Over the past number of months we have spoken many times about the property issues facing prospective first time homeowners, as well as those hoping to upgrade. Following on from the introduction of new and stricter mortgage rules in 2015 it has become increasingly difficult to gain a foothold on the property ladder. Whilst the prices of property soar, so too does the cost of renting which effectively blocks the ladder from those attempting to save for the now essential 10/20% mortgage deposit whilst also living in rented accommodation. The revelations that there might soon be changes to these rules were widely welcomed and soon cut short by the knowledges that they were unlikely to be revoked entirely.
Recently, changes were indeed made to the new rules which should provide some small relief to prospective homeowners as long as property prices don’t immediately begin to rise again. It was announced that from January 1st 2017 the 220,000 cap for first time buyers would now be scrapped. This will be a welcome change for buyers currently saving for their deposit as the deposit requirements will now be 10% across the board regardless of property price. As property prices continue to rise it becomes increasingly difficult to find housing under this 220,000 threshold to avoid paying the additional 10% on anything above this cost. Now, a prospective homeowner will need a deposit of 30,000 for a house costing 300,000 where previously under the old rules they would have needed 38,000 for the same house.
The rules regarding being able to borrow only 3.5 times your income will remain unchanged as it is thought that this failsafe will prevent buyers borrowing more than they will be capable of repaying long term. There will also be no change to the 20% deposit requirement for second time and subsequent buyers which will be disappointing for those hoping to upgrade in the near future.
One often overlooked aspect to the amendments given to the mortgage rules is that when used in conjunction with the help-to-buy scheme announced in the budget, there could be real savings to be had for first time buyers who choose a new build. The help-to-buy scheme announced by Minister for Finance Michael Noonan in the Budget states that the Government will offer first-time buyers tax rebates of up to €20,000 on new homes valued up to €500,000. When coupled with the now abolished cap on the required deposit this could mean great savings for first time buyers which will be welcome at this point in their lives.
Should you require any help, assistance or guidance on these or any other tax or business matters, please don’t hesitate to contact us.
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