Are you a first-time buyer looking to get the first step on the property ladder? This article explains what you can do to help yourself, and the Government Supports that are available to you as a first-time buyer.
But before you begin looking for a suitable property, you will need to know how much you can afford to spend.
Most people use a mixture of savings and borrowings to purchase their first property and you can use any of the many online calculators to estimate how much you can afford to spend.
As a first-time buyer you will need a minimum of 10% of the purchase price of the property in savings and can borrow up to 90% of the purchase price. You can borrow up to 3.5 times your gross salary – based on either a single or joint incomes – in general.
The biggest hurdle is getting a large deposit together. It is likely that you will need more than 10% in savings as you will have other costs associated with buying your first property – stamp duty, legal fees, valuation fees, repairs, decoration and decking it out with furniture.
The average deposit needed to buy a home is now €52,500 for a first-time buyer (FTB) according to figures from the Banking and Payments Federation Ireland (BPFI) December 2021.
You will need a large savings pot, not only for your mortgage application, but also to bridge the gap between the amount you can borrow and the actual cost of the property. Lenders will look for proof of employment and affordability via your savings, credit and rent history.
One of the best things you can do is to get into a ‘savings habit’ as soon as you start employment, before you even start thinking about buying a property! The longer you save, the more time your money has to grow.
When it comes to getting mortgage approval it is always a good idea to shop around to get the best interest rate and terms. You can avail of a fixed interest rate (in some cases up to 25 years) or a variable rate. Consider if you can still afford your repayments if interest rate increases even by a small percentage! It is a good idea to use a Mortgage Broker who will help you choose the best mortgage for you and who will guide you through the mortgage application process. Alternatively, you can contact lenders directly.
The good news is that as a first-time buyer there are also a number of Government Supports available to help you with your purchase and bridge the gap between your mortgage and the cost of your new home.
· Help to Buy Scheme (HTB)
This scheme is available for first time buyers of new houses, apartments or self-builds and has just been extended to 31st December 2022.
It will help you with the deposit you need to buy or build your new home. There are conditions attached to this support – you must take out a mortgage for at least 70% of the value of the property and be tax compliant for the previous 4 years.
Your property must cost less than €500,000 and you must live in the property for five years after you purchase it. When you buy or build your home, the incentive will give you a refund of Income Tax and Deposit Interest Retention Tax (DIRT) that you paid over the previous 4 years. A tax rebate of 10% is given up to a maximum amount of €30,000.
· Local Authority Home Loan Scheme
This is a Government backed mortgage for first-time buyers and certain other applicants. Loans are offered at reduced interest rates and can be used to buy both new and second-hand properties, or to build a home. The interest rates are fixed for the lifetime of the loan.
It is available nationwide from all local authorities for those aged between 18 and 70, who are on low or modest incomes, and who cannot get sufficient funding from lenders to purchase or build a home.
The scheme has recently been extended so that single applicants with a gross income of up to €65,000 in the Greater Dublin area, as well as Cork and Galway will be eligible to apply.
· Refurbishing Vacant Properties
The Government is due to launch another grant scheme to help people refurbish derelict properties in towns or villages around the country.
The grant of up to €30,000 is aimed at people who buy derelict properties, and who renovate them to live in. To receive the grant, it is expected that the property would not have been used for a certain period of time and must be used as the main residence of those who buy it.
It is estimated that there are between 42,000 and 92,000 vacant properties in Ireland. The exact details of the scheme are expected to be announced in the coming weeks ! We particularly like this incentive as it’s about time these properties were brought back to life and used to help alleviate the housing crisis here in Ireland.
· Shared Equity scheme
This new scheme is also due to be launched this year and is aimed at first-time buyers buying a new-build home on private land. It will provide up to 20% equity to bridge the gap between the mortgage that you can secure and the cost of the property. Exact details are yet to be confirmed.
Need help or advice on saving for your Deposit? We can help you put a savings plan in place (if it’s for 5 years or more).
Just secured your mortgage?
Give us a call and we can help you put life cover in place to cover your loan. The most competitive rates in the marketplace guaranteed.
Happy house hunting !