1. Buying a house
© Annie Patton
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2. Aim of the Lesson
To see what a mortgage is and to investigate the cost of buying a house.
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3. Rent or Buy
With renting you never become the owner no matter how many years you live there.
Less risk and responsibility attached to renting.
When you buy, the value of the house could go up or down.
When renting the landlord has to do all the repairs.
Renting is better if you are only staying in the area for a sort period of time.
A lot of banks insist you have a deposit and a secure job before they will give you a mortgage, so a lot of people have to rent.
© Annie Patton
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4. Living at home
This may not be possible as it may not be within commuting distance to work.
There may not be room for an extended family.
When one buys a house it is hoped that the house will go up in value, thus the hope that one’s wealth will increase and the sooner you enter the property ladder the greater the hope of you wealth increasing.
© Annie Patton
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5. Mortgages
Most incomes, even if they produce savings for a few years will not be sufficient to buy a house.
So, what has to happen is the prospective home owners must get a mortgage.
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6. Which house can one afford?
This will depend on:
Savings
Deposit available
Salary
Security of your job
Credit History
Number of years to retirement
Health
Other financial commitments
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7. Mortgage
This is where the new owner borrows to pay for the house and uses the deeds of the house as security.
The deeds are the piece of paper that must be in your possession before the house can be sold.
So when you get a mortgage the bank or lending institute keeps the deeds until the mortgage is paid.
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© Annie Patton
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8. Mortgage
Thus a mortgage is a loan, whose security is based on the fact the bank keeps the deeds of the house until the full amount of the loan is paid.
The new owner can sell the house, but must pay back the mortgage before they get the deeds to sell the house.
© Annie Patton
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9. How big a mortgage can you obtain?
Bank of Ireland
calculator
to see what
the repayments will be.
Bank of Ireland
calculator
to discover
how much you could
borrow
based on income.
Repeat this processes for different incomes and vary the term or number of years.
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10. Public Auction The house is advertised and prospective buyers view it.
On an advertised date prospective parties bid for the house in what is called a public auction conducted by an auctioneer.
The seller or their auctioneer will have agreed a reserve price previous to the auction and once that price is reached the house will be sold to the highest bidder, but the seller has the right to withdraw at any time before the agreement is reached.
If the bids do not reach the reserve price the house will be withdrawn from auction, but frequently agreements will be reached after the auction for the bidding price or slightly higher.
© Annie Patton
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11. Public Auction Continued
If someone intends to bid at an auction, they must have their solicitor check the contact for the house before the auction (This would include things like restrictions on the use of the house, planning permission, service charges etc.) and in most cases will have had a surveyor inspect the house.
The bidder whose bid was accepted must sign a contract immediately and pay 10 % of the asking price.
Some weeks after this the remainder of the price will be paid and the rest of the paper work completed before the keys are handed over.
© Annie Patton
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12. Private Treaty
The seller advertises the house and often states an asking price.
Prospective buyers view the house.
Interested prospective parties make an offer to the seller or their auctioneer.
The seller considers the offered price and either accepts or rejects it.
If the price is rejected the prospective buyer can make a higher offer.
The buyer will normally then set up their mortgage and have a surveyor inspect the house.
In due course, but not immediately a contact is signed and a deposit paid. The contract cannot be withdrawn after this point or the deposit will be lost.
Some weeks after this the remainder of the price will be paid and the rest of the paper work completed before the keys are handed over.
© Annie Patton
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13. Section of the house price that has to be paid by the buyer (Deposit)
Most banks demand that you can contribute a small percentage of the asking price, as a deposit rather than them giving you 100% mortgage.
This is a security measure for both the buyer and seller in case of the price of the house falls.
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14. Paying the Mortgage
When one is entering into a mortgage agreement, it is important to remember that you will still need to live and have a reasonable standard of living.
Also interest rates could go up.
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15. I still want to meet my friends!!
Money to live
I still need food!!
I still want to meet my friends!!
I still need coffee!!
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16. What happens, if interest rates go up?
Interest rates can go up or down.
If the interest rates go up, unless it is a fixed rate mortgage, the amount that has to be paid every month increases.
The fact that interest rates go up does not mean that salaries go up so one’s standard of living could fall.
It is recommended that if one looses their job or for any other reason is unable to pay their mortgage that they notify the bank and see if they can come to an agreement.
© Annie Patton
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17. Do I need any extra money apart from furniture?
Yes in addition to the asking price buying a house will involve a lot of extra expenses.
Solicitor
Surveyor
Mortgage Protection
Building Insurance
Insurance
Stamp Duty
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18. Solicitor The solicitors job includes:
Searches to see, who owns the house.
Searches to see, if planning permission has been sought.
Changes the names on the deeds.
Calculates the amount of the stamp duty.
A lot of paper work involved.
© Annie Patton
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19. Fees
Searches: to check the title of the house you are buying. At least €160.
Land Registry: to transfer the deed into the new owners name. At least €500
Solicitor own fees are likely to be at least 1% plus VAT of the purchase price of the house.
Postage, photocopying etc.
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20. Mortgage Protection
Banks will not lend you a mortgage unless you take out health insurance.
This means that if one of the parties of the mortgage dies, the mortgage will be paid.
You will have to give details of your health before the mortgage protection insurance will be issued.
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21. Surveyor
Checks to see the structure of the house. Is it about to fall of a cliff etc.
Checks is heating etc. working.
Checks what repairs you would need to carry out in the future.
The bank will send their own surveyor to do a valuers report, but they are really only interested in seeing if their investment is safe, so must people get an independent surveyor.
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22. Stamp Duty
Stamp duty must be paid to the government, when one buys a house.
The rate will depend if you are a first time buyer, if the house is new or second hand, the size of the house and if the house is going to be owner occupied or not.
Stamp Duty Rates
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23. Mortgage Fee
Most banks charge a fee for setting up a mortgage and processing your application.
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24. Mortgage Fee
Most banks charge a fee for setting up a mortgage and processing your application.
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25. Building Insurance
Banks will not give a mortgage, if you do not have this insurance.
This will reimburse the new owner, if a fire, flood etc damages the house or part of it.
It is important that the house is insured for the correct value, because if say a fire destroys your house you will only be reimbursed for the value of the house insured.
Your house is valued at €400,000, but insured for €300,000 and a fire damages your kitchen causing €100,000 damage you will only get €75,000 compensation. This is known as the Average clause in insurance.
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26. Contents Insurance This insurance is not compulsory.
It means you will get compensated for your loss, if the items in your house are damaged by fire, flood etc. or the items are stolen.
The owner needs to be careful to value the items correctly.
The value of the contents will differ for different houses.
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27. Annual Contract Fee
This is an additional yearly expense when one purchases an apartment. It covers:
Cleaning of general area
Upkeep of lifts
Public lighting
Gardening of common gardens
Building insurance. Hence if a fire occurs you will not be left with a site in mid air, as your neighbour underneath will also be insured under this policy.
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28. If one fails to repay the mortgage
Eventually the house will be reposed.
Any money left over after the bank has been paid their loan and the expenses of selling the house will go to the previous owner.
If the selling price does not cover the loan and expenses, the previous owner will be responsible for the shortfall and is said to have negative equity.
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29. Get the back garden!!
The transfer of a site below a certain value from a parent to a child is not subject to stamp duty, provided the child builds a house on the site and lives in it for 3 years.
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30. Re-mortgage
Eventually one might want to move and take out another mortgage to buy a bigger house.
Alternatively they may decide to re-mortgage the house and build an extension.
This means they go to a bank, which gives them a bigger loan based and again use the deeds of the house as security for the new loan.
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31. Happy ever after!!
House buying is a lot of hassle and expenses, but a step most people will take in life.
THE END
© Annie Patton
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