Q&A: Can I get a State-backed mortgage under the new rules?
Housing Minister Darragh O’Brien has announced a newly expanded local authority home loan scheme, increasing the eligibility of those who can apply.
The new regulations will make it easier for single people to avail of a State backed mortgage for a new, second-hand or self-build home.
A ‘fresh start’ principle also applies which means that people who are divorced or separated and have no interest in the family home, or who have undergone insolvency proceedings, will be eligible to apply also.
Below are answers to some of the questions you might have.
Q. What is the local authority home loan?
A. The LAHL scheme is the new name for the Rebuilding Ireland home loan (RIHL) scheme it replaces and it comes into effect today. Funded by the government, loans are issued via local authorities and the scheme is open to first time buyers – and to “fresh start” applicants – on low or modest incomes who cannot get sufficient funding from commercial lenders to purchase new or second-hand properties or to build their own home.
Q. Am I eligible?
A. Apart from being a first-time buyer – or being a Fresh Start applicant – you must be aged between 18 and 70, and to have been in continuous employment for a minimum of two years, as the primary earner or be in continuous employment for a minimum of one year, as a secondary earner.
Due to Covid-19, these requirements have been temporarily relaxed, so you could still qualify for a loan if there were periods where you were not in continuous employment due to Covid-19.
However, multiple casual employment will not be considered eligible and if you are self-employed, you’ll need a minimum of two full years accounts.
You also need to provide evidence of insufficient offers of finance from two banks or building societies, and you have to consent to an Irish Credit Bureau check.
Q. What’s the most I can borrow and earn to qualify?
A. Houses purchased under the scheme cannot have a value in excess of €320,000 in Dublin, Cork, Galway, Meath, Kildare, Louth and Kildare and €250,000 elsewhere. Single applicants cannot have income in excess of €65,000 if seeking to purchase a home in the €320,000 house price areas. The income ceiling for joint applicants is €75,000 nationwide.
Q. What sort of interest rates are we talking about?
A. When a 0.25% interest rate reduction on RIHL scheme loans (and future loans under the yet-to-be-launched LAHL scheme) was announced last September, the Department said that for loans with terms of up to 25 years, a fixed interest rate of 2.495% applied. And they said that for loans with terms of over 25 years to 30 years, a fixed interest rate of 2.745% applied.
The Mortgage Protection Insurance premium (MPI) was at the time 0.555%, bringing the all-in cost of the home loan product to 3.05% for loans with terms of up to 25 years, and 3.3% for loans with loans over 25 years and up to 30 years.
Q. How much deposit do I need?
A. The maximum loan amount under the RIHL was limited to 90% of the market value of the property or, in the case of self-build properties, 90% of the total build costs. This means you must raise 10% from your own resources and a minimum of 30% of this deposit amount had to come from consistent and regular savings. A verifiable record of rent payment may be considered the equivalent of saving.
Q. Can I apply to different councils for a loan?
A. Under the old RIHL scheme, which is supposed to be almost identical to the LAHL scheme, you could apply to more than one local authority if you completed an application form for each local authority you applied to and went through their application process. You could, however, only borrow one RIHL and you had to purchase or self-build a property within the local authority area that you borrowed from.
Q. As it is backed by the government, does that mean the same warnings about home loans from the private sector won’t really apply here?
A. No. The same warnings apply. They include the fact that If you do not keep up your repayments you may lose your home, the cost of your monthly repayments may increase and you may have to pay charges if you pay off a fixed-rate loan early. Added to that, if you do not meet the repayments on your loan, your account will go into arrears and this may affect your credit rating, which may limit your ability to access credit in the future.
News by Irish Examiner, (Neil Michael).
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