The Housing Market in Ireland: Is it time to Buy?

Are you dreaming of owning your own home in Ireland? For first-time buyers, Taking the leap into homeownership in Ireland is an exciting yet complex journey, especially for first-time buyers. The key to a smooth experience lies in preparation and understanding the nuances of the property market. Here are essential steps to get you started on the right foot.

Essential Steps to Start Your Journey

1. Start Early

Begin saving for your home purchase at least two years in advance. Banks value consistency and will look for a six-month savings record when you apply for a mortgage. With the average age of first-time buyers approaching 40 and the necessity for quicker loan repayments, early saving is more crucial than ever. Banks value consistency and will look for a six-month savings record when you apply for a mortgage. Early savings will not only help with your down payment but also position you as a strong mortgage candidate.

2. Assess Your Finances

In light of recent data showing a continuous climb in property prices, it’s imperative to examine your debts, expenses, and credit score to gauge how much you can realistically afford for a down payment. This financial clarity is crucial for setting realistic savings goals and determining your borrowing capacity where a modest-sized house requires a salary—or combined salary—of more than €100,000.

3. Consider Additional Costs

Beyond the down payment, remember to account for moving expenses, closing fees, and any immediate home repairs. These additional costs are often overlooked but are essential for ensuring you’re financially prepared for all aspects of buying a home.

4. Get familiar with Government Schemes available:

The Help to Buy scheme helps first time buyers purchase newly built homes. You must be a first-time buyer who buys or self-builds a new residential property between January 1, 2017, and December 31, 2025. To qualify as a First Time Buyer you can’t have had a mortgage before. If you have taken out a mortgage under your name either in Ireland or overseas, you are no longer a First Time Buyer. Importantly if there are two people going on the mortgage, both must never had a mortgage before to qualify as a First Time Buyer.

The Help to Buy allows first time buyers to claim 10% of their property value to help them pay a deposit on newly built homes. It’s a Government tax refund scheme and in order to claim, you must have paid the equivalent amount of 10% of your property value in tax in the previous 4 years before moving into your new home. The HTB Scheme provides a refund of the income tax and Deposit Interest Retention Tax (DIRT) you’ve paid in Ireland for the 4 years before the year you apply. In order to claim from this scheme, your home must be valued at €500,000 or less. The most you can claim is €30,000, so if your home is valued at more than €300,000, you still can only receive €30,000 max.

In addition, The First Home Scheme, which is a newer initiative that acts as a shared equity scheme, filling the gap between a buyer’s mortgage and the total cost of the home. It’s aimed at buyers who find the property they wish within reach but just out of grasp financially.

For example, you find a property that cost €250,000, but with your deposit and mortgage, you can only raise €200,000. The FHS scheme would pay the extra €50,000 and then have a 20% share in your property.

You will need to fit the eligibility criteria, but there are no income limits, so your earnings are not considered when you apply.

Now, Budget Wisely

1. Annual Budget:

By conducting an annual budget is more important than ever, with property prices climbing by an estimated 4.4% last year and likely more this year. This ensures you are aware of what you are earning and spending, helping to set aside more than €1,250 monthly to keep pace with rising prices. Check out Alpha Wealth’s complimentary financial budget calculator here

2. Prioritise Saving:

Adopt a “save first, spend later” approach to ensure you’re consistently setting money aside for your home purchase.  It is really important that you are saving your money in the most appropriate accounts with the highest returns to ensure your money is working for you. This is why it is vital to consult an impartial financial advisor to ascertain what the best account is for you in terms of your saving goals and time to purchase. Click here to discover the best savings options for your monies

3. Develop Saving Habits:

Focus on the habit of saving regularly, whether weekly or monthly, rather than initially focusing on the amount. By adopting early saving habits, you can demonstrate repayment capacity to lenders. The key is to start as early as possible, ideally tow years before your purchase date. The banks will look for a savings record for at least six months before your mortgage application. Example: So if you are borrowing €400,000, you would need to show a repayment capacity of circa €2,000 per month but this can include your rental payment if applicable.

4. Avoid Short-term Debt:

Clear any short-term debt before embarking on your homeownership journey to maximize your saving capacity. If you have short term debt, its best pay it off as quickly as possible.  Credit card companies thrive on high-interest rates, often around 22%. Don’t fall into this trap. Strategy to pay off debt: Start with your smallest loan. Pay it off as quickly as possible, then move to the next smallest. This ‘Snowball Effect’ creates momentum in clearing your debts.

5. Seek Independent Advice:

Consult with a financial advisor for unbiased advice tailored to your financial situation, helping you avoid pitfalls and adopt the best saving practices. You can book an appointment with one of our financial advisors here or contact us via info@alphawealth.ie

Conclusion

By cultivating a habit of saving, making informed decisions, and seeking the right professional advice, you can turn your dream of homeownership into reality. With the right preparation and mindset, stepping into Ireland’s property market as a first-time buyer can be a fulfilling and successful journey.

Investment property is a popular form of income for many people who rent out rooms or second homes. Utilising the funds as a form of investment allows you to grow your streams of income and potentially retirement funds. However, investment properties have many outside factors that can affect the amount of income you might receive.

Whether you end up as a landlord by accident or purposefully seek out the job, there are many factors that can influence whether the role is right for you. In this blog post, we discuss the important points to keep in mind when deciding whether to buy, sell, or keep an investment property to aid your financial future and retirement funds.

What is Rental Yield and how does it help

Rental yield is used to measure the return on investment or ROI of a rental property. In other words, it’s the money you earn from owning the investment property. It can be determined by dividing the annual rental income by the value of the property. For example, if you receive €12,000 per year in rental income and bought your property for €300,000, you would receive a 4% yield.

 A higher rental yield generally indicates a greater ROI, and therefore a better reason to keep an investment property. However, there are outside factors that need to be deducted from rent in order to generate the net rental yield.

These include:

• The property’s physical location
• Maintenance costs
• Potential periods of non-rent, or market conditions.

This means sometimes rental yield can be negative, and people don’t realize until it’s too late and you’re losing a valuable financial income potential.  

The benefits of Capital Appreciation

Property has the ability to change in value over the years; when it increases, this is capital appreciation. It is the difference between the price of the property when it was purchased versus what it can be sold for.

If you bought for €200,000 fifteen years ago, and the current value is €250,000, then the value has appreciated by 25% or 1.67% per year.

It’s important to determine whether it has increased at a stable rate or if something has occurred recently for the value to rise. If the value will continue at this rate, you have to ask whether it is worth keeping or selling. Look at the other investments in your portfolio and compare their growth to determine whether this is profitable and will actually yield a higher return on your financial investment.

What is Opportunity Cost and how does it work?

Sometimes keeping a rental property can actually cause you to lose out on benefits you might receive from other investment types. Investment properties are highly illiquid. In comparison, the stock market has yielded average returns of 10% pa over the long term. Plus, you can get 40% immediate relief on pension contributions. This equates to an approximately 66% immediate return.

When looked at comparably to the above yield and appreciation figures, the stock market generates a higher return. This is because property investments are far less diversified and involve more ongoing costs. This doesn’t mean that property is always the wrong decision. Sometimes yield and appreciation on properties are extremely high. It’s important to look at your property’s specifics.

Present Financial Situation and Portfolio

Your current income and tax position may affect whether you should sell or purchase investment properties. If you’re already earning highly taxed income at the top rate in a day job then a property investment might not be the most tax-efficient way of accumulating wealth. It may make more sense to use vehicles like a pension to grow your wealth tax-free whilst you are working and re-consider a property for passive income in your later years when you need it.

The other investments in your portfolio will also affect whether a property investment is the right investment for you. If you have no other investments with very little savings and 2 residential properties, you’ve concentrated all your wealth in one asset type which is illiquid. In this case, it makes sense to sell the property and diversify your portfolio with other more liquid investment types. This gives you more flexibility as well as safety by spreading your funds.

Nurturing your Financial Investments

Investing in real estate can be a great way to diversify your portfolio to increase your finances and generate passive income. However, it involves high levels of risk and many responsibilities. Alpha Wealth can help you decide if keeping the property is best for you through individualised financial plans and advice from our certified financial advisors. It’s important to determine whether buying, selling, or keeping your investment property is best based on your own individual situation.

Contact us now to see if your investment properties are increasing your financial freedom.

Buying a house can be an exciting time, but it also requires planning. Being prepared and taking a step-by-step approach can help alleviate the stresses and make the process more manageable.

Below is a step-by-step guide to help when you are planning to buy a house and helps you to save money for your first home.

1. Setting a budget
2. House hunting and research
3. how much deposit is needed to buy a house in Ireland
4. Viewing and surveying your potential home
5. What is the BER rating on the house
6. The loan approval process
7. Solicitor fees
8. Stamp duty
9. Property tax
10. Mortgage and mortgage protection
11. Insuring your property
12. Collecting your keys and moving in

Setting a budget

Buying a home requires planning. So, whether you’re saving for your own home or looking to put some money aside to help your children get on the property ladder, receiving the best financial advice is important.

When it comes to budgeting for buying a home, the first thing to consider is the cost of the house, the deposit you will need and how much you need to borrow from a lender for the mortgage. We have lots of tips, tools, and advice to help you budget and save for a house over on our house buyer’s website guide.

Buying a house in Ireland doesn’t just involve making a final offer on a house. There are additional hidden costs like solicitor and conveyancing fees and stamp duty but to start you will need to set a budget and save for your future investments.

House hunting and research

If you are planning on buying a house in Ireland, it’s important to do your research and get the most out of any viewings you have lined up. Research before viewing a house could see you decide that the home is not for you, and so save you valuable time and money when house hunting.

If you are viewing a house be prepared and ask the right questions to the owner or agent selling the house so that you have all the information needed to either, make an offer or walk away.

Here is a list of good questions to ask:

• How long has the house been on the market?
• Has there been much interest in the property?
• What is the area like?
• How long have the owners lived here and why are they moving?
• How old is the house and have there been any renovations or building work done?
• Has the correct planning permission been given for any extensions to the house?
• What is the BER rating on the house?
• How much will your utility bills be?
• What is or isn’t included in the sale?
• When are the sellers planning to move?
• How old is the roof and is there any area of the roof that is flat?
• What is the age of the property and is any part of the property protected?

When viewing a house to buy, these questions will help you make an informed decision before making an offer.

How much deposit is needed to buy a house?

Although getting on the property ladder might be challenging given the current conditions, it is still achievable. A well-thought-out financial plan based around sound savings can get you closer to turning your dream into a reality.

Firstly, you need to decide what your mortgage savings goal is and figure out how much you need to put away each month. You can use our free budget calculator to find out how much you can afford to set aside each month, or if you’re aiming to save a 10% house deposit amount, the budget calculator will help you work out how much you need to save each month to achieve that goal.

Once you have figured out what your mortgage savings goal is, get in touch with one of our advisors to enquire about a Regular Savings Scheme and check out Zurich’s savings and long-term investment plans to find out more.

Arranging a structural survey

When looking at your potential new home, it is advisable to hire a surveyor to give your new home the once over as buying a home is a huge investment. The surveyor will check for any structural damage and other things like damp, subsidence, and dry rot. The surveyor’s report will give you a good idea of the cost involved in fixing any potential problems and could also help when negotiating a price with the seller. The cost of a surveyor can be in the region of €300 to €500.

What is the BER rating on the house?

When deciding on which house to buy it’s a good idea to check what the BER rating of the home is. A BER cert is compulsory when selling a house so make sure you ask the seller. The BER rating is graded from A-G, with A being the most energy efficient and G being the least energy efficient. If the BER rating is between E1 and G on the scale, it could mean you will have additional investments in things like insulation, windows, and doors etc. to get the energy rating up.

A warmer and more energy efficient home can greatly reduce your energy costs so it’s an important factor to consider as you don’t want to be burdened with high energy bills.

Loan acceptance

In order for the mortgage loan to be accepted, your lender will look for a valuation report on the property to ensure that the price you are buying the house for matches the value of the home. It’s likely that your lender will have their own valuer, but the cost of the report falls to you. You can expect to pay between €200 and €300 for this. A quick money saving tip here is to check also if VAT is included. This may not be a lot but these fees add up quickly.

Solicitor Fees

When it comes to buying a house, you will need a solicitor who will look after all the legal elements of transferring ownership of the house over to you. The fees a solicitor can charge vary so it pays to shop around. Some solicitors will charge a flat fee while others will charge a percentage of the house price.

If a flat fee is charged, you can expect to pay anything from €1,500 to €3,000. Again, always check if the fee includes VAT. We worked with some well established solicitors in Cork and across Ireland, if you want some advice on hiring a solicitor when purchasing your first home, get in touch with us by heading over to our contact page.

Stamp duty

Stamp Duty is a tax you pay to Revenue when transferring the ownership of property in Ireland. The rates for residential properties are 1% on the first €1 million, and 2% on the excess over €1 million. So, if you purchase a house for €300,000, then your stamp duty will amount to €3,000.

If the house is a new build, the stamp duty is the value of the home minus VAT, which is currently 13.5%. That means that if your purchase a new home costing €300,000, the stamp duty you will need to pay is €2,595.

Your solicitor will make the required arrangements for payment to Revenue, but having this added to your housing costs is important to consider when saving for your house. For more information on stamp duty, Check out Revenues breakdown on their website.

Property tax

Your property is liable for Local Property Tax (LPT) if it is a residential property. LPT is a self-assessed tax which means you need to self-assess the value of your property and this determines the amount of LPT you pay each year. Revenue provides information on their website to help you determine the value of your property.

Mortgage requirements

Anyone taking out a mortgage is required by their lender to have mortgage protection in place. Many people take up a policy with their mortgage provider, but it’s always a good idea to shop around. Not only does this allow you to see the best premium available to you, but it ensures that you get the most suitable product for your needs. 

At Alpha Wealth we provide mortgage protection. Talk to us to find the one that suits your needs and helps you to save money.

Insuring your property

The cost of your home insurance premium will differ depending on the value of your property and your contents. You can use the house rebuild calculator from the Society of Chartered Surveyors to calculate the rebuild cost of your home. This will give you a good idea of how much you should be insuring your house for and help you save when purchasing insurance. 

Collecting your keys and moving in

When the time comes to move into your new home, you will want the moving part to be as stress-free as possible. You might decide to hire a van to move all your furniture to your new home, or you may prefer to hire a removal company to do it for you. Either way, more than likely there will be some cost involved, so it’s a good idea to budget for moving. 

Saving for your first home

We help first time buyers, investors and anyone else looking to purchase a house in Ireland save money and growth their finances. For more information on how we can help you save money to purchase your home then feel free to Get in Touch with a member of our team today. Additionally, make sure to check out our other blog posts where we share some great tips, tools and advice to save you thousands each year.