List & order of things/people/cost in buying a house

Gatica

I want to get my head around the numerous steps involved in buying a house and I'd like to start getting an idea of cost of each so we can budget accordingly.

• E.g. should we get recommendation for and find a solicitor we trust first?
• Should we get own surveyor or engineer who will thoroughly inspect a site and buildings for us when we find a house we like? or can we rely on a bank's recommendation?
• Should we get a max value mortgage pre-approved before looking for house and how long approximately will their "offer" last?

I've read a few threads on boards and a number of useful sites that give good overviews in what's needed, but not really in a comprehensive order. I've also noticed a number of terms for different costs/fees a solicitor will charge (land registration fee, bla bla...), which I've had to look up separately. So there's obviously many different extra costs that will be charged to complete a sale.



Also, what are the many extra costs involved in buying AND owning a house vs renting?

1. Home and contents insurance
2. Property tax
3. Mortgage protection insurance

Specifically for me/us, I'd like to know what are the approximate costs of these for say a 4 bed house in Galway for around 350,000?


Every time there's minute changes in budget or banks when it comes to interest or mortgage relief, there's huge country-wide panic. So how much really are people affected, and can anyone give quantified examples?


Naturally I'd like the best house we can afford, but also where we can afford rising changes in interest, property tax as well as continue to live reasonably comfortably rather than becoming hermits for the next 30 years...

Mrs OBumble

Leave contents insurance out. you need to have that whether you're owning or renting.

Gatica

ok, so difference between contents insurance and full home insurance (which should be building and contents)...

riclad

work out can you afford a loan,
if rates go up by 2 per cent.
mortgage relief is gone,
FOR NON landlords ,ordinary home buyers .
an extra 2 per cent is monthly loan payment increase of 60 per cent approx.
interest rates now about 3,5 variable rate ,
Last time i checked .

say you get mortgage approval,for 6 months, for 300 k,
no point in looking at houses ,
Priced over 330k,
banks usually lend 90 per loan to house value,
UNLESS you have a very high income.

SO you,ll need say 10 per cent house price, plus legal fees,stamp duty ,surveyors fees.
YOU can go to a mortgage broker,get free advice on mortgage,expenses etc.

say house is 300k ,stamp duty is 1 per cent.

http://www.revenue.ie/en/tax/stamp-duty/residential-rates.html

banks look at your monthly expenses, how much do you save,per month,
do you have a bank account in the bank ,you are applying to.

YOU NEED TO know how much can i borrow.
before you start looking at houses .

ABajaninCork

I'd get a structural survey done by your own surveyor. NEVER just rely on the bank's survey. All they'll do is a 'drive-by' just to make sure the amount you borrow is justified; i.e. can they get their money back if you sell or are unfortunate enough to be repossessed.

Factor in stamp duty and solicitor's fees. That has to be paid before you get the keys. Source your own solicitor and don't go by the EA's recommendation. Get recommendations from friends and family and check the solicitor out carefully.

As I understand it, mortgage offers are usually valid for six months, but can be extended if you need to. I stand to be corrected on that though. Banks are doing pretty stringent stress-testing of any loans these days, and will lend to a maximum 90% of the house value, and usually 85%. NOT what you agreed to pay, mind. It will be based on THEIR valuation. So - if there's a shortfall between the sale agreed price and the bank valuation, either you pay the difference or you re-negotiate the price with the vendor. As Riclad says, you need to look very carefully at what you can realistically borrow, and set your budget accordingly. Don't get carried away with the bidding. If the price is beyond you're willing to pay/what you think the house is worth? WALK AWAY!! There'll always be houses for sale.

You need to arrange life/buildings/contents/mortgage protection insurance before you get the keys.

Hope this helps!

riclad

once YOU get approval, look at houses , maybe put in a bid.
DO not let estate agent know how much you can borrow,
you ring, your solicitor , i wish to bid 200k on house x.
NOT all houses are listed on daft.ie ,
MOST estate agents have a website, eg gunne.ie
etc
SAY house is listed 200k, i,ll put in 150 as my first bid,
if house is worth 150k in my opinion.

BANKS are conservative,
they work out can you pay the loan, plus normal expenses , esb,gas,etc
eg what job are you in,
how long are you working there etc

A BANK SURVEY is they look is house worth x amount,and
theres no obvious issues, eg cracks in walls etc
its not a structural survey.

ITS harder to get a loan on an old house ,that needs repairs,new windows, etc
than say a standard semi d thats 15 years old.

Think how much will i have left per month after paying the loan.
maybe get approval for 200,
and borrow 150k, if you see a house thats cheaper than 200k

Gatica

PS: Thanks for all the replies, btw!

riclad wrote: »

an extra 2 per cent is monthly loan payment increase of 60 per cent approx.

I'm confused by this one. So if I'm paying variable rate of say 4.5% on mortgage and it costs 1000 a month, does that mean that if it goes to 6.5% my mortgage will go to 1600??
How is that calculated? or are there sites/tools handy for doing this?

We were offered a townhouse, for relatively cheap. It's not somewhere we'd like to live permanently, i.e. probably 1-2 years realistically, but seems to make sense in the short term as we're wasting money on rent at the moment anyway. We were thinking that if it's as cheap as it'll get we'll either buy our own house and try to sell this one in the future, or rent it out. I think after 5 years of saving on rent, it would be worth it even if prices dropped more... At the same time, with all the overheads of buying/selling it may not work out worthwhile or be worth the headache.

Agh, Decisions decisions...

riclad

Simple math,
say interest is 4 per cent,mortgage is 1000 per month,
if rates go to 6 per cent in 3 years.
your payment per month goes up to 1400 approx.
each 1 per cent= 230-240 euro.

First 10 years of a loan your monthly payment is 90 per cent interest approx.
10 per cent capital repayment .
This is not exact no,its a guide.
After 10 years the capital repayment increases gradually.
Every year your bank sends you a statement ,
payments, interest paid ,capital paid, in 2014.

ITS naive to believe that interest rates can stay low for 20 years.

Google mortgage calculator ie ,
go to aib.ie
Can you not just buy in area x,
where you can live for 20 years.

In many area,s prices are going up.

averagejoe123

Gatica wrote: »

I'm confused by this one. So if I'm paying variable rate of say 4.5% on mortgage and it costs 1000 a month, does that mean that if it goes to 6.5% my mortgage will go to 1600??
How is that calculated? or are there sites/tools handy for doing this?

Say you borrowed €300,000 at an initial rate or 4%. This works out at €12,000 (€300,000*4%) p.a in interest.

If the rate was to increase to 6.5% at the start of the 2nd year then you would be paying €19,500 (€300,000*6.5%) in interest per year. This assumes that no capital was repaid off the initial €300,000 in the 1st year which will not be the case but it will only have a slight impact on the figures.

The bank stress test your repayment capabilities when deciding your repayment capabilities....e.g. they will add up to 2-3% on top of today’s variable rate to see if you will be able to make repayments at the higher rate.

mortgages.ie have good calculators for this. I would get a mortgage broker to assist you with getting the max approval at the most competitive rate.

Always get independent structural reports and valuations done. I would also shop around for a good solicitor to look after the sale, you should expect to pay €1,200-€2,000 + VAT for their fees excluding searches and folio charges which will come in at about €300-€500.

OREGATO

Here's a post I posted here in another topic. Hope it helps:


***


Hey guys,

I've been lurking on here for a long while but thought I'd share my own experience and something I wrote up on another forum to do with buying a house as there were some good questions raised around the process.

Here is a post I put up on a separate forum, hopefully it'll be of use to some of you in the same boat. Before November last year, I knew nothing only the high level of whats expected, having gone through the cycle, I decided to put together some of the insight I gained from my own experience on buying a house. It goes through the steps (we took) and some risks we identified along the way

Some details about me:

First Time buyer with OH, no dependencies, no loans etc. Buying in SCD (I know, I know)

I feel that the information below should give most people in a similar position some idea of what to expect..

Just for some more information, here are some risks we identified with each step that could have or could still potentially affect the sale. Some will not apply but it might just give you an insight of some of the stuff you might encounter. Some didn't apply for us but these are generic things that I think would be useful for someone close to our position. I'm by no means an expert or working in the field so please do update or chime in with something constructive that may help others.

Hope this is helpful to some of you.

1. Do the math, have your savings in place, solicitor fees, stamp duty and statements etc ready (online banking is a godsend). A further step we took was to have a surveyor, valuer, solicitor, builders, electricians all lined up. Trust me, it's a lot easier to be able to pick up a phone to any of these guys sooner and ask them a question than cold calling when you have a query when you're sale agreed.

- You may realise that the cost of builders/electricians etc will all mount up into costs that you weren't expecting.
- Things like permanent employment for less than 6 months, outstanding loans etc may affect or limit your borrowing power.
- Do the math on costs of commuting, schools and other factors as well. Factor in contingency as you never know what'll happen.

2. Get Mortgage approval in principal - go through a broker or go to a few banks, see what's on offer and do the math again

- The bank may not offer you what you expect depending on your own financial situation. They were very tough after the crash but have seemed to loosen up a little (this is from talking to others in a similar position to us) - for example, if you have an existing mortgage and want to take out a second, back in the good dsays, they would have taken rental income into account, they don't any more.

3. When approval in principal is sought, we went a step further here as I have a close relationship with the bank and was told to put in a house that we'd be interested in. We filled out all the forms, got the salary certificates signed, P60's lined up, statements lined up, utility bills, passports and driving licenses etc and submitted it to make sure that we were fully approved and didn't just have the in principal approval.

- All quite straight forward, one thing to note is, for your salary, be sure that you put down your basic pay and not factor in bonuses or overtime (if it isn't guaranteed) We were fine for this but a few contacts I have did mention that some applicants got approval in principle by stating they were earning €70k PA and when the time came for the actual mortgage application, they were declined because the figure of €70k was made up of €25k basic and €45k potential bonus/commission.

4. Go and look at houses - by far the most daunting and frustrating part - but a necessity all the same

- Your biggest risk with this is dealing with idiotic estate agents. Take a look at boards.ie and other property related websites for some insights into some of them. We're dealing with some very professional and decent crowd and have had no issues. Emails/phone calls answered promptly etc.

5. When you've found a house or houses that you're interested in, make an offer if you are ready. This process can take a while depending on other bidders, the seller etc.

- Biggest risk is being outbid or getting caught up in the whole process and going above and beyond what you can afford in a bidding war.

6. If your offer has been accepted, you will then need a booking deposit, typically €5,000 which is payable to the estate agent. You are now officially sale agreed. The estate agent will take the house off the market and issue instruction letters to both parties' solicitors.

- No big risk here, just make sure you have the booking deposit - forgot to mention, the booking deposit comes off your 10% deposit. So if you are buying a house for €100k, have a deposit of €10k and require a booking deposit of €3k, it'll mean that you pay €3k to the estate agent when you go sale agreed, €7k will be given to your solicitor (which is the rest of the 10%) and you'll be paying back the €90k mortgage (and the interest of course)

- Booking deposits are also refundable by law, up until the point that the contracts have been signed.

7. In the mean time, you should get the valuation and the survey done on the house - Valuations will depend on bank and each bank will have their own form that they want filled in. Just make sure you notify the company as to which bank requires the valuation.

- Like a used car check, you may find that there are some substantial issues with your house which may make the purchase implausible - that's the worst case scenario. Most of the time, the surveyor will find some - relatively small items that need doing.

8. Receive the survey report and if you have anything, raise it with your solicitor for further clarification or the estate agent - in the case that you need a builder in or some other professional to look at a certain aspect of the house

- See point 7, I'd recommend that you get any points on the survey report you're unsure of, checked out prior to signing.

9. Your solicitor (make sure you get a good one) will inform you when contracts have been received by the vendors side, (when the vendor gets the letter of instruction, their solicitor will go about getting the deeds if not already in their possession, doing checks on same and then drafting up and sending a contract to the buyers side) In the letter, you will be advised of a closing date, by which the contracts should be signed and you will hopefully get your keys. Inform your bank - they will issue a letter of offer to your solicitor - this is the document they fill out with you when you go in to sign the contract.

- From what I gather, once you go sale agreed, there isn't really any driving force in the process, so sit on your solicitors if required.
- Letter of offer is the form your solicitor will fill out and send to the bank, if you got mortgage approval six months ago, you may find that the bank will not offer you the same amount as 6 months ago, based upon your current situation and their thresholds.

10. Sort out your life assurance and home insurance - your bank will be able to advise and get this in place for you.

- Life assurance may require a medical, if you are in ill health or receiving treatment for something, this may delay you/hike up your preimum

11. The next step will involve your solicitor going through the contract and making sure all is in order - there may be delays if there are questions over different points within the contract. Your solicitor will also do their own check on the property in terms of deed and title checks

- Lost title deeds, delays in if it's a repossessed house, judgments against the property etc can cause delays here.
- With regards to a house that is occupied - discussions may arise from the contents of the house and if you'd like to purchase these with the house etc. Something to factor in as well is what will be left and what will be taken. Simple things like curtains and basic furniture like bed frames and white goods should be taken into consideration.

12. Once your solicitor is happy with the contract, they will get you in to sign, normally, the days leading up, you will be able to go into the house to take a look, potentially meeting the sellers.

- No real risk here.. I don't think.

13. Once you sign, then the contract goes back to the sellers side and they will go through the same exercise with their solicitor.

- If you're buying from someone who is also going sale agreed on another property, they have up until this point to pull out and they could well do if the house they're purchasing falls through for whatever reason.

14. If all goes well, you will get your keys (the date will be determined by the closing date but could be before or after depending on delays etc

From here, the risk is you can't afford your mortgage!

riclad

IN simple terms, say rate is 4 per cent, loan payment per month is 1000 euro.
1 per cent increase= 240 euro increase in payment, in the first 10 years .
Thats on a common mortgage, standard variable rate mortgage ,which most ftb,s get.
FTB is first time buyer.

Gatica

Thanks for the input, lots of useful info there.

Sorry riclad, but your calculation is not easy to follow. It may be something that's easy for you to calculate in your head and then write down 240, but someone like me reading it the other side, I've no idea where you pulled that number from.

Just wondering, when it comes to buying a townhouse, do you still need to do a structural survey, considering the house is part of a greater building...? Or what would a surveyor be inspecting exactly?

riclad

OK, i,ll explain it,
if the interest rate now is 4 per cent,
and it goes up to 5 per cent .
Thats, almost a 25 per cent increase in your monthly mortgage payment.
Say payment is 1000 per month,
it,ll go up to 1240 euro per month approx.

Because the first 10 years most of your payments, 90 per cent plus,
are interest payments on the money you borrowed.
This is not an exact figure .
250 is a quarter of 1000 euros,
I reduced it to 240, to account for capital repayments in your monthly
mortgage.

it depends on the age of the building,
Surveyors look for faults in the walls, roof, structure of a building ,
eg dry rot, rising damp, bad insulation .
OR basic faults that may need fixing.
eg cracked roof tiles.
EG i would not bother getting a survey of a building less than 20 years old .
Unless i was concerned about pyrite or some other specific problem.
Some buildings built in the boom , have bad sound insulation, and basic insulation problems.

When you say town house i presume you mean an apartment ,or a studio unit , part of a large building.

Gatica

To update, the place we were looking at was sold privately in the end (Cash I reckon).
It was townhouse in the sense that it's very similar to a semi-detached house: 2 floors, a private entrance at the front and back, it was end of terrace with side access to private garden, but it's part of a complex and has a single bed apartment above it, no fireplace and only electric heating.
We did get a surveyor, the house was build 2001 I think, there was a structural crack above the downstairs and upstairs window at the front. He pointed out the crack could be seen outside and inside the house, so it wasn't merely paint, but he didn't feel it would affect the integrity of the building. The sound insulation was indeed absolutely abysmal, you could hear the upstairs neighbours peeing and boiling the kettle, never mind the walking on the wooden floors...
For the bank we got a valuation done, so we'd know the max we could afford to bid. Ended up being money down the drain as it never went to auction, but at least now we have contacts.
Got a solicitor too based on a recommendation, were very happy with services but must admit they were on the upper scale of solicitors I'd priced in the mean-time.

Keeping an eye out now for other homes in the area. Wondering if we could make it happen before the 20% rules come into effect, although the OH reckons the prices will drop again if demand drops due to this new rule.

Btw, I finally got the repayments calculation increases for interest increases :rolleyes:

RealistSpy

am hoping to buy next year and I am stress just from reading this thread