The Money Doctor is an independent financial adviser and a fully authorised intermediary who, irrespective of agencies held, will always guarantee the best rate and terms possible plus will take the hassle out of your mortgage application and at no cost to you. We represent virtually all the lenders and they all pay fees for the placement of businessMortgage Pre-Enquiry Form Mortgage Calculator Book Consultation
Loan to Value (LTV) for principal dwelling houses (PDH)
There are different limits for different categories of buyers:
• PDH mortgages for non-first time buyers are subject to a limit of 90% Loan To Value (LTV).
• All other borrowers are subject to 80% LTV ( includes switchers )
Loan to Value (LTV) for Buy to Let mortgages (BTLs)
• BTL mortgages are subject to a limit of 70% LTV.
• This limit can only be exceeded by no more than 10% of the euro value of all housing loans for non PDH purposes during an annual period.
Loan to Income (LTI) for PDH mortgages
• PDH mortgage loans are subject to a limit of 3.5 times loan to gross income.
• This limit should not be exceeded by more than 20% of the euro value of all housing loans for PDH purposes during an annual period.
Switcher mortgages and housing loans for the restructuring of mortgages in arrears or pre-arrears are not in the scope of the Regulations. It should be borne in mind that these are maximum limits and that individual lenders will also take into consideration othe factors such as age, family situation such as dependent children and other borrowings.
REMEMBER for EVERY loan applied for, the lender will ALWAYS check your credit history with the Irish Credit Bureau ( ICB, Newstead, Clonskeagh, Dublin 14 tel 01 – 260 0388 )
N.B. The Help to Buy Scheme allows first time buyers to 5% grant of the purchase price up to a maximum of € 400,000 provided
- The property is new build or self build ( so second hand properties do not qualify )
- You have paid sufficient income tax over the previous 4 years that exceeds the 5% grant.
1. Repayment / Annuity
This is a loan repaid over a certain agreed term. Interest on the loan and the capital (the amount of money borrowed) is repaid in equal monthly / weekly repayments over that agreed term (loan terms with certain lenders can extend up to 30 years.) The average mortgage term is 25 years
Interest is greater at the start of the loan repayments and as the capital is repaid over the period of the loan, the interest reduces. The repayments are evened out over the term of the loan and as long as repayments are made, this type of mortgage is guaranteed to be repaid at the end of the term. It is also the most popular type of mortgage. Warning: The cost of your monthly repayments may increase – if you do not keep up repayments you may lose your home.
2. Interest only loans
This mortgage option is now unavailable in the market to new borrowers. With this system, no capital is repaid (that is, on the original amount borrowed) and interest on the amount outstanding is paid on a monthly basis. At any time and generally at no cost, you can
• pay off lumps sums (while the mortgage is in variable interest rate mode)
• switch back to a capital and interest system ( the Repayment mortgage )
At some stage however, the capital must be repaid at either the full term or swapped back to a capital and interest repayment during the term to coincide with the original loan agreement : provision can be made for this capital lump sum owed and payable on maturity through
• A pension plan (maturing at 60/65 ) which then repays the capital originally borrowed.
• An investment plan (for the term of the mortgage, like the old style endowment mortgage) that also repays the capital on maturity.
• Selling the property (after a number of years ) and repaying the loan.
• Switching back to an annuity plan (capital and interest repayments over a new agreed term) with a defined term to pay back the capital.
• Passing the property onto your estate where the loan is either renegotiated or repaid by your beneficiaries
• Winning the lotto.
However you have the choice of repayment method if the term negotiated on the interest only loan is for the full term . A mortgage protection insurance policy must be taken out so that if the applicant/s dies, the mortgage, i.e. the outstanding capital borrowed, is repaid immediately. Life cover here is mandatory on home loans, but if there is a medical issue or you are aged over 50, the lender may waive this requirement. For residential Investment property loans, life cover is not mandatory but advisable.
Warning: The cost of your monthly repayments may increase – if you do not keep up repayments you may lose your home.
Warning: The entire amount that you have borrowed will still be outstanding at the end of the interest-only period.
3. Pension – backed mortgages
Similar to the investment type mortgage, the capital is not repaid until pension age (60/65 if self employed) has been reached. The most attractive feature of this mortgage is the tax relief received from the pension contributions at whatever level of tax being paid ( currently 20% or 40%).
On maturity, 25% of your pension fund is available as a tax free lump sum and this is the amount together with the taxable 75% of the fund that should repay your mortgage.
Therefore, the contributions are geared towards making the sum borrowed equate with the 25% tax free lump sum and encashment of the balance (75%) at your marginal rate of tax on maturity of the pension plan.
MORTGAGE INTEREST RATE OPTIONS
1. Standard Variable interest rate mortgages.
The interest rate on the mortgage varies according to the economic conditions and actions taken by both the European Central Bank and Irish fiscal policy. Variable rates are determined by the cost of money (European Central Bank base rate) plus the lender’s margin.
Some of the lenders offer discounts on these variable rates e.g. c. 1% below the variable rate for a period of 6 -12 months. At the end of the discount rate, the normal standard variable rate applies.
If you wish to pay off your mortgage, there is no penalty if the rate is variable and for a small vacate fee (€100 – most lenders do not charge anything) you can switch into a fixed rate if desired. Variable rates are subject to the vagaries of the current market rates and would be less certain than fixed rates.
2. Fixed rate mortgages
Loans are fixed for certain periods (from 1 to 20 years) during the term of the mortgage. The advantage is that the repayment is fixed for that period and therefore certainty in your repayment schedule.
If a fixed rate loan is being repaid early there can be a penalty of up to 6 months interest. This can be avoided if the borrower is just moving home as the lender will usually carry forward a fixed rate to the next home loan. Alternatively, you could wait until the end of the fixed rate term. Warning: You may have to pay charges if you pay off a fixed-rate loan early.
1. Legal costs
• Your own solicitor conveys the property for both the borrower and the lender. The fees are generally 1% of the purchase price plus €100 plus 23% VAT. Shopping around usually can bring results.
• On top of the fees, there is legal outlay. This covers searches (this ensures your property is registered correctly and that the vendor is the proper owner) stamping fees – always seek the full itemised listing of all the possible outlays from the solicitor on engaging the services.
• Check with Money Doctor for updated details of official discounts on legal fees.
• Most lenders have panels of valuers – either auctioneers, architects or engineers – who would value professionally the property being used as security.
• The costs can vary depending on where the property is, but again generally as a rule the fee is €130 + VAT for the average price property for a simple valuation.
• Where the property is in need of major repair and requires a more detailed report, the lender will call for a structural report. This is more expensive because of the detail and time required and could cost between €200 to €600
Also remember for all properties being rented or sold, a Building Energy Rating ( BER ) certificate must be available. This will allow prospective buyers or tenants to factor energy performance and costs into their comparison of different properties and into their ultimate decision of whether to buy or rent. It should also enable self-builders to make amendments at design stage to improve the energy efficiency of their home.
3. Stamp Duty
Since December 2010, the rates for stamp duty for all residential properties are
– up to € 1,000,000 – 1%
– excess of € 1,000,000 – 2%
Since 2011, the rate of stamp duty for non-residential property is 2%
LOAN TIME FRAMES
Once you have paid the booking deposit on your desired property (usually a nominal amount), here are the 5 steps to be taken:
1. Your solicitor will receive the title documents from the vendor’s solicitor.
2. When he is satisfied with the title, the initial contracts are drawn up by the vendors solicitor and then signed by you.
3. The full 10% deposit less booking deposit, is paid over by your solicitor to the vendor’s solicitor along with the initial contracts.
4. The contract is now irrevocable and at the agreed closing date should you fail to complete the deal, you will lose your deposit.
5. There is normally then a period of c. 4 weeks to close the deal from booking deposit to loan cheque draw down.
As regards your mortgage, the timing for initiating the loan process starts once you have begun to think about buying a property. Some leave it until the booking deposit has been paid. The loan process timing is as follows:
a. Loan approval in principle – within 24 hours of application and can be within an hour. Your Money Doctor adviser will give immediate assessment on application.
b. Full application to be completed, including ID, PPS# and proof of residence, confirmation of income (P60s, Status Enquiry letters, or other proofs) if new house, Home Bond certificate, this together with a valuation organised by the lender (within 5 working days).
c. Assurance (life cover) and buildings insurance to be arranged before the closing and sent to the lender.
d. Loan cheque issue – your solicitor must generally give 5 working days’ notice that you will require the loan cheque. This is called the cheque requisition. – 5 days before the closing and receiving of the keys.
e. Your loan repayments start generally a month after the loan cheque has been issued
Providence Finance Services Limited trading as Money Doctor is regulated by the Central Bank of Ireland