Opinion To get Help to Buy, must borrow 80% of purchase price

Discussion in 'Budget 2017' started by Brendan Burgess, Oct 11, 2016.

  1. Brendan Burgess

    Brendan Burgess Founder

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    Last edited: Oct 11, 2016
    "In order to qualify, applicants must take out a mortgage of at least 80% of the purchase price, or in the case of a self-build, 80% of the valuation approved by the mortgage provider. Individuals whoare in a position to avail of a mortgage at a lower loan to value ratio than 80% already have sufficient resources to more than meet the deposit requirements of the macro-prudential rules and thus are less in need of assistance from the Exchequer."

    House price: €200k
    Help to buy: €10k
    I must borrow at least 80%: €160k
    Maximum deposit: €30k

    So if I have saved up €50k, I just use €30k when I draw down the mortgage and pay down the mortgage after I have received the rebate?

    Not sure about this. OK, it rules out cash buyers, but how many FTBs are there?

    Many people aim to borrow just below the 80% mark to get the lower mortgage rate.

    I presume that this can changed in the Finance Bill. It should be changed to 75%.

    Maybe it should just be scrapped as people can get around it anyway?

    Brendan
     
    Last edited: Oct 11, 2016
  2. Brendan Burgess

    Brendan Burgess Founder

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    Differences in mortgage rates

    upload_2016-10-11_14-38-18.png


    While Ulster Bank has the biggest differential of all of 0.5%, they reduce the rate for existing customers who move into a lower LTV band.
     
  3. Sarenco

    Sarenco Frequent Poster

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    It seems a bit odd that FTBs are required to take out a mortgage with at least 80% LTV. No?

    Could a cash-buyer not simply take out the requisite mortgage, get the tax rebate and pay off the mortgage?

    If they also take out a "cash back" mortgage, the windfall just gets better!
     
  4. Brendan Burgess

    Brendan Burgess Founder

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    What is the implication of the cash back mortgage?

    If I were taking out a cash-back mortgage, I would borrow the maximum anyway? Does this change it in any way?
     
  5. Sarenco

    Sarenco Frequent Poster

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    Well a buyer could get 2% of the mortgage amount back from EBS plus up to 5% of the purchase price back from the government if they take out an 80%+ mortgage to buy the new build. Then they just pay off the mortgage from their cash reserves and pocket nearly 7% of the purchase price.

    Nice!
     
  6. Brendan Burgess

    Brendan Burgess Founder

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    Yes, but they are separate schemes? They don't interact at all?
     
  7. Sarenco

    Sarenco Frequent Poster

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    No, absolutely, there's no link between the cash back and tax rebates.
     
  8. Aero60

    Aero60 New Member

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    Looks like Single buyers will be further disadvantaged by this scheme as it's unlikely they will qualify for 80% LTV mortgage under CBI rules.
     
    trasneoir likes this.
  9. kamakaze J

    kamakaze J Frequent Poster

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    When will the final details be published in the finance bill?

    I've currently got a loan offer (received prior to July 19th) that was based of a 74% LTV (as you say I was aiming to keep it below the 80% to avail of the cheaper interest rates).

    As I'm self-building and haven't yet drawndown my first trance would I be correct in saying that I can still get this re-valued to exactly 80% LTV to qualify for this rebate but keep my interest rate in the 61-80% band?
     
  10. Aero60

    Aero60 New Member

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    Nievely I thought this scheme was to help buyers who were having difficulty raisins a deposit
    #ifyoucanafforditthenyoushould
     
  11. kamakaze J

    kamakaze J Frequent Poster

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    Last edited: Oct 12, 2016

    Build Cost- 280k
    Site Value- 70k
    Mortgage- 260k
    Savings- 20k
    Valuation= 350k

    LTV= 74%

    Build Cost- 280k
    Site Value- 45k
    Mortgage- 260k
    Savings- 20k
    Valuation= 325k

    LTV= 80%

    How does the fact some auctioneer considers my site to be worth 70k rather than 45k mean I don't have difficulty in saving to build a house?
    I plan on living here for 40+ years- I couldn't care if the site is valued at €100 or €100,000 it doesn't affect the price I have to pay to build on it.
     
    Last edited: Oct 12, 2016
  12. MajorTom

    MajorTom Registered User

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    Hi, but the scheme is for borrowers taking out at least 80% ? So, single borrowers likely to be in that category ?
     
  13. SBarrett

    SBarrett Frequent Poster

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    The Terms and conditions of this scheme:

    1. A tax rebate of any income tax paid in the previous 4 years for first time buyers.
    2. It only applies to new builds or self builds from 19 July 2016 onwards.
    3. If being bought by a couple, both have to be first time buyers.
    4. The maximum rebate is €20,000 per property (not per joint owner).
    5. The rebate is also limited to the actual amount of income tax paid in the previous 4 years. So if you paid less than €20,000 income tax, you get a rebate of the actual income tax paid.
    6. The rebate only applies where the loan to value is at least 80%.
    7. The rebate does not apply to house purchases over €600,000.
    The Finance Bill is out on 20 October so we should see more detail then.

    The people in Finance aren't stupid, so I would assume that there will be a clawback provision for situations where people take out a mortgage, get 4 years income tax rebate and then pay off mortgage in full. Would this situation even apply to that many first time buyers? Would they need a bit of financial help from parents to do it? Then Revenue could come after them for CAT...


    Steven
    www.bluewaterfp.ie
     
  14. Sarenco

    Sarenco Frequent Poster

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    I don't know Steven, I think it would be very challenging to frame a workable clawback mechanism. What if a buyer pays off, say, 95% of the outstanding balance of the mortgage immediately after getting the rebate?

    Also, property valuations are obviously fluid and somewhat subjective.

    In any event, it seems odd to me that the State is effectively incentivising FTBs to take out larger mortgages than they might otherwise.
     
  15. SBarrett

    SBarrett Frequent Poster

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    As McWilliams said in his article in the Indo today, it's their way of poking the Central Bank on their mortgage rules.
     
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  16. trasneoir

    trasneoir Frequent Poster

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    The loan-to-income requirements could keep this incentive out of reach for single middle income earners.

    Say a single person with an income of 35k wants to buy a 160k property. The loan-to-income requirements necessitate a deposit of 37,500 (23%), making them ineligible for this incentive.
    This would be pretty galling for somebody who has done what the central bank told them and saved.

    Meanwhile, an employee/couple with a 50k income will get 8k "help" to raise the 16k deposit they'd need to secure the same property.

    With the way that the LTI/LTV exceptions are structured, I think a lender is unlikely to make an exception for such a "small" loan.
     
    Ihana likes this.
  17. Ihana

    Ihana Frequent Poster

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    Just had a look at update on Irish times website and it says all claimants will have to file tax returns for previous four years in order to be eligible.
     
  18. trasneoir

    trasneoir Frequent Poster

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    Buyers with cash in excess of 20% will pay it against the loan exactly as fast as any clawback rules permit.

    In other words, clawback rules would only benefit the lenders, not the state.

    Meanwhile, in combination with the LTI rules, it could have the (unexpected?) consequence of excluding single or lower-income buyers who need to save larger deposits.
     
  19. Sarenco

    Sarenco Frequent Poster

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    RTE reporting this evening that the LTV floor is to be dropped to 70% on foot of concerns raised by the Central Bank.

    I would be surprised if a reduction isn't also made to the €600k ceiling given the Minister's public comments that he wasn't hung up on this figure.
     
  20. Bronte

    Bronte Frequent Poster

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    Should singke people get help before families with children?