will tell you how much of a financial penalty you would have to pay to exit your deal before you reach the agreed maturity date.
Take current five-year, fixed-rate products as an example. Many lenders will charge you a % of your mortgage balance to quit the deal in the first year, but in reality this is something you are quite unlikely to want to do.
The situation changes when you get to the last 12-18 months or so of your term as you will be taking more notice of the interest rates available and starting to consider your options for when your deal finishes.
This is where the difference in ERC charges is important. In the final year of a five-year fixed deal, some lenders will only charge 1% of your balance as a get-out fee whereas some will demand a hefty 5%.
To give you an idea of the cost difference, someone with a €175,000 mortgage having to stump up a 5% exit penalty would be faced with a bill of €8,750 compared with a far more manageable €1,750 payable to a lender charging just 1%.
For those with a smaller loan, the costs will not be as great.
However, the potential savings of moving to a lower rate will be smaller too, so the size of the exit fee is still an important factor.
First Timers and deposits.
The biggest problem for first-time buyers is managing to save a 5% or 10% deposit to put down on their first home. Following the 2008 banking crisis, it became almost impossible to find a lender willing to lend unless you had at least a 20% stake to put down.
To give you an example of the monthly repayments on a mortgage with a 5% deposit, look at the following example with Building Society mortgage at 5.99% for twenty five years plus a fee of €899.
On a property costing €120,000, you would need to find a deposit of €6,000 plus pay the mortgage product fee of €899. On the remaining €114,000 mortgage balance, if you select a 25-year term, your monthly repayments will be €734 per month.
Be aware of the risks of a large mortgage.
However, taking out a large mortgage does come with some risks. The main one is the danger of falling into negative equity if house prices fall and your outstanding mortgage is more than the value of your house.
If you have a small deposit you only have a small buffer against the effect of falling house prices. This problem is sometimes greater with new-build properties because you often pay an extra premium on the price simply because you are buying a new home.
Negative equity becomes a problem if you have to move or you want to remortgage to a new deal.
Unless you feel very confident choosing a mortgage, it is always wise to seek independent mortgage advice, particularly so if you are planning to buy with a small deposit.
6 things to consider when buying
1 - Interest rate choice – fixed rate or variable rate?
Rather than base your decision solely on cost, this should come down to your own financial situation. If you are worried about your budget then an affordable fixed rate is likely to be your best option as you won’t have to worry about finding extra money if interest rates go up. If your budget is flexible, it is worth taking a look at the lower priced tracker and discount mortgages.
2 - Why the size of your deposit is important
Lenders price products according to how much deposit you have available. Lenders express this as Loan to Value (LTV). For example, if you have 25% of the purchase price to put down, the lender is giving you a loan up to 75% of the value of the property. The higher the LTV, the higher the interest rate becomes as the lender is taking on a greater risk.
3 - What is Standard Variable Rate?
The SVR is a lender’s “default” rate you are automatically transferred to when a fixed-rate or tracker mortgage deal expires. Lenders can raise or lower their SVRs at any time – but this tends to be influenced by changes to the base rate at which banks themselves borrow.
4 - Overpaying your mortgage
If you can afford to make additional payments on top of agreed monthly repayments, you will end up repaying your mortgage earlier than planned and can save substantial interest charges. Check with your lender to see if overpayments are permitted.
5 - Offset mortgages
Some lenders offer deals where your savings balance can be offset against your loan. If you had €60,000 on your mortgage and €15,000 in savings, you would be charged mortgage interest on the difference of €45,000, and you have access to your savings. This is a great way to repay your mortgage much earlier and save thousands in interest too.
6 - Read the small print
It is easy to get carried away by a very low interest rate or a fee-free mortgage, but don’t jump in without understanding the finer details. What are the exit penalties, can you make unlimited overpayments and the lenders SVR are things to consider.
So why not get a no obligation fixed fee quote now. You could save a lot of money. If you have questions, why not call or email us now without obligation and we will be happy to answer your queries without charge.
No solicitor/client relationship or duty of care or liability of any nature shall exist or be deemed to exist between O’Shea Legal and you until you have received confirmation in writing from us in which we confirm our appointment as your Solicitors.
*In contentious business a solicitor may not calculate fees or other charges as a percentage or proportion of any award or settlement.