How Do I Buy A House?
If you’re planning on buying a property in Ireland, it’s important that you come to the table prepared.
There are many steps in the process which may seem daunting, but with a clear plan it will be worth it when you settle into your new home!
What Are The Steps In Buying A Home?
- Speak to a mortgage professional to find out how your current financial situation sets you up for a home loan.
- Save for a 10%-20% deposit and ensure your finances are in order.
- Get an ‘Approval In Principle’, which is a pre-approval for a mortgage.
- Ensure you are putting extra funds aside for Stamp Duty, Solicitor Fees, VAT, Insurance Policies etc.
- Start your property search online to understand how far your budget gets you.
- Hire a Solicitor to manage the legal aspect of purchasing before you make an offer.
- Inspect properties of interest until you find one that’s perfect for you and make an offer.
- Once your offer is accepted, subject to the survey, the property goes Sale Agreed & a booking deposit is paid to the listing Estate Agent.
- A document of sale is sent your solicitor.
- Hire a professional surveyor to inspect the property, if there is a large issue then you can back out of the sale or renegotiate.
- Organise a property valuation through your mortgage lender & secure a formal loan approval
- Organise Home & Mortgage Insurance policies
- Sign the Contract & pay the required deposit, minus your booking deposit. Once these contracts are exchanged you will typically have 6 weeks to finalise the sale.
- Sign your mortgage documents and ensure the loan will be ready for your agreed sale date as outlined in the contract.
- Your solicitor will request payment of stamp duty prior to settlement.
- On the agreed date home ownership will be transferred and your mortgage opened.
- Pick up the keys and move in, remembering to set funds aside for ongoing maintenance work.
1. Finding a Mortgage Lender:
First-time buyers need a minimum deposit of 10%. Non first-time buyers will need a 20% down payment. This will be vary based on your mortgage lender so it’s a good idea to speak with a consultant who will explain whether you need a greater or lesser deposit amount.
Mortgage Lenders such as Bank of Ireland have Mortgage Lending Specialists who you can ring to discuss further, or arrange a call back at a time that suits.
This is your first discussion to find out how the mortgage process works and how to be best prepared when it comes time to apply for a mortgage.
When finding out how much you could potentially borrow, ask what factors are affecting that amount as this puts you in a stronger position to make changes to your financial situation before applying.
2. Saving Your Deposit
You’ll be surprised how quickly the small purchases add up, even if you feel that you’re already being quite frugal.
There are some excellent free apps that track your spending, set a ‘safety’ spend limit on extras and highlight where you are over-spending.
This added visibility allows you to be very conscious of where you’re spending your hard earned money and cut back. Some of them even allow you to set a weekly, fortnightly or monthly savings deposit that helps build your home deposit.
7 best free money saving & budgeting apps:
First-time buyers should also look into the Help to Buy (HTB) incentive. The HTB helps new buyers purchase a home or apartment with a maximum €20,000 claim.
3. Getting an Approval In Principle:
There’s a big difference between speaking to a Mortgage Consultant to find out how much you can borrow and receiving a pre-approval. The first step is theoretical: you earn a certain amount of money, have a certain amount of debt (if any) and spend a certain amount each month.
This allows a Mortgage Consultant to tell you roughly how much you can borrow.
The ‘Approval In Principle’ is the part where they take the theory out of it and apply it directly to your personal situation, based on your credit history, proof of your financial situation and several other factors.
There is no point in house-hunting without having taken this step because the amount that you can borrow in theory versus the amount that you are pre-approved to borrow can be quite different.
The pre-approval will also help to speed up an actual approval when you’ve found that perfect property you are wanting to buy. The mortgage lender will have a lot of your documentation on file and you are already in the system as pre-approved, so you’ve jumped the first few hurdles.
It will also avoid the nasty shock of potentially not being able to take out a mortgage at all so it’s definitely worth doing.
What Happens if the Bank Says No?
If you don’t quite have enough for a deposit, or the bank is concerned about your current living expenses when assessing your mortgage repayment ability, they can either deny the loan or offer you a far lower mortgage amount than you need.
This is where having a good lender is highly beneficial as they will help you to understand and subsequently map out what steps you can take to tick all the boxes in the mortgage application process. Whether that be saving a larger deposit or reducing your monthly outgoings.
Personal loans, car loans & high credit card debt can work against you as it reduces how much more you can borrow, so it could be a case of coming up with a plan to pay those off before you submit a mortgage application.
4. Budget For More Costs
On top of paying your new mortgage repayments, don’t forget to budget for home insurance, mortgage insurance and property taxes. These bills can add on a few hundred extra euros a month so make sure to include these costs in your budget.
You can get an idea for what a home insurance policy will cost you by comparing different policy options using a comparison website such as Compare Insurance
Most lenders need homebuyers to have mortgage protection insurance. This policy will pay off your mortgage if something happens to you before the term of the loan has ended.
Lenders may give mortgages without mortgage protection when:
- The buyer is over 50.
- You are buying an investment property
- You have ample life insurance
- You cannot get cover due to pre-existing health conditions
Depending on the home’s Building Energy Rating (BER rating), your monthly bills may be more than anticipated. Utilities include electricity, gas, and water. Here in Dublin we’re very familiar with chilly winters and the costs associated with heating your home.
If you’re concerned about ongoing utility costs then look for a home with a stronger BER rating. There is also data to support the claim that BER ratings can directly affects a home’s value.
With many buyers wanting an A-C rating, this comes at a premium and provides the opportunity for you to buy a lower BER rating home and take the necessary steps to improve the energy efficiency and not only save on bills but also potentially add value to your new property.
How do you improve the BER rating?
- Improving wall insulation
- A lagging jacket for your hot water heater
- Install low energy lighting
- Renewable energy options such as solar panels
- Replace or re-seal old windows
- Smart home technology for increased efficiency
There are a large range of improvements you can undertake to improve a home's BER Rating.
5. Let the Search Begin:
Once you have your finances in order, you can begin your search!
You know how much you have been pre-approved by the bank and there are several ways you can approach the searching process:
- Search specifically in your target areas with your maximum budget set to see what is available
- Input your maximum budget and use the map view feature on PerfectProperty.ie to see what you can buy all across Leinster. You may be willing to consider a new area if you find your dream home within budget.
You can also assess each property on its financial and investment potential: Buying Like An Investor
Many home buyers will be faced with the big decision of:
- Buying a move-in-ready property
- Taking on some form of modernisation, renovation or extension
Often the move-in-ready property will require no effort but be the more expensive option and the property in need of work will give you more size for your budget. It’s a tough decision because, depending on the extent of the work, a renovation project can be time consuming, unforeseen issues arise and cost more than you initially thought.
You will need to weigh up the pros and cons of each option, giving serious thought to your long term plans. Will you need a larger home to grow into several years down the line or is the move-in property going to suit you just fine?
6. What Do I Need a Solicitor For?
Both buyers and sellers need to hire a solicitor to do the conveyancing which is the legal transfer of ownership from the current home owner to the new owner.
Homebuyers should hire a solicitor before making an offer on a property. As soon as a home becomes ‘Sale Agreed,’ the solicitor will need to check whether the property sale is legal.
Ideally you want to be recommended a solicitor so ask anyone you know who has purchased a house in the last few years to see if they speak highly of their Solicitor. Alternatively you can either Request a Recommendation on Facebook to find out if anyone in your social network knows or speak with your local Estate Agent.
You can also search the Law Society directory: Find a Local Solicitor
7. What Happens During the Sale Agreed Period?
Once you’ve found the property for you, it’s time to make an offer. There are a range of strategies that home buyers use but you will need to decide which one is most suitable based on how long the home has been for sale and how many bids have already been placed.
In highly competitive markets some buyers choose to go in strong with close to their highest offer in order to secure the property, others choose to start low and negotiate up from there.
When your offer is accepted, you will need to pay a booking deposit to the estate agent. A deposit will either be a set amount, or a percentage of the sale price.
A document of sale is then sent to both solicitors. This document includes:
- Conditions of sale
- Estimated closing date
- Names and addresses of both parties
The seller’s solicitor prepares and sends contracts. There will be a copy of the Title Deeds, which are legal documents showing ownership of the property.
8. Apply For a Mortgage
It’s likely that you will officially apply for your mortgage with the same lending institution that provided you with the pre-approval. Criteria varies across lenders so if you do decide to switch, make sure that you get pre-approved with the new mortgage company before submitting your official mortgage application.
That way, any red flags can be raised before the mortgage application is potentially not approved.
It can hurt your ability to obtain a mortgage if you have mortgage applications denied with other lending companies so make sure that the lender doesn’t have any cause for concern before officially applying.
Remember to negotiate, find out if your mortgage lender can offer you a better interest rate or package. It certainly doesn’t hurt to ask!
Mortgage lenders also have a range of offers which you should assess, such as:
- A percentage of your mortgage’s value in cash.
- A set amount of cash back.
- Offer to pay all, or part of your legal/or valuation fees.
9. Valuing Your Purchase:
At this point, you’ll also need a professional home valuation. The valuation looks at the general state of the property and the location. Your mortgage lender will then base their final loan offer on the property’s valuation.
It’s very important to note that even if you have been pre-approved for a certain loan amount, if the valuation comes back lower than the amount you have offered, the mortgage may not be approved.
A mortgage lender needs assurance that if you were no longer able to make the repayments and the property needed to be sold, that they would recover the debt owed to them. This is why a valuation is the final piece of the puzzle from a mortgage lenders point of view.
10. Contingency Checklist
Sellers are not required to disclose any issues within the home. Homebuyers should hire professional surveyors, engineers, or architects to conduct a home inspection. If there is a large issue, buyers can back out of the sale, or ask for a discounted selling price.
For new builds, have the surveyor draw up a ‘snag list’ of fixable items. Snag items include:
- Cracks in ceilings or walls
- Skirting boards not correctly placed
- Doors that don’t open and close correctly
- Uneven plaster work
- Broken light switches
- Loose wiring
- Leaking pipes
11. Contracts and Documents
Your solicitor will check all the legalities involving your purchase. Homebuyers will then accept the mortgage company’s offer letter through the solicitor. Once buyers legally agree to buy the property, they will need to pay a 10%-20% deposit, or the amount that has been agreed upon.
Next, the seller signs the contract, and agrees to sell their property. Both solicitors will arrange for a final closing date. Everything must get filed before this date.
Requisitions on Title
The homebuyer’s solicitor raises general queries to the seller’s solicitor. These questions are Requisitions on Title. They refer to the home’s fixtures and fittings that are staying in the home for the new buyers.
Deed of Conveyance
After Requisitions on Title, solicitors draft a Deed of Conveyance. There is a search against the seller to ensure there are no judgements or liens on the property.
After the search is complete, the mortgage company issues a loan cheque. The cheque goes to the seller’s solicitor to cover all documentation fees.
12. The Final Costs
Paying Registration Fees
The solicitor titles the home in the Land Registry or the Registry of Deeds. Land Registry provides required title registration. Registry of Deeds is a system of registrations for deeds and conveyances. Registration fees vary between 0.25%-0.75%, depending on the value of the property.
On top of paying your solicitor there is also an imposed Value Added Tax (VAT), which is 23%. This charge is on top of the solicitors fees:
- Fixed fees, or 1%-1.5% of the home’s sale price, plus 23% VAT.
The Estate Agents fee is paid by the seller and is either paid as a fixed fee or a percentage of the sale price once the sale is completed.
Paying Stamp Duty
Stamp duty is a tax that homebuyers must pay to the solicitor. Stamp duty rates vary depending on the market value of the property. Your solicitor will pay this tax during the closing of the sale.
Stamp Duty on Residential Properties
Property Value (€)
Stamp Duty (€)
Up to €1,000,000
2% on all values over €2,000,000
13. Meet on the Closing Date
After the transference of funds, buyers, sellers, and solicitors will meet at closing. This is when keys change hands, and the homebuyers become the new property owners.
Make sure to inspect the property before moving in. Also, buyers should have homeowners insurance in place and ready.
14. Perform Routine Maintenance
Once you’ve moved in, keep in mind that your home will require maintenance, so it is recommended to budget about €3,000/per year for home maintenance. Hire professionals to take care of serious issues.
The End Result:
The most important final step is to enjoy and look back on all the steps you successfully took to achieve home ownership.
It is a lengthy process but that’s to ensure that you can afford the ongoing mortgage repayments, are protected should something happen to your property or yourself and that you are covered legally in your new purchase.