Guide to Purchasing a Property
BUDGET / QUOTE
You need to carefully buget before considering any property. This involves calculating the funds at your disposal either on deposit or cash, estimating the value of your equity in your existing house, if applicable, getting a quote from a Solicitor of the costs involved in purchasing, obtaining approval in principal from a lender-this gives confidence that a lender will lend a certain amount of money when a property is found.
APPOINT A SOLICITOR
Contact your Solicitor to open a file and commence the transaction. Shop around for a good qoute and a reliable, fast, efficient Solicitor.
Once you have decided to proceed with the purchase of the house and have been approved, at least in principle, for the loan, you should pay a booking deposit to the Estate Agent. Booking deposits can be as low as €3,000 but can be up to 3%. This deposit is refundable up to the point before contracts are signed. When the Estate Agent receives the booking deposit they issue a sale details to all parties.
This is prepared by the Estate Agent and issued to you, your Solicitor and the Builder’s Solicitor. It contains the price, conditions of sale, estimated closing date, engineer reports, BER certificates, names and addresses of all parties.
The seller’s Solicitor on receipt of the Sale Details, will issue the Contracts. The Contracts are sent in duplicate together with a copy of the Title Deeds to your Solicitor.
Once your Bank/Building Society has formally approved your loan in writing on the basis of the price of the house and information furnished by you, a formal loan pack is issued. Normally a Letter of Offer setting out the main details of the loan is issued to you and the Loan Pack comprising Mortgage Documentation, Acceptance of Letter of Offer and Assignment etc., is issued to your Solicitor. When your Solicitor has checked the Loan Pack and discussed key terms with you, various documents are signed and completed to enable the Bank/Building Society to proceed. This offer will include all the particulars of the mortgage such as rates and repayment term.
SIGN CONTRACTS, PAY DEPOSIT
When your Solicitor has checked the Contracts you will be required to visit your solicitor to sign the Contracts and pay the Contract Deposit (10% of the purchase price less booking deposit already paid). With a new house you may not be obliged to pay a full 10%, instead a reduced payment (called a stage payment) is accepted. The amount of the stage payment is specified by the Estate Agent at the outset. This should happen within 3 weeks of paying deposit. Your solicitor returns the Contracts and Building Agreements in duplicate signed by you together with the Contract Deposit/Stage Payment to the Seller’s Solicitor.
The Seller’s Solicitor returns one copy of the Contract and Building Agreement. This creates a binding agreement between all parties, subject to the terms and conditions contained in the Contract.
LIFE INSURANCE/HOME INSURANCE
All lenders require you and your partner to have Life Insurance, or more commonly known as Mortgage Protection. If either you or your partner dies before the mortgage has been repaid, insurance is designed to cover the mortgage amount outstanding, at the very minimum, depending on the type of life cover selected. Home Insurance is also highly advisable and is required by all lending institutions to insure your home and property against e.g fire, theft. This step often takes longer than many buyers expect so allocate time to making it happen.
On exchange of Contracts, your Solicitor returns the loan acceptance and ancillary documents to your Bank/Building Society.
Your Solicitor raises Requisitions (lengthy Questionnaire) on Title and these are sent to the Sellers Solicitor together with a draft Purchase Deed. The Sellers Solicitor replies in writing to the Requisitions received from your Solicitor and approves the Deed.
NOTIFICATION OF COMPLETION – NEW HOUSE ONLY
When the house is finished the Builder sends you and your Solicitor a “Completion Notice”. This is an important document and sets the meter running against you within which time period you must finalise completion. Immediately on receipt of the Completion Notice you must “snag” the house. This is a formal inspection by you or your agent to establish that the house has been finalised. You draw up a list of any unfinished works. This list, known as a “snag list”, is prepared in duplicate and one copy retained by you and the other handed to the Site Foreman. You should contact the Site Foreman within a number of days to check if all the items of the “snag list” have been completed and that exercise should be repeated until all matters have been dealt with. Immediately the house has been completed to your satisfaction you should inform your Solicitor.
Once all queries raises and the Requisitions have been satisfied and all matters are dealt with a closing date and time is finalized to suit all parties. You should check with your Bank/Building Society that everything is in order to allow the loan cheque issue. A common cause of delay is that the Life Insurance or Fire Insurance has not been taken out in time. Your Solicitor will prepare a Statement setting out the balance required to complete the purchase and costs. This is sent to you in advance of the completion in order that you can deliver the balance of funds to your Solicitor (see 15 below). This takes into account any extras or allowances agreed by you and the Seller.
This is received in advance of the completion date.
BALANCE OF FUNDS
These are delivered by you, by Bank Draft made payable to your Solicitor in advance of the completion date. Normally the loan cheque and balance of funds are received the day before the completion date.
CLOSE SALE AND MOVE IN
The completion is the formal completion of the purchase. This takes place at the Seller’s Solicitors offices. You do not need to attend as your Solicitor will represent you. Your Solicitor checks the Vendor’s Title and when he/she receives good Title with fully signed documents hands over the balance of the purchase price. At that keys are handed over to your Solicitor. For a second hand purchase for a new house the Site Foreman is contacted by telephone following completion of the transaction and informed to release the keys to you. Usually you collect the keys from the Site Foreman.
After the sale is completed you must sign the Purchase Deed. This document is only handed over to your Solicitor at the closing and is not available for signature by you prior thereto. You must sign immediately following the closing as there are strict time limits for stamp duty.
Following signing by you of the Purchase Deed your Solicitor will proceed to stamp the Purchase Deed and Mortgages and then register same in the Land Registry/Registry of Deeds. Registration can take months, if not years, depending on the County and type of property involved.
At this stage you are registered as owner of the house in either the Land Registry or Registry of Deeds. Legal ownership to the property passes to you on completion of the purchase but registration may take a minimum of 6 months. This delay does not in any way undermine the fact that you are the legal and beneficial owner of the property. Indeed you can sell a property even though registration has not been finalised in the Land Registry or Registry of Deeds.
Your Solicitor, on completion of registration, returns your Title Deeds, to your Bank/Building Society together with a Certificate confirming that you have acquired a good marketable Title. Usually, you will be notified that registration has completed and the Title Deeds have been returned. At this stage your Solicitor closes off your file.
Hidden Cost of Buying A Property:
- Valuer’s Report: €100 to €250
- Surveyor’s Report: €100 to €250
- Deposit:10% of Total Purchase Price
- Solicitor’s Fee: Dependent on nature of Transaction – Do not be afraid to shop around for quotes!
- Searches (for judgements or planning permission): €100 to €200
- Some hidden Costs: Retrieval of Title Deeds from your Lender €40 on average / Vacate Fee €40.
First Time Buyers Useful Terms
Annualised Percentage Rate (APR):
This is a financial tool to help you identify the true cost of borrowing and to give you a way of comparing the true cost of different types of loan on an annual basis, as it includes the rate, the way is applied and any other fees and charges.
This is another term for a standard capital and interest repayment mortgage.
This is when you pay the balance of the purchase price and in return receive the keys to the house. Certain documents will also have to be signed. These arrangements will be made by us in conjunction with the other parties involved I the transaction. Barring any problems you now own the hosue and can move in any time you like.
Documents which set out all the details of the transaction for the transfer of ownership of the house. These will be drawn up by the solicitor for the seller.
Legal process for transferring the ownership of property and land.
Deposit: Initial downpayment for a house. Payable (aafter meeting your solicitor) to the seller of the house, usually an auctioneer or an estate agent. It will be 10% of the agreed purchase price.
Disbursements (conveyancing and outlay):
The cost your solicitor has to pay to carry out their work such as searches, Registration fee, photocopying, postage and couriers. They, in turn, will charge you.
Family Home (Statutory) Declaration:
This is a sworn statement required by the Buyer’s lender, and the buyer’s solicitor. It clarifies the ownership of the house and declares that it was used as a family home or not. In the case of marriage separation/divorce, sections of Separation/Divorce Agreement would be produced.
When the person selling a property cancels their agreement on an offer from one buyer in order to accept the higher price of another offer.
This is a service provided by the National Housing Building Guarantee Scheme, through registered builders, to people buying new, privately built houses and apartments. The certificate id called ‘HB47’ and it provides:
- A guarantee against losing your deposit if the builder goes into bankruptcy or liquidation
- A 10 year Defect Warranty against major structural faults which happen within 10 years of completion
- A 2 year Defect Warranty against water and smoke damage after completion.
There are three main types of insurances associated with a mortgage. They are:
- Life Assurance: This is compulsory if you are taking out a mortgage. There are two main types of life assurance;
- Mortgage Protection: This means the amount outstanding on your homeloan will be repaid in the event of your death. The amount that is paid out reduces in line with your mortgage over the years.
- Term Assurance: This is life assurance that does not reduce during the term of the loan. In the event of death, the mortgage is repaid and the rest of the money goes into the estate.
- House Insurance: This is also compulsory for those taking out a mortgage. This insures you against damage to your home, up to and including rebuilding your home should it be destroyed.
- Mortgage Payment Protection: This form of insurance is not compulsory. If you cannot work because of an accident, illness or because you have been made redundant, this policy will cover the repayments on your mortgage (and more if you wish) for a period of time, usually up to 12 months.
This is simply the cost of borrowing money. If the rate was 10% per annum and you borrowed €100 for the year, the interest payable would be €10. Another way of saying this is that the cost of borrowing €100 for the year is €10.
Interest rates can be either:
- Fixed: A loan where the payments are based on a constant interest rate for a set period of time
- Variable or Tracker: This means that the interest rate charged on the mortgage can go up and down over the term of the mortgage.
As soon as you draw your loan, interest begins to accrue. However, the first mortgage payment only falls due on the following month. The interest that accrues between you receiving the money and the first repayment is known as interim interest. This can be paid at the time or added to the loan.
Land Registry Fee:
A fee paid to the Land Registry to update and entry in their records after you buy your home. This fee will be included in the legal costs charged by your solicitor.
Loan application Fee:
This may be charged by your Broker for processing you mortgage application. Can be negotiated.
Loan to Value (LTV):
The amount you wish to borrow expressed as a percentage of the value of the property.
Mortgage Indemnity Bond:
A type of insurance that cover the lender in the event that they make a loss on the sale of a repossessed property. It normally comes into effect when the loan amount exceeds 75% of the purchase price or property value.
This is the amount of money still to be paid to your Financial Institution on the remainder of the loan for the property being sold. This will normally be paid from the proceeds of the sale of your property.
Registration of Title:
The title deeds are registered in the Registry of Deeds or in the Land Registry. The cost of this will be included in your outlays.
These will be carried out on the day the transaction is due to be completed. They will determine whether any judgments have been registered on the property or against the sellers. It will also indicate whether there are any planning restrictions or planning changes. The searches are carried out by a firm of law searchers under our instruction.
The mortgage is secured against your home. A mortgage lender is entitled to sell the house if you do not make the necessary repayments.
This is a tax paid to the government when you purchase property.
Stamp Duty on Mortgages:
Yet another tax! Calculated on mortgages greater than €254,000.
A full inspection of property to check that it is structurally sound.
An inspection, carried out by a qualified valuer, for the benefit of the mortgage lender to see if the property will provide good security for a loan. This is not a structural survey.
Stamp Duty Rates for Buying a Property
Under the new system there is an exemption of €125,000 with two rates 7% and 9%.
The 7% rate applies up to €1,000,000 and it is charged on the excess over the exempt €125,000.
The 9% rate applies where it exceeds €1,000,000 and it is charged on the excess over the exempt €1,000,000.
- First €125,000 Zero
- Next €125,000 7%
- Excess over €1,000,000 9%
Land Registry Fees
Sample Scale Chart – Fee
€1 – €13,000 – €125
€13,001 – €26,000 – €190
€26,001 – €50,000 – €250
€50,001 – €255,000 – €375
€255,001 – €385,000 – €500
€385,001 upwards – €625