Help To Buy 2017

cronos · 12-10-2016 12:40AM #1

Quick question, not sure of the maths on this example. Hoping someone might be able to work it out. Figures are made up for the purpose of simplifying the maths.

So say a first-time buyer is looking to buy a new build house for sale at 400k and has savings of 300k. They could look to get a mortgage of approx 120k to cover the amount not covered by savings and enough to lay floors and buy furniture etc...

However, with this new rule, they will get nothing as their loan to value is not less than or equal to the 80 percent.

What if instead, they choose not to use all their savings to buy the house, so invest (80k) in the mortgage thus matching the 80 percent Loan To Value rule. Then accelerating their payments with the rest of the savings that they could have just put in initially.

The questions are:

1. Do you think this still meets the criteria?
2. Are they going to end up paying more to the bank in additional mortgage interest than you save in the tax rebate?
3. Any issues you could foresee in accelerating mortgage payments? Will this acceleration reduce the APR being paid or will the bank take into account the savings when calculating the APR?

Reference Docs

http://www.revenue.ie/en/tax/it/reliefs/htb/index.html
http://www.revenue.ie/en/tax/it/reliefs/htb/htb-faqs.pdf

dogsears · 13-10-2016 12:16AM

cronos wrote: »

Quick question, not sure of the maths on this example. Hoping someone might be able to work it out. Figures are made up for the purpose of simplifying the maths.

So say a first-time buyer is looking to buy a new build house for sale at 400k and has savings of 300k. They could look to get a mortgage of approx 120k to cover the amount not covered by savings and enough to lay floors and buy furniture etc...

However, with this new rule, they will get nothing as their loan to value is not less than or equal to the 80 percent.

What if instead, they choose not to use all their savings to buy the house, so invest (80k) in the mortgage thus matching the 80 percent Loan To Value rule. Then accelerating their payments with the rest of the savings that they could have just put in initially.

The questions are:

1. Do you think this still meets the criteria?
2. Are they going to end up paying more to the bank in additional mortgage interest than you save in the tax rebate?
3. Any issues you could foresee in accelerating mortgage payments? Will this acceleration reduce the APR being paid or will the bank take into account the savings when calculating the APR?

Reference Docs

http://www.revenue.ie/en/tax/it/reliefs/htb/index.html
http://www.revenue.ie/en/tax/it/reliefs/htb/htb-faqs.pdf

I'm not 100% sure I follow what you're proposing here but bear in mind that the only information available about this was the announcement made yesterday and the fairly brief documents you linked i.e. there is little actual detail to go on. The detail will be in the Finance Bill and that will be out in a couple of weeks, so if you hang on you'll get more clarity from that.

However if your idea is to go with an 80% mortgage which would be 320k, so you use 80k from savings to pay the balance, and then immediately afterwards you use the rest of the savings (220K) to pay down the mortgage leaving an effective mortgage balance of 100K, I imagine there will be rules to prevent such obvious dodging of the basic rules set down.

I think that 80% rule will seem quite unfair in the situation where someone has a deposit higher than 20%, but maybe the idea behind it is that it should only benefit first time buyers who need the help and that doesn't include those with higher savings. Leaving aside arguments about whether the measure is sensible at all (stimulates demand when problem is supply etc) if the idea is to help out first time buyers who need the help maybe this is a reasonable rule.

Anyway it should all be clear in a couple of weeks, so maybe check it out yourself when the Finance Bill is published or else come back here.

Steve · 13-10-2016 12:21AM

Tread wisely, make sure there is at least one penalty free pay down with the mortgage provider. Use this as a bargaining tool, right now they need you more than you need them.

cronos · 13-10-2016 12:34AM

dogsears wrote: »

I'm not 100% sure I follow what you're proposing here but bear in mind that the only information available about this was the announcement made yesterday and the fairly brief documents you linked i.e. there is little actual detail to go on. The detail will be in the Finance Bill and that will be out in a couple of weeks, so if you hang on you'll get more clarity from that.

However if your idea is to go with an 80% mortgage which would be 320k, so you use 80k from savings to pay the balance, and then immediately afterwards you use the rest of the savings (220K) to pay down the mortgage leaving an effective mortgage balance of 100K, I imagine there will be rules to prevent such obvious dodging of the basic rules set down.

I think that 80% rule will seem quite unfair in the situation where someone has a deposit higher than 20%, but maybe the idea behind it is that it should only benefit first time buyers who need the help and that doesn't include those with higher savings. Leaving aside arguments about whether the measure is sensible at all (stimulates demand when problem is supply etc) if the idea is to help out first time buyers who need the help maybe this is a reasonable rule.

Anyway it should all be clear in a couple of weeks, so maybe check it out yourself when the Finance Bill is published or else come back here.

That's basically what I was thinking. Don't see how they could know to be honest unless they do a means test. If they were going to do that it would have been mentioned. But I'll wait for the finance bill.

I'm not going to let myself miss out on this payment. So the other money will just get moved into savings bonds if this approach isn't possible. Makes no sense for someone to pay 20k more for the same house because they have saved more.

Plus who's to say how much a person should keep as liquid assets?

Cian53 · 13-10-2016 02:01PM

Anyone know if one off builds in countrtside by private builders are included in this scheme and not just developers..also wat qualifies as new build.iv jus bought house built in 2010 but we are de first occupiers.will we b eligible for rebate

CIARAN_BOYLE · 13-10-2016 03:35PM

Cian53 wrote: »

Anyone know if one off builds in countrtside by private builders are included in this scheme and not just developers..also wat qualifies as new build.iv jus bought house built in 2010 but we are de first occupiers.will we b eligible for rebate

Theres a date in June or July 2016 that you have to buy it after. You are not eligible. As to private builders versus one off builds in the countryside I suppose we will have to wait for more details to emerge.

CT2 · 13-10-2016 04:42PM

Question
So the rebate is going to be 5% of the purchase price which is less VAT of 13.5%

So a builder asking for a total of €300,000 for a new house

means that purchases price is €264,317 put vat €35,683 for a total of €300,00.

You can now receive rebate of €264,317*5% €13,215.

barneystinson · 13-10-2016 06:40PM

CT2 wrote: »

Question
So the rebate is going to be 5% of the purchase price which is less VAT of 13.5%

So a builder asking for a total of €300,000 for a new house

means that purchases price is €264,317 put vat €35,683 for a total of €300,00.

You can now receive rebate of €264,317*5% €13,215.

Where are you getting this "less VAT" thing from? It's the first I've heard of it...

Cian53 · 13-10-2016 07:58PM

CIARAN_BOYLE wrote: »

Theres a date in June or July 2016 that you have to buy it after. You are not eligible. As to private builders versus one off builds in the countryside I suppose we will have to wait for more details to emerge.

We only purchased house and closed the sale on July 19th...Will I b eligible or is it backdated to when booking deposit was put down which in my case was June and would make me ineligible.

CT2 · 13-10-2016 08:05PM

16. Will the property value be taken as it is displayed on the property price register?
The purchase price is the final price of the house, which is the amount that the individual pays to the builder. For example, it is the amount that would be used for the payment of stamp duty.

A new house stamp duty is calculated from the total less vat.

This is from revenue.ie (can't post links yet) i've seen this link in other posts.

This would mean that the limits are all 13.5% higher!

barneystinson · 13-10-2016 08:32PM

CT2 wrote: »

16. Will the property value be taken as it is displayed on the property price register?
The purchase price is the final price of the house, which is the amount that the individual pays to the builder. For example, it is the amount that would be used for the payment of stamp duty.

A new house stamp duty is calculated from the total less vat.

This is from revenue.ie (can't post links yet) i've seen this link in other posts.

This would mean that the limits are all 13.5% higher!

I think you're ignoring the first sentence there though, that the purchase price is the amount the individual pays to the builder - I'm pretty sure the builder will want the VAT...

CT2 · 13-10-2016 08:43PM

"For example, it is the amount that would be used for the payment of stamp duty."

But the last line above states that it will be the amount used for the payment of stamp duty.
which is the total less vat

Some else might know this, but does your solicitor transfer the VAT to revenue as they do stamp duty and then pay the balance to the builder.

It's a bit confusing TBH.

Steve · 13-10-2016 09:17PM

CT2 wrote: »

"For example, it is the amount that would be used for the payment of stamp duty."

But the last line above states that it will be the amount used for the payment of stamp duty.
which is the total less vat

Some else might know this, but does your solicitor transfer the VAT to revenue as they do stamp duty and then pay the balance to the builder.

It's a bit confusing TBH.

The issue there us the amount of VAT included will be unknown until the developer / builder provides this (normally at the end of the build / closing). There may or may not be VAT in the site cost (especially for a self-build), there will be different rates for materials, subcontracted labour etc..

The builder pays the VAT to revenue, Your solicitor handles the stamp duty.

barneystinson · 13-10-2016 09:42PM

CT2 wrote: »

"For example, it is the amount that would be used for the payment of stamp duty."

But the last line above states that it will be the amount used for the payment of stamp duty.
which is the total less vat

Some else might know this, but does your solicitor transfer the VAT to revenue as they do stamp duty and then pay the balance to the builder.

It's a bit confusing TBH.

If only the solicitor did transfer the VAT to revenue...!

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