How does buying Council out work?

J

jen007

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Hi guys,

Im just reading a few threads there and came across one about buying the council out , how exactly does this work.

I have a 3 bed house which I got for 123,000, market value at the time was 170,000, I know houses in the estate have sold recently for between 240-250,000. How much roughly would you think I would have to pay to buy the house outright.

I am currently waying up my options as next year am getting married to my partner I met after getting the house, he is presently building on his farm so will not be realistic to live in my house after we get married.. Was interested in renting it out but realise I can't, thought selling up was my only option but maybe buying them out might be a realistic option. Are mortgage lenders giving mortgages for buying out an affordable house???

Basically my question is (in a long winded way!) how much roughly based on the figures above do you think I'd have to get a mortgage for to buy the council out.

Thanks,

Jenx
 
Re: How does buying Council out work??

going on the 250k valuation I have calculated the clawback as in the region of €69,000. you can of course make allowances for any work that you have carried on on the property which has resulted in its increased value
 
Thanks for your reply card,

Just to Clarify, to buy out the council I would have to pay back the clawback (69,000) + the mortgage 123,000 which is with the council(minus whatever has been paid of it in the last 4 years).

So I would be looking at a mortgage for around 180,000, is this correct?? This would increase my mortgage repayments by a good bit so I would want to be sure I could rent out this property if I was going down that route.. Like the idea of holding on to the property though...
 
Could be wrong about the following. Is it not a different issue than normally selling your house and paying the clawback calculated at the time of the sale, i.e. Buying out the clawback and keeping your property?

Would it not mean the difference between the actual price paid at the time of the original purchase (123,000K) and the market value (170,000K) at the time of purchase. Difference equals €47,000?
 
Hi Mayo exile,

Im liking your answer better only because it means less money to look for in mortgage terms to buy them out!!! :)

If anyone knows for sure I'd be gratefull, maybe somebody on here has done this already?? Do banks treat this as a normal mortgage or is it more complicated because your buying out the co. council???
 
You bought house for €123,000 and house was worth €170,000 therefor the % clawback discount you got was 27.65%


house is now worth say €250,000

27.65% of 25,000 = €68,750

So you owe the council €68,750 which leaves you with €181,250

which means you made a profit of €58,250


I think this is how it's calculated
 
This would be the case I know Sammie if I was selling the property full stop but not sure if this is right if I want to buy the council out so the property is completley mine, ie all ties gone with the council and mortgage taken out with new lender..
 
Re: How does buying Council out work??

Card said:
you can of course make allowances for any work that you have carried on on the property which has resulted in its increased value
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Sorry for going off topic but do you have any experience of this happening in practice, or any links to back this up Card?

I am only asking as a friend just sold her AH. When they bought it was a bare shell and so they spent significant amounts on flooring, tiling etc. which they argued contributed to the increase in value. The council said that they would not take this into account and the original clawback % applied.

I helped a family member apply for AH and asked this question during the application process and was told there would be no change in clawback % and so told her I thought the council was right.
 
I have emailed her asking about my options last week but she's on holidays, as I said won't be making any decisions till this time next year but just wondering about different options.

These forums are very helpfull
 
yeah i'd like to hear what her answer is, be interesting to know. I'd say you would have to get a valuation done and then deduct the amount of money that you invested into it for major home improvements etc, and then the clawback is applied to the sum.

let us know what she says. don't know of anyone who has bought them out but i would be interested in knowing.
 
Here's a similar thread on buying out clawback:

http://www.askaboutmoney.com/showthread.php?t=78359&highlight=buying+clawback

Important piece (Originally posted by Clongriffin, post #12):

The redemption figure is basically the final figure that the council give you that will cost you to buy them out. So basically it would be what you borrowed from them, plus interest, plus claw back price, those three added together will be the redemption figure = what you need to give them to buy them out.
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if you wish to buy the council out there is a number of things you will need first. First you MUST be in the property a year. Secondly, you will need to have the apt valued by your own valuer, plus the council will send out someone to value also (to match yours) then you must get the redemption figures from the council to be able to go to your local bank/building society to buy them out.
Click to expand...
 
Hey All,

Just thought I would update all in relation to buying out the council as I am just about to complete the process. I bought my house under the affordable housing 5.5 years ago. My clawback was 30.4 percent at the time. Early to mid last year my house would have sold for about 320. Now valued at 280,000. I just bought the council out for 190,000 and took 30,000 equity to make some improvements and possibly kickstart a deposit for new gaff down the country.

It was a relatively painless procedure considering I was expecting it to be horrendous. I had the house valued at 290,000 earlier in the year but the valuation decreased as the process went on and 280,000 was the valuation that was used for the remortage which I got with PTSB.

Got a good rate from PTSB, tracker with 0.75% above ECB for the first year and 1% after that.

I bought my house with Fingal County Council and they have been helpful with the buyout, but considering they have just liquidated some assets thats not really surprising.

I had originally wanted to rent the house out as I was going to be moving down the country but did not want to sell in case I did not want to stay down the country. When I approached the Council about renting they gave me 'permission' to rent it out for 6 months. I couldnt be bothered having to ask every 6 months for 'permission' to rent out my own house so I decided to buy them out!

If anyone wants to know more about the process let me know and I will pass on the info. I got the mortgage through a broker.

Hope this helps some people. It can take a while but at least in my case I think it was worth it in the end. It means I can do what I want now with my own house!

B
 
Bradfield, did you originally have your mortgage with Fingal Co. Co., so you had to look for a new mortgage supplier when you came to buy the council out? With my own clawback of just 9% (market value in Dec 07 240K, now revalued to 200K, purchase price 182K, sale yet to be concluded) it could be a relatively cheap procedure for me to buy out the clawback.

At the moment I have an approved mortgage with BoI for the property. Its their "Breakthrough" mortgage for AH applicants. If I was lucky enough to be able to buy out the council with cash/draft/cheque I suppose the payments on the original mortgage would continue as before?
 
Hey Mayo Exile,

Yes my original mortgage was with Fingal County Council. I have now replaced that mortgage plus the clawback and my new mortgage is with Permanent TSB with none of the restrictions of the AH ( which I am not complaining about as I would not have been able to purchase without it at the time that I bought the house). Your situation is interesting and I am not sure how that would be managed, as you are already dealing with BOI it might be worth outlining the situation to them and see what they come up with?

Good luck!

B
 
hi bradfield, i would be very interested and love to know how the process worked if you could let me know. I too bought my house with fingal county council 6 years ago and at the time i got approx. 30% discount, so just wondering would it be worth my while to buy them out, house has gone down appro. 50,000 i'd say in last year
 
Rex said:
hi bradfield, i would be very interested and love to know how the process worked if you could let me know. I too bought my house with fingal county council 6 years ago and at the time i got approx. 30% discount, so just wondering would it be worth my while to buy them out, house has gone down appro. 50,000 i'd say in last year
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Hey Rex,

It was pretty straightforward though I had a broker do all the work for me so I suppose it would be really. I went to the broker and had to supply all relevant paperwork (bank statements, income letter etc) I also had to write to the council and ask them for a redemption letter with the full redemption amount on it including the clawback. I then received a number of mortgage offers and chose the best one, there was a solicitor involved but the broker paid for that ( I started the process a fair few months ago when brokers were still offering such deals, dont think they do that any more!). I owed the Council 190000 including the clawback, I got the new mortgage for 220000 taking some equity out of the house. I plan on keeping the house long term and renting it out. I signed some forms (loan offer) and now I am just waiting for the drawdown which I am told will be next week! Getting a mortgage to buyout the council is the same as getting any mortgage the same paperwork and solicitors fees etc need to be paid!

I think the process was relatively simple but it did take a lot of time as I decided to do it in a very unstable time in the market and I was not in any particular hurry, I imagine you could speed it up if you were in a hurry.

If you need any more info let me know!

B
 
URGENT NEWSFLASH!!!

I understand that Minister John Gormley has just announced today, Friday 25th July 08, revised terms and conditions for affordable home owners to remortage or top up existing affordable loans without the clawback provision coming into play.

The clawback does still apply if you sell up within 20 years.
 
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