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Costs associated with a Mortgage

The Mortgage Advice Store do not charge arrangement or acceptance fees. There are several costs associated with the mortgage process, these are:

- Deposits
- Stamp duty
- Legal Fees
- Home Insurance
- Surveyors Fees
- Valuation Fees
- Life Insurance
- Indemnity bond
   

Deposits

Savings are a key part of the mortgage process. Whereas banks currently place less reliance on savings than in the past, the discipline of saving cannot be underestimated. With the exception of special 100% mortgages available for some professionals, the normal maximum facility is 92% of the purchase price

Accordingly you will need to source the remaining 8% in addition to any funds you require for legal fees, furniture etc.

A steady savings record helps an application. Banks will require evidence of your deposit in the as part of the loan underwriting process. Loans from parents very often form a part of the deposit. Savings also reduce the necessity for short term borrowing which may have a strong impact on cash flow following a house purchase.

Once again we would emphasise the need to avoid other forms of borrowing wherever possible if you are contemplating buying a new home. The level of any existing loans will effect the amount you will qualify for in respect of your mortgage.

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Stamp Duty Rates

In general, first time buyers and owner occupiers do not pay stamp duty on new houses, there are exceptions for larger houses. Set out below are current stamp duty rates.

Property
FTB's
Owner Occupiers
Investors in Property
Up to 127,000
-
-
-
127,001 - 190,500
-
3%
3%
190,501 - 254,000
-
4%
4%
254,001 - 317,500
-
5%
5%
317,501 - 381,000
3%
6%
6%
381,001 - 635,000
6%
7.5%
7.5%
Over 635,000
9%
9%
9%

There is relief for first time buyers as per above table. Stamp Duty on property transfer is expensive in Ireland. For larger properties, the rate is as high as 9% of the value of the property. Funds need to be set aside by the borrower to cover stamp duty, which is payable on closing. Lenders do not advance funds to pay stamp duty.

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Legal Fees

Many solicitors charge 1% of property value plus vat at 21%. In addition outlay for stamp duty on the mortgage document and other miscellaneous costs might add in the region of €400 for a standard mortgage. Should you require a solicitor, contact us and we would be happy to make a recommendation.

The Mortgage Advice Store have special arangements with a number of solicitors offering significantly lower legal fees than the rate quoted above.

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Home Insurance

All mortgage lenders in ireland require that properties they are lending against be insured for fire and perils risk (earthquake, storms, flooding etc) and they have their interest in that property noted by the insurance company.

Virtually all borrowers require that their personal possessions, furniture, clothes and other belongings are insured against the same risks. Whereas this is not compulsory from the lender's viewpoint, it is advisable to cover potential personal losses in the event of fire for example, items over €5000 must be valued separately and listed on the policy.

Your home insurance depends upon:

- Location
- Required insurance amount
- Contents cover
- Extra all risks cover

Discounts may be applicable depending on:

- Age
- Smoke detectors
- Alarm
- Security
- Occupation
- If your home is occupied during the day.
- Neighbourhood watch

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Surveyors Fees

It is recommended that you employ the services of a qualified surveyor to check the property for any structural problems or to advise you on any matters that may involve significant outlay e.g. dry-rot, subsidence, dampness etc.

The structural survey is usually not a condition of the loan offer and is a completely different matter to the valuation, which is carried out on the lenders behalf.

Use a reliable firm, agree their fees at the outset and insist on a written report. Budget €200 approx.

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Valuation Fees

Before a lender will issue a formal offer letter in respect of a property, they require an independent valuation from a qualified valuer. We will arrange this for you. Budget €125 approx.

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Life Assurance

All home loans require mandatory life cover. This means if you or a joint applicant dies during the term of the mortgage, an insurance policy covering death, is payable and repays your mortgage ensuring you need not worry about the repayments.

Premiums depend on age, health status, occupation, smoking habits and can vary from one insurance company to another. The Mortgage Advice Store will be pleased to provide quotations.

The options for life and health cover are as follows:

1. Decreasing life cover (mortgage protection) - as the name implies, your mortgage balance is covered and as it decreases through capital being repaid, so does the life cover. This is the cheapest of the types of life cover available.
2. Level term assurance - this means whatever the original sum borrowed is covered for the entire term irrespective of what the balance is when the life assured dies. This is therefore more expensive than decreasing cover.
3. Total care cover - this is top of range and you are covered both on a level term basis against death but also on a level term basis for serious illness cover. Effectively, should you receive a serious illness during the term of the loan, the full original sum borrowed is payable. In this case, you do not have to die to receive the benefit. However, this is the most expensive of the types but it is also the most reassuring !
4. Serious illness cover - covers the assured against most of the serious illnesses for the specified period. Illnesses include heart attack, stroke, cancer and a list of others. Separate and stand alone cover can be obtained.
5. Permanent Health Cover - if you are incapacitated and unable to work, this cover will pay up to two thirds of your income until either you can resume employment or you retire and your pension kicks in. This is also expensive, but again reassuring.
6. Mortgage repayment protector - this covers your repayments for up to one year in the event of accident, illness or redundancy.

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Indemnity Bond

In general lenders do not charge an indemnity bond fee to First time buyers.

Indemnity Bonds are insurance policies taken out by the lender to insure against a potential loss in the event of a forced disposal of the property. Lenders only take out such bonds when the loans exceed 75% of the value of the property (which is highly likely for first time buyers). Many lenders waive indemnity bond charges.

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Variable rate warning: The cost of your monthly repayments may increase - If you do not keep up your repayments you may lose your home. The payment rates on this housing loan may be adjusted by the lender from time to time.

Warning: Your home is at risk if you do not keep up payments on a mortgage or any other loan secured on it

Fixed rate warning: You may have to pay charges if you pay off your fixed-rate loan early

Interest only warning: The entire amount that you have borrowed will still be outstanding at the end of the interest-only period

Debt consolidation warning: This new loan may take longer to pay off than your previous loans. This means you may pay more than if you paid over a shorter term

Endowment loan warning: There is no guarantee that the proceeds of the [Insurance Policy / Pension Policy] will be sufficient to repay the loan in full when it becomes due for repayment