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The Help To Buy Scheme for First Time Home Buyers

A Helping Hand onto an Elusive Ladder

We have spoken at length in the past about the multitudinous issues facing prospective first time home buyers in our current climate in Ireland. From saving deposits amidst paying skyrocketing rents, to being effectively written out of the narrative due to stricter borrowing rules and increasing home prices across the country. As a result it was recently reported that owning their own home has become more of a distant dream for many, rather than a feasible option for the future, with many saying that it would take them many years to save a deposit and even then they may not be able to afford the costs on current salaries. Rather than sticking with the unpopular opinions of recent months, of giving up avocado toast and living on your parents couch while asking for a loan of €30,000 we decided that today we would take a look at the more positive side of being a first time or prospective first time buyer. Believe it or not there are some options available to you out there, and we hope that access to these may make your dream more of a reality.

We all know about the all-important 10% deposit required to get your foot onto the first rung of the property ladder, as well as the additional funds required on top of these for legal costs etc. As mortgage relief is no longer an option, this all adds up quickly and when paired with every increasing house prices which don’t seem inclined to start falling any time soon, can lead to a number of hopeful buyers who simply cannot afford the costs. Whilst seeking a loan from a local authority may be an option for some, there is still the matter of a deposit to be raised and countless costs to be taken into account. The recent installation of the Help to Buy (HTB) Initiative may be a saving grace for some buyers, and has already helped many families find their new homes.

Essentially, the Help to Buy (HTB) scheme is an income tax rebate scheme now in place in order to help first time buyers buy new or self builds, and does not apply to second hand dwellings. This scheme allows buyers a rebate of their income tax paid over the previous 4 years as well as a refund of DIRT and will run until the end of 2019.

Naturally there are a number of stipulations on this as follows:

  • You must take out a mortgage of at least 70% of the cost of the property.
  • Applies only to properties costing €500,000 or less.
  • Applies only to new builds.
  • You must occupy the property for 5 years or more from the date it is habitable.
  • You must be fully tax compliant for the 4 years prior to your claim, complete a tax return form (Form 12) and pay any outstanding taxes that may be owed.
  • PAYE employees can apply using Revenue’s My Account system whilst self-assessed employees will apply through Revenue’s online system (ROS).

Should you have any queries or require further information on this or any other business or financial matter please don’t hesitate to contact us here at EcovisDCA’s new head office, where as always we will be delighted to help.

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DCA PARTNERSDECLAN DOLAN & EAMONN GARVEY

Should You Fix Your Mortgage Rate?

Keeping that Roof above Water

We have spoken recently about the struggles facing prospective homeowners and their long term range of effects on the market at large. Something we haven’t touched upon thus far is the struggles facing those who already have a foothold on the property ladder, existing homeowners currently holding a mortgage. Whilst this may seem like the ideal status for those struggling to buy their first home, there are of course issues which apply here that may not be considered.

It has been reported recently that homeowners could see a marked increase on their mortgage bills in years to come. This is due to the fact that European interest rates are set to begin to rise from 2019 to 2020 as the European Central Bank is expected to increase its main refinancing rate. Depending on the rate of mortgage and the loan size, this could see mortgage payments possibly increase by a couple of hundred euro.

These European interest rates have been at a stable low for many years, with many homeowners likely to not have experienced excessive rises in their time. In the atmosphere of uncertainty as we wait for the confirmation of these changing rates, what action can be taken either on new or old mortgages to limit the amount of damage to your pocket?

Fix it Up:       

A fixed rate mortgage can often seem like the most expensive option on the surface when choosing your mortgage, but can be quite the saving grace at times like these when rates are in flux as this option fixes your mortgage rate at one price for a certain period of time.

Whether choosing your mortgage or switching, a fixed rate might be the perfect option during these uncertain times and may offer you a slight buffer.

Pay, Pay, Pay:

Although it can be tempting when funds are low to take out further loans to replenish emptying pockets, this is likely to be damaging in the long run as your repayments begin to stack up. Instead of this, it is advisable to keep your mortgage payments up to date, and even overpay whenever possible in order to reduce your overall term.

In addition to this, clearing off any other debts you may have from loans or credit cards is advisable as the goal is to reduce your monthly repayments to as few as possible, with your mortgage being the ultimate priority. This will avoid you paying higher interest rates on other loans as well as your mortgage.

Should you be in a position of struggle when these rises come into play, be sure to discuss with your provider and solicitor options for restructuring your mortgage in order to avoid any long term issues.

Should you have any queries or require further information on this or any other business or financial matter please don’t hesitate to contact us here at EcovisDCA’s new head office, where as always we will be delighted to help.

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DCA PARTNERSDECLAN DOLAN & EAMONN GARVEY

The Affordable Mortgage Scheme

The First Time Ever you saw your Own Home

We have spoken many times in the past about the ongoing increase in house prices and the ways that these rises combined with stricter mortgage rules have begun to effectively squeeze many first time buyers out of the market. Similarly, the rapid increase of rental costs has dampened many prospective buyers hopes as these costs make it increasingly difficult to get a deposit together. In recent years it has become very difficult to be a hopeful first time buyer, but it seems that there might be a blink of hope on the horizon for prospective buyers on lower incomes.

It was announced this week that the Government has set aside €200m to fund a new scheme entitled the Affordable Mortgage Scheme to offer relief to first time buyers on lower incomes. The scheme will see local councils offer mortgages at lower interest rates than the majority of lending banks and crucially, will be fixed for the duration of the loan. This is said to save buyers up to €10,000 over the duration of their mortgage. The scheme is set for a relatively immediate start, with a start date of February 1st and is sure to offer some hope for lower income buyers.

Interestingly, the scheme’s loan can be used for second –hand as well as new properties, and to build your own home. This is a departure from all other recent schemes which were available only to new homes, and did not apply to building your own home. Previously, there was a local authority mortgage scheme in place for those who had been previously turned down, but this was offered at a variable interest rate and did not offer the long term savings that the Affordable Mortgage Scheme promises.

Under this scheme first time buyers will have access to loans of up to €288,000 at a fixed interest rate of 2.25% for 30 years. This offers first time buyers the security of knowing their repayments for the duration of their mortgage. Minister for Housing Eoghan Murphy has said of the scheme:

“What this means essentially is that a person or couple can purchase a home, while ensuring that they can still keep their monthly repayments to one-third of their net disposable income – with no risk of their mortgage rate rising and so no threat to their ability to afford repayments, giving them certainty and security.”

The loan will be subject to the same lending rules as the banks, in that buyers will require a 10% deposit on the property. Buyers will need to have evidence of being turned down by two lenders and there is also an income cap of €50,000 per year for single buyers and €75,000 per year for joint buyers. There will also be a limit on the overall price of the home as in the Greater Dublin, Cork and Galway areas the maximum market value of the property cannot exceed €320,000 whilst elsewhere in the country this limit will be €250,000.

Should you require any guidance on any financial or business matters, please do not hesitate to contact us here at EcovisDCA, where we will be happy to assist.

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DCA PARTNERSDECLAN DOLAN & EAMONN GARVEY

Granting your Switch Wish

It is obvious that the changing mortgage rules have made it more difficult for first time buyers to enter the property market in recent years. Despite recent changes allowing for a decrease in the necessary deposit required (abolishing the 225,000 cap on a 10% deposit) the continuing rise in house prices has all but ruled many first time buyers out of the market for the foreseeable future. An issue which affects many but has seen much less column inches is the issue of switching your mortgage to another bank. This is something which has been increasingly difficult to accomplish in recent years with the ever changing financial market, but there may be a distant light at the end of the tunnel for those wishing to switch their mortgage in the future to reduce their repayments.

The Central Bank has recently stated that it will be considering imposing new rules which will make it easier for people to switch their mortgage to another lender. This exciting development follows recent research by Behaviour and Attitudes which found that only 4% of mortgage holders had switched to a new lender. Switching your mortgage to another lender can often result in a reduction in your repayments and other benefits as your needs grow and change in your home.

The proposal by the Central Bank would ensure that banks must offer greater clarity to their borrowers to ensure that they have all the information available regarding switching, something which is sorely lacking in the current market. There is also a suggestion that the banks will be required to ensure that borrowers have all the information regarding switching mortgage product and the associated costs of this.

The fact that so many of those surveyed had never even considered changing their mortgage is surprising given that Ireland’s variable mortgage rates have been found to be among the highest in the Eurozone. Lenders do not currently offer enough accessible information about these issues and as such it is not something at the forefront of buyer minds. Acting Deputy Governor Bernard Sheridan has been quoted as saying:

“It is clear that lenders could be doing more to facilitate consumers who are thinking about switching.”

The Central Bank suggests these new changes will be beneficial as over 109,000 people could save money by switching mortgages and will reportedly publish a paper later in the year in which these proposals will be set out.

Should you require any help, guidance or advice on these or any other business and financial matters please don’t hesitate to contact us here at Ecovis DCA where our dedicated advisors will be delighted to be of assistance.

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DCA PARTNERSDECLAN DOLAN & EAMONN GARVEY

Taking the Fear out of Arrears

Following on from the economic crisis and the subsequent increase in the cost of living and decrease in available work, many thousands of Irish people have been left in mortgage arrears which is a very stressful and uncertain position to be in. As the country begins to regain its financial footing there are of course increases in finance options, but up until this point many Irish householders may have found it quite difficult to avail of advice on these matters during what is of course a difficult financial time.

Recently, Tánaiste Frances Fitzgerald and Minister for Social Protection Leo Varadkar announced an awareness campaign to promote Abhaile, a free mortgage arrears support service which many of those struggling were unaware of.

This news follows a survey which found that many struggling with mortgage arrears are too embarrassed to tell their family and friends about their ongoing issues. This in itself is incredibly problematic as the weight of these issues alone can cause isolation, depression and other mental health difficulties. As such, it is essential that all homeowners who find themselves in arrears should have someone to speak to. That is the service that Abhaile hope to provide. Tánaiste Fitzgerald has stated that despite falling numbers, there are still approximately 34,500 people in this country in long-term arrears. These are the people they hope to reach with this new campaign as it also emerged that over two thirds of people did not know that there were any services available to them to discuss these issues. Minister Varadkar was quoted as saying:

“It’s our firm hope we’ll bring forward thousands more people who are now in need of similar help. The key message is to come forward and seek the help that you need. Don’t be afraid, help is available at no cost and we’re on your side.”

Whilst the fact that the number of repossession cases has halved in recent years is indeed positive news, it is also essential that those still struggling be aware of all of the assistance at their disposal to ensure that these rates continue to fall in the coming years so that we can see a significant reduction in people feeling alone in these issues. It was also revealed that those in long-term arrears are those least likely to seek advice or assistance as they may feel that their situation is hopeless.

Angela Black of the Citizens Information Board has said:

“What we’re doing is asking members of the public to go out there and take a look around at their family and friends and people who might look ok on the surface but who are struggling behind closed doors with mortgage arrears. They might not realise they have access to this free expert financial and legal advice. Family and friends can play a vital role in encouraging people to look for help”

The Abhaile service has assisted 4,500 people since it became fully operational last October.

The Abhaile scheme is administered by the Money Advice and Budgeting Service (MABS).

Its helpline, which is open Monday to Friday 9am to 8pm is 0761072000.

 

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DCA PARTNERSDECLAN DOLAN & EAMONN GARVEY

ICS YOU CAN

Something which we consistently come back to as a topic of interest for our customers are mortgage lending rules and the tiresome process of trying to get a foothold on the property ladder, which let’s face it, these days can often feel like playing a very difficult video game. You’re pressing all the right buttons, but somehow still find yourself placed back at the previous checkpoint. Recently, with minor changes made to the rules for first time buyers it seems that the clouds are clearing somewhat to allow an easier path to your first home. Further good news continues to come in for prospective new home owners in the form of the return of schemes and products which assist in the purchasing process and provide buyers with more options than were previously available. Following on from the economic downturn, all available products and schemes aimed towards making it easier to begin the climb up the property ladder seemed to effectively disappear overnight. Recently we have seen a slow resurgence in these schemes and products which is welcome news. Today we will be discussing the new buy-to-let product from Dilosk and ICS mortgages which is aimed towards both individuals and companies.

 

The idea of buy-to-let is to turn a property purchase into an investment in order to utilise it as a cash flow solution. Upon purchasing the property, it is then placed for rent in the hopes of covering mortgage costs as well as any outgoings and perhaps generating some amount of income for the landlord. Buy to let involves dealing with the expectation of capital growth and thinking in the long-term which can be tricky as these matters are always in flux but it is ultimately a worthwhile endeavour which can generate cash flow which would not ordinarily exist which is never a negative thing these days.

 

ICS’s buy-to-let mortgage package is available to both individual and company investors. The loan structure for both options is fairly similar in that both offer a 10 year interest only option and a 20 year capital and repayment option as well as a minimum term of 5 years and a maximum of 20. The differences arise in relation to the borrowers themselves as there are additional criteria which applies to the individual and not the company investor.

 

The individual must be:

 

  • Min age at application: 21 Years.
  • Max age at maturity: 75 Years.
  • Minimum annual income: €40,000.
  • Max of four applicants.

 

 

The property must also be in the Republic of Ireland. Lending will be made available to those who meet these criteria, have a clean and who wish to buy in any major cities in the Republic of Ireland with more than 10,000 citizens. Further information can be found on their website or by contacting ICS directly. Finally we are seeing some positive movement in the mortgage market

 

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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DCA PARTNERSDECLAN DOLAN & EAMONN GARVEY

THAT WHICH SHALL NOT BE NAMED – MORTGAGE RULES

Over the past year, we have discussed mortgage issues at length with the various new changes to mortgage rules and the difficulties this has posed for both business and home buyers, in particular, for the first time buyer. It has become clear since the introduction of these new guidelines that the number of first time buyers was in decline. Recent reports however have shown that not only is this the case, but also the number of mortgages being approved has fallen in recent months.

 

Data from Banking and Payments Federation Ireland (BPFI) shows that from December to February, 1,951 mortgages were approved, which is a drop of 15.1% when compared with the same period in 2014-2015. First time buyers accounted for half of these approvals, whilst re-mortgages accounted for just over 13%. With the number of first time buyers apply for mortgages dropping by 27% in recent years, it is clear that the introduction of the new mortgage rules will continue to have a far reaching consequences on the property market.

 

Rachel Doyle of the Professional Insurance Broker’s Association (PIBA) lamented the situation and its long lasting effects recently, saying that

“The question now is, how much deeper is this crisis going to get before it turns around. If this situation becomes prolonged it will not only continue to prevent first-time buyers, primarily in their 20s and 30s and living in urban areas, particularly the greater Dublin area, from buying their first homes but it will impact the wider economy.”

 

Another change we are seeing is that the actual value of the mortgages approved was down by 5.8% from January to February, undoubtedly a result of new mortgage rules and the slight increase in spending over the Christmas period. The mortgages approved during this three month period are estimated to be worth around €374 million total, which remains in line with the 14% drop in value each year that we have seen in recent years.

 

We are all aware that there is to be a review of these mortgage rules to be published in November, and whilst prospective buyers will be hoping for some changes or leniency, recent comments suggest that this may not be the case. Chief economist Gabriel Fagan spoke at the recent presentation of the Central Bank’s quarterly accounts and stated that whilst a review will be published, it will certainly not result in the abolishment of these rules, and that there is the possibility that the rules may in fact be tightened.

 

Don’t say goodbye to that silver lining of home ownership just yet though as there is still a chance of change. Until that point, if you require any assistance or advice on your own financial matters, please don’t hesitate to contact us here at DCA Accountants.

“We shouldn’t think of a change taking place,” he said, adding that the rules may not be changed at all, or may in fact be tightened.

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DCA PARTNERSDECLAN DOLAN & EAMONN GARVEY

WHOSE HOUSE IS IT ANYWAY?

It comes as no surprise these days that the world of buying your first home has become an increasingly difficult one to navigate. Gone are the days of being able to finance your first home, and also have overflow cash readily available for furnishing and renovations. This year’s introduction of the new mortgage rules has made the process somewhat more difficult for both first and second time buyers to gain access to the funds required. As a result of this, the average age at which couples are buying their first homes has increased greatly in recent years.

 

With these new mortgage rules making it increasingly difficult to save for your first and then subsequent second home, the issue then becomes saving that extra bit of cash to furnish and renovate any problematic areas of your new home. Thankfully, a new Bank of Ireland mortgage initiative promises to help you with this arduous task.

 

Bank of Ireland already promise customers the lowest available 3 year fixed term rate available and 12 month approval. Now, in addition to these promises, Bank of Ireland are offering customers who are first time buyers, movers, or those interested in switching an existing mortgage to Bank of Ireland, 2% cashback on their loan.

 

While 2% may seem an insignificant number at first glance on paper, this could be of great benefit when your savings have immediately gone into the new requirements for deposits. Where there was no real wiggle room to start work on your new home, there now is an unexpected sum available at your disposal. Get thee to a DIY store!

 

To put this figure into perspective, if you are to borrow €150,000 for your new home, Bank of Ireland will then lodge€3000 into the account used for the mortgage. Bank of Ireland state that this payment will be made within 45 days from the mortgage being drawn down. Just in time to start collecting tiles for that new bathroom you would like to put in.

 

This offer applies to mortgages drawn down between 3rd June 2015 and 31st December 2015, so this is a good time to do a check on those all-important savings and hopefully make a move towards your new home.

 

Buying a home is a very expensive yet rewarding endeavour and it is a relief to see some new initiatives announced to assist people on their way. Should you require any assistance with your own savings, finances, ormortgage arrangements, please do not hesitate to contact us here at DCA Accountants.

NEW MORTGAGE RULES

The Central Bank’s much debated and often bemoaned stricter mortgage rules were finally officially announced last month and officially put into place only last week.

 

Under these new tighter guidelines first time buyers appear to have business as usual as they can continue to apply for a 90% mortgage up to a limit of  €220,000. Anything above this limit will be subjected to the new 20% deposit requirement. Given that the average house price in Dublin is approximately €269,000 (according to latest published results from myhome.ie) it would seem unlikely that many buyers will escape the clutches of this requirement entirely.

Those looking to trade up on their existing homes will be entirely subjected to the 20% requirement for the entire sum of their loan which has caused concerns that many young couples and families may find themselves ‘locked out’ of the property market or, having already taken a step onto the first rung of the property ladder in easier financial climates, may find it impossible to take the next step, or fall off completely.

 

There will also now be a cap on the amount that can be loaned, something that banks and mortgage lenders previously had left to their own discretion. This sees lenders being restricted to only borrowing 3.5 times their income. Given that there is massive disparity between wage scales across various sectors, this rule would seem to leave those in lower earning sectors out in the cold.

 

It was reported last week that banks have been urging mortgage defaulters to seek a familial ‘dig out’ to help them meet their mortgage repayments.  These new tightened mortgage rules could now see buyers returning to the ‘bank of Mum and Dad’ model of purchasing in order to meet the deposit demand. It was recently reported that the Credit Union will be willing to allow parents to borrow significant amounts to assist with their children’s deposit as the prospective buyer themselves would be unable to take out a loan.

 

As the Capital Acquisitions Tax on gifts currently allows an un-taxed amount up to €225,000 we may well expect to see these rules also tightened. As it stands, without the addition of a parental gift the average couple can expect to be saving for at least four years to meet their deposit requirements for first time buying, whilst those trading up may well be reliant on these so-called ‘dig outs’ when they have outgrown their current dwelling.