![]() ![]() ![]() Other enhancements mean that more potential buyers – divorced, separated or otherwise – will qualify as first-time buyers as, since January 1st of last year, the “fresh start” approach applies to the local authority home loan. Applicants no longer need to get life and disability cover: from the start of this year, life cover is seen as sufficient, and this has resulted in a “substantially reduced premium” for new borrowers, says the spokesman. The protection cover needed has also changed recently, according to a spokesman for the Department of Housing, Local Government and Heritage. Overall, since February 2018, more than 3,300 people have got on the property ladder through the loan. Meanwhile in Cork city, there were no applications – and thus no mortgages drawn down – last year. For example, there were just 30 mortgages drawn down under the scheme in Dublin city in 2022, at an average value of about €200,000. There have been criticisms of the scheme in the past, mainly centred on the high mortgage protection cover that must be taken out in conjunction with a loan. You can borrow up to 90 per cent of the purchase price of the property, so a deposit of just 10 per cent is needed. That’s something that is impossible to predict. ![]() Depending on future interest rate trends, these may look like very good value – or may end up being considerably higher than market rates. Rates for the loan have increased from the 2.5 per cent prevailing when it first launched. ![]() The loan, which can be used to buy a new, second-hand or self-built home, is aimed at first-time buyers who may not be able to access finance in the traditional market, and comes with the option of two fixed rates: 3.35 per cent fixed for up to 25 years (APR 3.4 per cent) or 3.45 per cent fixed for up to 30 years (APR 3.51 per cent). While the local authority home loan, which was formerly known as the Rebuilding Ireland Home Loan, has had a mixed response, recent enhancements may mean it will reach a larger audience – including divorced/separated buyers. The Central Bank is not the only one that has changed its approach of late. Some lenders will allow only the applicant’s basic salary, whereas others will include some or all additional income such as car allowance, bonuses, overtime, shift allowance, commission, etc, and will allow borrowings of four times that higher income amount,” he says. “This can vary significantly from one lender to another. When working out how much they can borrow, Sheehan says it’s important to consider what the lender will take as income. So, last year, such an applicant on a salary of €60,000 could borrow only €210,000 (unless they were granted an exemption). Now, a divorced or separated buyer will have to save only half as much – or €30,000 – to buy that home and they will also be able to borrow four times their income. “That’s a significant change when you consider that, previously, someone buying a house for €300,000 were limited to borrowing 80 per cent – so that was €30,000 in additional savings they needed,” he says. This is because second-time buyers had to save a higher deposit of 20 per cent to fund home purchase, while they were also restricted by the 3.5 times earning rule.Īn easing of the Central Bank rules means that the 10 per cent deposit rule has been extended to people getting back on the housing ladder, divorced/separated applicants will also be able to borrow four times their salary, more than the 3.5 times which is the limit for everyone bar first-time buyers.Īs Joey Sheahan, of MyMortgages.ie says, the move is a “game-changer” for this cohort. On the other however, it made what was a difficult situation for many even more difficult. On the one hand, this makes sense, because they were in fact second-time buyers. Previously, someone buying a house for €300,000 were limited to borrowing 80 per cent – so that was €30,000 in additional savings they needed - Joey Sheahan, of MyMortgages.ie Until recently, people who were divorced or separated were treated as second-time buyers by lenders when it came to buying a home (assuming they had previously owned one). ![]()
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