The amount you can borrow depends on the purchase price of the property. For first-time buyers, you need to shell out 10% of the property value as your downpayment. Fortunately, the Irish government provides assistance in securing the 10%, which is the Help to Buy Scheme (HTB). 

HTB Scheme is an incentive program for first-time home buyers. This can be a new build, self-build, or apartment. It is basically a refund based on your tax payments in the past four years prior to your HTB application. The scheme will be able to pay for the 10% downpayment up to a maximum of €30K. If the property is worth €200K, the government will be able to provide €20K (10% of the €200K), then your down payment is fully covered. However, if for example, the property you are eyeing is €330K, 10% is €33K, the HTB scheme will be able to pay €30K but you’ll have to shell out the balance of €3K. Though you paid this amount out of your pocket, this is still way cheaper than paying the whole €33K. 

If you are planning to avail of the HTB scheme, log in to your revenue account and check how much tax refund you can claim. For instructions click here.  To learn more about the HTB scheme, click here. 

With the increasing cost of real estate properties, sometimes it is difficult to mortgage a property on your own. If it’s not a joint mortgage, and your annual salary is €60K, your maximum loanable amount is only €240K. And if the property is at €330K, you’ll have to cash out the remaining balance of €90K. For some it might be difficult to produce that amount, hence, will not be able to push through buying their first home. Fortunately, there’s another scheme that can help that – First Home Scheme. 

First Home Scheme (FHS) is a shared equity scheme wherein the government and participating banks pay up to 30% of the property value. But if you are also availing of the HTB scheme (yes, you can avail of both), the maximum equity will only be up to 20%. With the FHS, the government becomes part owner of your home. However, you can buy back the share without any interest within the next 5 years. After that, there will be interests based on the current market value of your home. It ranges from 1.75% to 2.85% depending on the number of years. You can find more details on the First Home Scheme by clicking this link. 

The table below provides a quick summary for both HTB and FHS using our example of €330K home with only one individual taking the mortgage.

So even if you are not sharing a mortgage with anyone, it is still possible for you to get your first home in Ireland.

3. Calculate Repayments

Having an idea of how much you’ll be paying for your mortgage will help you prepare, and assess your financial capability.

Your mortgage repayments will depend on several factors. This includes loan amount, interest rate, loan term, and down payment. For the €330K property less €33K down payment (€30K from HTB, and €3K out of pocket), the amount which will be financed by the bank is €297K. For this, the monthly repayment is €1,387.24 for 35 years with an interest rate of 4.40%. I got these values from BOI’s mortgage calculator. 

Although the maximum term is 35 years, this will be dependent on your age. The loan should already be paid when you reach 70 years old. If for example, you are 40 years old now, the maximum loan term will be 30 years (= 70 – 40). If it’s a joint mortgage, the term will be calculated based on the person who is older.

4. Assess Your Eligibility

The eligibility requirements for a home mortgage vary from lender to lender, but here is a quick guideline.

• • Income stability: Banks want to see that you have a steady income to support the mortgage repayments. If you are employed, they will need your payslips, salary certificate, and most recent End of Year Certificate (P60) from the Revenue. If you are self-employed, you’ll have to provide audited accounts, and other additional documents to show that your income is stable. 
• • Debt-to-income ratio (DTI): Your DTI ratio is the percentage of your monthly income that goes towards debt payments. Most lenders want your DTI ratio to be below 50%. So if you currently have other loans, the total amount of debt payments including the mortgage repayment should not exceed to 50% of your monthly income. If possible, it is best to clear out all your debts (e.g. credit card, other personal loans) before applying for a mortgage. 
• • Credit History: Having a good credit history is important it shows lenders that you are a responsible borrower. They want to see that you have a history of making timely payments on your debts, and even bills. So be sure not to miss your utility bill payments because it might impact your credit standing.

5. Obtain Approval In Principle (AIP)

So now that you have saved enough to pay at least for reservation, assessed your mortgage eligibility, and already obtained an estimate of how much you can borrow, and the possible mortgage repayments, it’s time to reserve your dream home. 

But based on experience, real estate agencies will only seriously entertain you if you already have what’s called the AIP or Approval In Principle. AIP is a letter from the bank which states that they are willing to lend you to buy a home. It is not a formal mortgage offer, but it can give you an idea of how much they will be lending and make the home-buying process go more smoothly.

If you inform your real estate agent that you already have an AIP, this signifies that you are not just inquiring but have the capacity to purchase a home because you are already pre-assessed by your bank. Check BOI’s requirements here.

6. Reserve Your Property

You can reserve your property by providing the initial booking deposit of 2% – 5%. As I mentioned, we deposited €5k for our property. The good thing about this though is that it is refundable. Once the drawdown (loan disbursement) is made by the bank and paid to the developer, the initial booking deposit will be refunded by the real estate agent which usually goes to your solicitor, and you’ll be able to use it as payment for the solicitor fees and stamp duty. 

7. Hire a Solicitor

What I like about the process of purchasing a property in Ireland is that we are required to get a solicitor. In the Philippines, you don’t need to hire a lawyer if you are planning to buy a home. The solicitor will help you understand the legal process of buying a property and protect your interest. Here are some of their specific tasks:

• • Do title searches to make sure that the seller has a clean title to the property. 
  • Prepare and review contracts
  • Process the transfer of legal ownership of the property 
  • Calculate and facilitate stamp duty payments
  • Completion or finalizing the property purchase process

During the process, banks will ask for the name of your solicitor. If you don’t have one yet, they can provide a list of their accredited solicitors. Our solicitor quoted us €2,708 plus stamp duty which is 1% of the purchase price. You don’t have to pay for this immediately. This will be paid at the last part of the purchase. As mentioned, you can use your initial booking deposit to pay for the legal services and stamp duty. In our case, the stamp duty is € 3,300 with a total of €6,008 (including solicitor fees). Since we only have €5K deposit refunded, we paid an extra €1,008. 

8. Obtain a Formal Loan Offer From Your Bank

We started the process in the first quarter of 2022. This includes property reservation, AIP, and hiring our solicitor. We were told by the developer that our unit will be ready by the third or fourth quarter of the year. September came and the property is still not ready but we initiated the request already to obtain a formal loan offer. I believe the loan offer should be done after your AIP. We had to resubmit some documents, such as payslips, and salary certificates to prove to the bank that we are still employed or still had a stable income. 

Once the formal loan offer is provided, you will now start to comply with the rest of the requirements like 

• • Having the property evaluated. This can be done only when the property is almost complete. The assessment is performed by a property evaluator usually from another real estate agency. They will assess the market value of the property ensuring that it is equivalent or higher than the market price. The bank usually has a list of accredited property evaluators. We paid €150 for this service to the evaluator. 

• • Getting Home Insurance. The purpose of home insurance is to protect your home and its contents against damage caused by fire, theft, and other hazards. When requesting a quote, you’ll be asked to provide the value of the contents of the house. Naturally, you don’t know yet but you can provide an estimate. 

• • Obtaining Mortgage Protection. This is a type of life insurance that pays off the mortgage when a borrower(s) dies ensuring that the beneficiaries will not have to worry about making mortgage payments. 

Since the Bank of Ireland can also quote for these types of insurance, we decided that it’s easier to get from them since they already know the details about the mortgage. However, you all have the option to shop around and get it from other providers.

9. Conduct House Snagging

When your house construction is almost complete, ideally with water and electricity already, you need to hire a professional evaluator to do the snagging. House snagging is the process of inspecting a newly built home for defects or unfinished work. The purpose is to identify any problems with the property so that they can be fixed before you move in. 

The snagging process typically involves inspecting the property from top to bottom looking for things like:

• • Cracks in the walls or ceilings
  • Uneven floors
  • Missing tiles or grout
  • Faulty appliances
  • Poorly fitted windows or doors
  • Damaged paintwork

Once the defects have been identified, the snagger will provide a list of all defects and the builder is then responsible to fix these defects.

We paid €300 to our snagger and he inspected the unit twice wherein the second visit was to check if the items in the snag list were rectified. If there are still pending items, you can inform the builder. In our case, there were still some pending minor items. We still moved in but we made sure that the builder was aware of the remaining unrectified items. 

10. Completion & Getting Your Keys.

Once all documents are submitted, your solicitor will then facilitate contract signing with you, the developer/owner, and the bank. The whole process may take 2 – 4 weeks. Your solicitor will also provide the go signal to Revenue to release the Help to Buy Scheme funds. After all the contracts have been signed and finalized, your bank will then release the funds to the developer, and when they confirm that they already receive the money, the developer will then instruct the real estate agent to give you the keys to your new house! Congratulations!

Additional Tips

1. Getting Humm vs credit union. If you are planning to finance your furnishings, some shops can offer in-house financing or refer you to Humm (a retail installment payment plan facility). However, the challenge is, your furniture and other home items may not be available in one establishment. You’ll need to submit documents to each shop where you’ll get your financing from. In the case of Humm, they will charge an application fee between €0 – € 40 every time you apply for financing for every single shop you use them. 

Though you can ask your mortgage specialist if you can avail of a personal loan to finance your furnishing at the same time as your mortgage. If they can offer you both the better. If it’s not possible, one option can be your local credit union.

Drogheda Credit Union, for example, offers a welcome loan with up to 10 years maximum term if it’s your first time getting a loan from them. There are pros and cons to this. Interest rates can be higher compared to in-house financing or Humm (they may offer interest-free plans for 36 months but with other additional fees) but with a 10 year-term, the monthly repayments might be affordable compared to 3 years. Additionally, if you’ll get a one-time cash loan, you can buy your home furnishings from any shop without the hassle of applying for financing every time. You can also haggle with prices since you are paying cash. Ultimately, if you have the funds to furnish your homes, you don’t actually need to take a loan. This is just an option. If you will go through this path, please consult a professional to help you weigh the pros and cons.

One more thing, do not apply for any loan prior to your mortgage drawdown. This will impact your debt-to-income ratio and might jeopardize your mortgage application. Once the drawdown is completed, then you can apply. Your new lender will be able to reassess if you have the capacity to pay on top of your mortgage repayments.

2. Cashbacks. Cashbacks are bonuses when your mortgage is approved and the drawdown is made. Bank of Ireland offers 2% cashback. This means that if you took a loan of €300K from them, you’ll get € 6,000 in your account once the drawdown is completed. You can use this money to help with your home furnishings. This cashback is on top of your mortgage saver bonus which  discussed in Step 1.

3. Buy major furniture first then do the minor details later. There’s going to be a lot of expenses involved in furnishing your home. And for some, it’s really overwhelming. As a suggestion, prioritize big and important items first. Then work (or save up) for the small and less important ones later.

4. Haggle with prices on your home items. You might think that prices are already set in stone. Not exactly. You can ask for additional discounts especially if you are buying a lot from one shop or huge cash items. Even during a sale period, we were able to get great discounts and free deliveries on our furniture, and appliances. Ask for discounts. There’s no harm in trying.

5. Buy during the Black Friday sale (if possible). This sale event usually happens in November. Our home was expected to be available for move-in in December. We used the black friday sale to start buying our discounted homewares, some of the furniture, and appliances during this month. If you are buying large items such as sofas, you don’t need to have them delivered immediately. You can schedule delivery when you have already moved into your house. Shops will not charge you for storage fees. That way you don’t need to worry about space but you have already locked in a good deal for your big home items.

6. Shop Around For Mortgages and Offers. I specifically mentioned the Bank of Ireland in this blog because it’s the financial institution that we use. However, feel free to shop around, and include credit unions in your area. Definitely, they’ll have their own unique pros and cons. Whatever information you’ll gather, have them tabulated so that you can easily compare and find the best offer suitable for you.

That’s it!

Whew! That was a lot. I expected this to be a long blog but I hope I have provided you some insights. 

Purchasing a home in Ireland indeed requires careful planning, diligent saving, and adherence to the intricate steps involved in the process. By following this guide and seeking guidance from professionals, you can navigate the journey of acquiring your dream home with confidence. Remember, each individual’s circumstances are unique, so consulting with financial advisers and mortgage specialists will provide personalized assistance tailored to your needs. With the right knowledge and preparation, you can embark on your exciting path to homeownership in Ireland.

I wish you all the best in your journey! Congratulations in advance on your new home!

Disclaimer

Use this material at your own risk. Though the information and recommendation provided are based on the author’s best knowledge, the author is not liable for any loss or damage, due to actions executed based on this course. The author advises the user to perform his or her own due diligence and conduct necessary research to verify, supplement, nullify, and/or contradict the data and suggested actions stated herein.  All investment instruments involve risk. The author strongly recommends to the user determine his/her risk appetite and be aware of the full extent of possible losses when investing in different financial instruments. Any mention of the brand is provided as an example and should not be taken as an endorsement.

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