This guide takes you through the whole process from your first dreams of a new home to ownership. It deals with all the steps and provides the “what happens next” to every step. This guide is written to help you through the legals of buying.
Now that you have decided to buy your own home what should you do? Buying is a big decision and a long term commitment. There are lots of sacrifices and commitment. For most people, this is not a decision they take on their own- with today’s deposit/loan requirements most people cannot afford to buy on their own. It’s a joint decision and normally made with one’s partner or spouse. This brings another level of commitment and doubles the factors to be taken into account (family, careers, workplace, hobbies/activities. For this to succeed and be worth the effort you need to take all aspects of your (both) life into account. It should be a good decision from day one, made for good sound reasons and with long term plans in mind.
This is important and does determine both where and what you can afford to buy. There are two elements to budgeting, what you have to contribute to the purchase and what it costs to repay the loan. The legal costs of a new home are approximately 2% of the purchase price. The biggest cost being Stamp Duty which is 1% of the purchase price excluding vat, legal fees, valuation fees, registration fees vat and miscellaneous other expenses.
The cost of repaying the home loan is determined by the rate of interest, the amount of the loan and the length of the term of the loan. The younger you are the longer term a bank will loan.
The cost of repaying will be considered by your bank when considering how much it will lend to you. Your bank will only lend you a specific multiple of your salary (this may also include bonus and overtime). In addition to your salary your bank will also look at the type of employment you are in and how stable that employment is. They will also look at any other loans repayments and your spending profile (for instance it is not a good idea to have lots of gambling payments on your credit card). You need to have your financial profile in good order before you apply for a loan. A good financial advisor will help you how to best present your case to a bank.
With a new home, there will also be additional expenses which you should factor into the equation such as furniture and household goods.
When you are ready to apply for a loan you should have now worked out the amount you want to borrow. The next step it so applies for a loan. You may deal directly with a bank or through a mortgage broker. If this is your first-time buyer you may be better off applying through a broker. You should be seeking approval in principle- in other words, how much your bank will lend you. This is important and will arise later when you bid on a home. Your maximum budget will be the total of your savings and the amount your bank will lend.
Where you decide to buy is important. Primarily it has to be suitable from a work commute point of view. There are other factors to consider such as other family members location, school if you have/plan children, social activities if you are involved in sports or clubs. You should also keep an eye on the location you are buying as someday you may decide to sell and move on. If the area is on the way up or has the improving infrastructure it will be easier to sell on later. If however, the area is on the way down you may be impacted when you decide to sell, “the day you buy is the day you sell”.
This is now getting down to the actual type of home you are looking for. You should narrow down to a specific type and approximate size. This may be an apartment, duplex, townhouse, semi-detached or detached. There are advantages and disadvantages to all. New residential property is priced at what the market will pay. So the more home has going for it the dearer it will be. Watch out for management service charges as these are annual expenses that attach to buying certain types of homes, typically apartments, duplexes and some townhouses.
Now that you have all your work done and hopefully decided on a location and home type you should start going to scheme launches. These are usually advertised in the media approximately 3-6 weeks ahead of launch. You should visit lots of different launches to get a feeling for what is on offer and what it will cost. You will also get a good idea of who your new neighbours will be from the launches. Take your time and spend weeks looking at different homes. You will soon narrow the search down and at that stage, it is a good idea to bring another family member or friend with you for a second opinion. You will meet the selling agents at the launches and it is worth talking to them as they will help you on queries.
This is the last step in buying your home stage. Do make your decision carefully and consider as many aspects as possible. When you are sure you are ready to buy don’t hesitate. You need to engage with the selling agent and let them know you have decided to buy. The selling agent will likely only deal with you if you have your loan approval in principle. If you do have that you will be asked to pay a refundable booking deposit (usually €5,000.00) to secure the home. You are not legally bound to buy the home at this stage but you would be expected to complete. Sometimes people make genuine mistakes or their circumstances change and can withdraw up to the formal signing of contracts. The selling agent will accept your booking deposit and take all your details including the name of your Solicitors and lendor. You have now agreed to buy and the next step is the Contracts issued stage.
Management service charges – are charges imposed by management companies on behalf of all of the owners of homes for the provision of services such as maintenance of common areas outside, maintenance of common areas and roofs/walls inside the multiple-unit building, insurance lighting and a whole range of services that may be provided outside (grass cutting). The fee for all the services and the cost of managing those services is divided equally among all the owners within the same class of the development. The charge is an annual charge and is not optional.
Approval in principal – means that your bank has agreed to lend you up to a certain amount on your purchase subject to conditions such as a valuation for the property and you being approved for mortgage protection or life assurance. It is only in principal and is not based on any particular home.