So, you’re thinking of buying a house? Well congratulations! This is an important decision and one that should not be taken lightly. When it comes to buying a house in Ireland, there are many things you need to take into account. From the legal aspects of the purchase to the financial implications, there is a lot to think about. To help you out, we’ve put together a buying checklist of things to know before buying your home. While every sale and purchase are different, by educating yourself on the steps that can be expected, you can minimise the possibility of any unwanted surprises. This way, you can be sure that you’re as prepared as possible for this big purchase.
In this blog post, we will give you a comprehensive guide to buying property in Ireland. We will discuss everything from solicitors’ roles in property purchases to how best to go about organising your funding. So whether you’re just starting your house-hunting journey or are about to sign on the dotted line, make sure to read this blog post!
Organising Your Finances
Organising your finances in advance of any purchase is one of the most important aspects of buying a house. Be it assessing what you can actually afford, saving for a deposit, or getting mortgage approval, having your finances in order before you even start looking is crucial.
The best thing you can do when you start considering purchasing a home is assess how much you can afford and what your budget is. This will help you immensely when it comes to searching for a property, as you’ll know exactly what your price range is. Two important factors to consider when assessing your budget is realistically analysing how much of a deposit you will be able to save. This is important as, in Ireland, the minimum deposit is 10% the price of the overall purchase price of the property. The second important factor to consider is your debt-to-income ratio (DBI ratio). This is the percentage of your pre-tax income that goes towards paying debts, and banks will use this to calculate how much they’re willing to lend you.
Once you have a realistic idea of what you can afford and what your budget looks like, it’s time to start saving for that deposit! Depending on the price of the property, this could take some time. A great way to jump start the process is by opening a dedicated savings account for your deposit. This way, you can set up automatic transfers from your salary each month and watch that deposit grow. In Ireland, regulations have been put in place to limit the amount a bank or lender can lend you for a mortgage. These are called the Central Bank’s Mortgage Lending Regulations or LTV (loan-to-value) Limits. The maximum amount you can borrow is now set at:
- 90% of the value of the property for first time buyers
- 80% of the value of the property for second and subsequent buyers
So, if you’re buying a house worth €300,000, the maximum amount you could borrow would be €270,000 as a first time buyer or €240,000 as a second-time buyer. This means that you would need to have a deposit of at least €30,000 (or €60,000 if you’re a second-time buyer).
If one cannot afford a deposit to cover an LTV limit, there is another option available to them if they are first time buyers. This is the Help-to-Buy (HTB) Scheme. This scheme was introduced in 2017 and was enhanced in July of 2020. Be sure to contact Kevin O’Higgins Solicitors to find out more about the HTB Scheme and to find out if you might be eligible.
Getting Mortgage Pre-Approval
Once you have a deposit saved and know how much you can afford to borrow, it’s time to start the mortgage approval process. In Ireland, you must have your mortgage pre-approval in place before you can make an offer on a property. This is because once your offer is accepted, you only have six weeks to complete the purchase. This means that you need to have your mortgage approval in place so that you can move quickly when you find the right property.
The first step in getting pre-approval is to contact a mortgage broker or bank and arrange an appointment. At this meeting, you will need to provide documentation such as payslips, tax returns, and bank statements. The mortgage broker will then assess your financial situation and tell you how much you’re eligible to borrow. It’s important to remember that just because you’re approved for a certain amount doesn’t mean that you have to borrow the maximum amount.
Once you have your mortgage pre-approval in place, it’s time to start searching for your dream home! This can be an exciting time, but it’s important to remember to stay within your budget. It can be easy to get caught up in the excitement of finding a new home and overlook your financial limitations.
Finding the Right Solicitor for You
As with any legal process, it’s important to make sure that you have the right solicitor on your side when purchasing a property. Your solicitor will be responsible for handling all of the legal aspects of the purchase, from negotiating with the vendor’s solicitor to ensuring that all of the necessary documentation is in order.
When choosing a solicitor, it’s important to make sure that they are experienced in handling property purchases and sales. Your solicitor will also be able to inform you of any title or covenant issues regarding any properties you are looking at – eg. if there is a right of way across the property, if there are specific covenants forbidding future development to the property, or if there are any rules or regulations concerning an apartment block or complex. Your solicitor should also complete conveyancing checks on the property to ensure there are no legal issues with the property that may cause you trouble down the line.
Read our previous blog, “Finding the Right Property Solicitor for Your Situation”, to find out what you should look for in a solicitor or, alternatively, reach out to Kevin O’Higgins Solicitors today.
Finding Your Home and Making an Offer
The next step is where the fun begins. From here you can start looking for your new home by attending viewings. Once you’ve found a property that you’re interested in, it’s time to make an offer. In Ireland, the general process for making an offer is to formally make the offer to the estate agent handling the sale.. If the seller accepts your offer, you will be given a contract of sale. This is a legally binding document that outlines the terms of the sale. It’s important to have your contract of sale reviewed by your solicitor before you sign it.
Getting Mortgage Approval
Once you have a deposit saved and know how much you can afford to borrow, it’s time to start the mortgage approval process. In order to get approved for a mortgage, you will need to provide the lender with proof of your income, employment history, and outgoings. You will also need to undergo a credit check. This is important as it will give the lender an idea of your financial history and whether or not you’re a high-risk borrower. Your lender will also require you to obtain a Standard Surveyors Report or a Mortgage Valuation to ensure the price and standard of the property is consistent with the amount of the loan you have applied for. If you are purchasing a second-hand home, it is highly recommended that you organise a structural survey of the property to get a deep-dive into the integrity and quality of your potential new home.
The mortgage approval process can be lengthy, so it’s important to start it as early as possible. Once you have been approved for a mortgage, the lender will provide you with a Mortgage Offer Letter. This letter will outline the terms and conditions of your mortgage, as well as the interest rate and repayment schedule. It’s important to read this letter carefully and to make sure that you understand all of the terms and conditions before signing it.
Final Contracts
Once the valuation has been completed, the lender will issue a Loan Offer Letter. This letter will outline the final terms and conditions of your mortgage, as well as the interest rate and repayment schedule. Again, it’s important to read this letter carefully and to make sure that you understand all of the terms and conditions before signing it. It is even more important to have your solicitor read over it, ensure it is in order, and explain any particulars you may not understand.
The final stage of the process is known as completion. This is when the legal ownership of the property is transferred from the vendor to you. In order for completion to take place, your solicitor will need to receive the balance of the purchase price from you. They will then pay this amount to the vendor’s solicitor. Once this has been done, the keys to the property will be released to you and you will officially become the new owner!
Buying a house is a big decision and one that should not be taken lightly. There are a lot of things to consider before taking the plunge, but if you’re prepared and have done your research, then it can be a smooth and exciting process. Be sure to get advice from professionals, such as solicitors and mortgage brokers, and make sure that you understand all of the legal and financial aspects before signing any paperwork.
I hope this blog has helped to give you an idea of some of the things that you need to consider before buying a property in Ireland. If you have any questions or would like more information, please do not hesitate to get in touch today.
Happy house hunting!