When purchasing a property, there are many issues that face a buyer: will I get a mortgage? How much will I get? Do I have to pay stamp duty? It is important that each issue is carefully considered, thus enabling you to make a fully informed decision regarding possibly the biggest purchase of your life. We, at Pierse & Fitzgibbon, pride ourselves on our awareness of those issues and strive to assist all our clients in reaching that all important correct decision.
Selecting a property
When searching for a property, buyers will inevitably search through the property pages of newspapers and visit various auctioneers to see what properties they have to offer. Once a buyer has found a property, he/she must then meet with the auctioneer to view same. Once the buyer has made the decision to purchase the property, a booking deposit must then be paid to the auctioneer. It is important that a buyer consults with his/her solicitor before paying the booking deposit as said deposit should be paid by the solicitor to the auctioneer.
What is a mortgage?
A Mortgage may be defined as a conditional transfer of property to a bank/lending institution.This transfer is conditional in that when the borrower has repaid the Mortgage loan, the bank will then transfer the property back to the Borrower. If however, the Borrower cannot repay the loan, the bank will then become the absolute owner of the property, and may sell that property to pay off the Borrower’s loan.
It is important to realise that when obtaining a Mortgage, you must ascertain all your other debts for example, car loans, credit cards etc., to see if you can actually afford the mortgage you wish to obtained.
How do I get a mortgage?
Step 1 – You can obtain a mortgage by contacting a Bank/Financial Institution directly or alternatively, you may engage the services of a Mortgage Broker. However, if you do decide to employ a Mortgage Broker, you should ensure that he/she has agencies with all the main lenders.
Step 2 – The Checklist of Documentation
In order to start your mortgage application process, either your Broker or your Bank (whichever you decide to deal with) will require the following information:
§Photo I.D. (Passport or Full Driving Licence)
§Two Proofs of Address (Utility bill, bank statement)
§6 months original current account statements
§3 recent payslips
§Employer’s certificate of income
§P60
§Evidence of all savings/investments
§Existing Mortgage Statement(s) (if applicable)
§Loan statements (if applicable)
§Letter from Landlord confirming monthly rent & duration of tenancy (if applicable)
§2 years audited accounts (for self-employed only)
§Accountant’s letter confirming tax affairs are up to date (for self-employed only)
§3 months business current account statements (for self-employed only)
§Statement of Affairs (for self-employed only)
§A signed tax relief at source form (TRS1)
This requested information is a standard requirement of all the lending institutions.
Step 3 –Submission of Application & Obtaining of Loan Approval in Principle
If you engage the services of a Mortgage Broker, you need only sign one application which can be submitted to the various lenders. The Mortgage Broker will then complete that single application from the documentation you have supplied to him/her. Within five working days from submission, your broker should have what is described as an ‘approval in principle’ from the lenders. An ‘approval in principle’ states the mortgage amount that the lender will grant to you, subject to certain conditions being fulfilled. If you have not yet found the property of your choice, you now know what your budget is. If you have submitted an application to a Bank/financial institution directly, then they will have their own application forms to be completed by you. As above, once this is application is submitted, the Bank should revert within a certain period with an ‘approval in principle’.
Step 4 – Engaging a Solicitor
Pierse & Fitzgibbon have 40 years experience in dealing with all the legal work involved in buying your home and will inform you of the likely time frame involved to complete the purchase. HomeBuy HomeSell, a fixed price conveyancing service, offer a fixed price fee of €1499 + VAT + Outlay.If you would like further information on this service we would be delighted to answer any questions you may have.
Step 5 – Finalising the mortgage application
Once your Broker has obtained your approvals in principle from the various financial institutions, you may then choose your preferred lender. Alternatively, if you have obtained approvals in principle directly from various financial institutions, you will need to decide which lender you are going to proceed with. A loan offer is then obtained from this lender, either by your Broker or yourself. You and your solicitor need to read through this written offer in detail and fulfil any conditions that are on the loan offer. Do not sign any mortgage documentation without consulting a solicitor. The usual standard conditions that attach to a loan offer are:
A valuation to be carried out on the property
Life assurance and house insurance are in place before the mortgage can be drawn down.
Step 6 – Property Valuation
Once the preferred mortgage provider has been selected (bank/building society) you will be required to get your property valued. You are generally responsible for the payment of the valuation fees, which usually cost in the region of €150 plus VAT. If the property you are buying is a second hand property it may also be advisable to arrange for a structural survey of the property before signing the contract. This survey is optional. It can cost in the region of €500 to €1000 but it will be a great source of comfort to you to know the structural state of the house you are buying.
Step 7 – Life Assurance
Section 126 of the Consumer Credit Act 1995 governs the requirement to have life assurance if you are taking a mortgage out on your home. There are two main types of life assurance: mortgage protection and term assurance. A mortgage protection policy is designed to protect your partner, family or dependants if you die before you have finished paying off your mortgage. The policy is designed to cover the amount outstanding and the proceeds are paid directly to the mortgage lender.
Term Assurance is life assurance that does not reduce during the term of the loan. In the event of death, the mortgage is repaid and the rest of the money goes into the estate of the deceased.
Step 8 – House Insurance
This is also compulsory when you are taking out a mortgage. This insures you against damage to your home, up to and including rebuilding your home should it be destroyed.
Your valuer should have noted the amount of the rebuilding cost in his/her valuation. The buildings should be insured for this amount. If you have bought an apartment then you do
not need to take out building insurance as it will be included in the block policy. We would, however, advise you to take out contents insurance.
Step 9 – The Mortgage Pack
When you have obtained your letter of loan offer and accepted same, a Mortgage Pack will be sent to your solicitor containing all relevant mortgage documentation, for example, the mortgage deed, the conditions and covenants attaching to the mortgage, solicitor’s undertaking and certificate of title. It is important that one obtains independent legal advice before signing these documents. It is also necessary that a purchaser has obtained loan approval before signing any legally binding contracts. If you do not have loan approval, but wish to sign the contracts anyway, they should be signed strictly subject to loan approval being obtained.
Step 10 – Close and move in
The loan cheque is issued by the lending institution to your solicitor once all the relevant documentation is in order and he/she forwards the cheque to the sellers’ solicitors. The sale of the property is registered at the Land Registry Office or the Registry of Deeds, depending on the title of the property. Your solicitor then forwards on the completed deeds to the lending institution, which they hold as security for your loan.
Stamp Duty
Stamp duty is a tax charged on instruments transferring property from one person to another. It is the primary tax to be dealt with on the purchase of property. The rate of stamp duty payable is dependent on the status of the purchaser and the value and type of property. Different rates of stamp duty apply to residential property as compared with commercial property. Likewise, a first time buyer will get relief from paying stamp duty whereas an investor may not get any relief.
What is residential property?
Residential property is defined in Section 1 of the Stamp Duty Consolidation Act, 1999 as including:
A building or part of a building, which at the date of the Instrument, Conveyance or Lease (a) was used or was suitable for use as a dwelling,
(b) was in the course of being constructed or adapted for use as a dwelling, or
(c) had been constructed or adapted for use as a dwelling and had not since such construction or adaptation being adapted for any other use.
The cartilage of the residential property up to an area (exclusive of the site of the residential property) of one acre.
What rates of stamp duty are applicable to residential property?
The rates of stamp duty for conveyance on sale or lease premiums of residential property for transactions executed on or after the 5th of November, 2007 are as follows:
The first €125,000 of consideration is exempt from stamp duty.
The next €875,000 is charged at the rate of 7% stamp duty.The excess portion of the purchase price which is over €1,000,000 is charged at 9% stamp duty.
Who is a first time buyer?
The Revenue Commissioners describe a first time buyer as a person, (or where there is more than one buyer, each of such persons):
Who has not on any previous occasion, either individually or jointly, purchased or built on his/her own behalf a house (in Ireland or abroad) and
Where the property purchased is occupied by the Purchaser, or a person on his behalf, as his/her only or principal place of residence.
It is important to note that first time buyers who fall within this definition provided by the Revenue Commissioners, are exempt from paying stamp duty in respect of all types of residential property.Therefore, if a first time buyer buys a new house or second hand house, they will be exempt from Stamp duty in all such cases.
Since the 2008 budget, you do not take the contents of the Residential property into account when determining the stamp duty payable based on that consideration for all transactions executed on or after the 5th of November, 2007.
It is also important to note that a stamp duty relief, for example first time buyer relief, is subject to claw back provisions.Therefore, if you purchase the property claiming first time buyers relief, but do not occupy that property as your only or principal place of residence, you may be then liable to pay the stamp duty you should have paid when first purchasing the property.
Steps in Purchasing a Property
Steps to be followed by your Solicitor in the Purchase of your property:
1.Obtain instructions from Purchaser and enquire about loan approval. 2. Request Contracts from Vendor’s Solicitor. 3. On receipt of contracts, arrange with purchaser to sign and pay balance of 10% deposit - discuss the inclusion of conditions re loan approval , structural report etc. 4. Return signed contracts and cheque to the Vendor’s solicitor. 5. Await return of contract signed by the vendor. 6. Raise Requisitions on Title with Vendor’s solicitor - a long series of questions about the title to the property. 7. Requisition purchaser’s loan cheque and deal with queries from the lending institution. 8. Arrange to close and forward the balance purchase monies to the Vendor’s solicitor. 9. Await title deeds from vendor’s solicitor. 10. Authorise release of funds and arrange for purchaser to collect keys. 11. This entire process takes 4 to 6 weeks on average. 12. Prepare and send bill to the purchaser. 13. Arrange to stamp title deed in Revenue Commissioners Office and register the Deeds in the Land Registry / Registry of Deeds Office. 14. On completion of registration, forward the title deeds to the lending institution involved.