There are numerous benefits associated with buying a newly built home, says Margaret Barrett, managing director at MortgageNavigators.ie, such as the fact that they offer modern design and energy efficiency. However, high demand in the new-homes market means buyers need to be extremely prepared, she says. Here are 10 tips to bear in mind when buying a house in a new development.
1. How much can I borrow?
Before anything else, you need to work out how much you can borrow. Whether you’re a single buyer or a couple, or a group of friends or family buying together, your combined gross annual income multiplied by four for first-time buyers or 3½ for subsequent buyers will provide the maximum sum of money you can potentially borrow to purchase a house (according to Central Bank lending rules).
For example, a couple with a combined gross annual income of €90,000, could potentially take out a mortgage of €360,000.
2. Save your deposit
According to loan-to-value limits set out by the Central Bank, you also require a 10 per cent deposit when buying a home. Therefore, your mortgage amount accounts for 90 per cent of the maximum price of a house you can afford, plus the deposit. So, if you can borrow €360,000, you could potentially buy a home costing up to €400,000 with the 10 per cent deposit added. The tricky part then is saving the deposit of €40,000, which is a stage many would-be first-time buyers find themselves stuck in for a long time.
3. Financial aid options
A major incentive for first-time buyers to buy a newly built house is that it makes them eligible to apply for the Help to Buy scheme. The Government scheme allows such buyers to apply for a tax refund of 10 per cent of the house price up to a maximum of €30,000 for new houses (priced below the €500,000 threshold) to help cover the deposit. You can apply for Help to Buy through Revenue’s myAccount page.
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Also available to first-time buyers is the First Home Scheme which was brought in to help such buyers bridge the gap between what they can borrow and the price of a new home. As a shared-equity scheme, it involves the Government taking a stake in your new house in return for a percentage of the property price. For further details and to check your eligibility, visit firsthomescheme.ie.
4. Additional costs
Bear in mind when the time comes to buy there will be some additional costs. Solicitors’ conveyancing fees range from about €2,000 and €3,000 plus VAT. The bank you’re borrowing from will also need to create a valuation report which costs in the region of €150 to €250 plus VAT.
Although you can figure out your monthly mortgage repayments in advance, there will also be local property tax to pay on your new home (see the rates at lpt.revenue.ie) and mortgage-protection insurance which you will need to put in place before you can draw down your mortgage.
Living in a new development may come with management fees. “Confirm any proposed annual fees for estate upkeep, and how the owners’ management company, if applicable, will operate,” says Gemma Moore, associate director at Sherry Fitzgerald New Homes.
You should also factor in the cost of stamp duty, which is charged at a rate of 1 per cent of the purchase price of properties costing up to €1 million (and 2 per cent of any property purchase price over that).
You will also need to invest in life cover and home (buildings) insurance, which will likely cost about €1,000 a year.
5. Realistic choices
You don’t have to put the idea of finding a house out of your mind completely while you save for the deposit. You can use that time to work out the type of house you will be able to afford and the places in which you’ll be able – and happy – to live.
“If you’re not familiar with the area, spend some time there on the weekend. Grab a coffee, have a meal, take a walk and get to know the neighbourhood,” says Moore.
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“Investigate various new developments in your desired area and what amenities are available; research public transport, wifi speed, creches and schools,” says Lisa McKenna of McKenna & Co Solicitors.
“Ask the local Garda station what the crime rate in the area is,” she adds.
6. Future planning
When buying a house you need to think about your future. It’s impossible to predict what’s going to happen before it does, but you need to make some sort of plan, however vague. If you plan to have children, or more children than you already have, you may need an extra bedroom, or two. Or, if you see pets in your future, a suitable garden is something to look for.
In terms of career, will you be close enough to your current workplace or within a comfortable distance from other possible workplaces should you choose to change jobs? If you work entirely remotely, are there facilities in your area you might use, such as a communal workspace, and is the wifi connection reliable?
If you do need to move for whatever reason in the future, you should think about how much your house is likely to be worth. If it is near a new rail line or a large employer headquarters or educational institution, these are good indicators of future appreciation in value.
7. Seek mortgage approval
When you are close to having the necessary deposit saved, you can use an online mortgage calculator, such as that on the CCPC website, to figure out what your monthly mortgage repayments will be, and which lender offers the best rate for you.
You can then contact the lender you wish to go with through its website or over the phone to get your mortgage application under way.
You’re likely to be asked for several documents from each party applying for the mortgage, so have these downloaded on your computer and ready to forward to your mortgage adviser. Although requirements vary, it is likely you will be required to provide a salary certificate (provided by the lender) to be completed by your employer, your last two to three months of payslips, your employment detail summary from Revenue, a copy of your ID, six months of statements for all current accounts held outside the lender, 12 months of statements for savings accounts held outside the lender and six months of accounts statements for any other lending held outside the lender such as loans or credit cards.
Make sure your account statements are in good order. Some key things to ensure are that you have no expenditure recorded on gambling sites, and that your monthly rent, if applicable, is clearly labelled so a bank can see you have the capacity for monthly repayments. It’s also a good time to check your direct debits and cancel any subscriptions you don’t need, just to help boost your saving.
Once the lender is satisfied with what you present, you will be provided with an approval in principle letter before the mortgage is officially granted.
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8. Local planning
Prospective buyers should look up the planning website of the relevant local authority to find out the development plans in the area, Barrett advises. For example, will schools be built nearby which could be convenient for you, or will a major road be developed that may cause unwanted traffic and noise down the line.
9. Buying off plans
With estate agents selling off plans before new housing developments are constructed, it is important to do your research before signing a contract.
You should “knock on a few doors” of homeowners in the same development if they are already living there or of homeowners in previous developments by the same developer to ask if they have found any issues after moving in, McKenna advises.
“This will give you the ultimate comfort between contract signing and completion which could be one to two years unless the property is already built when you go sale agreed,” she says.
It’s also important to understand what’s included in the purchase, says Moore, with items such as flooring often costing extra.
10. Build quality
“I do not recommend [having a building survey conducted] when you first purchase a new house as the property is ‘too new’ and the chances of any significant problem having manifested itself in the early stage is unlikely,” says building surveyor and SCSI member Val O’Brien.
“It is generally accepted that it would take a minimum of 18 months [for problems such as floors swelling or sinkage or blocks disintegrating] to manifest,” he says.
This is where developer warranties and guarantees come into play, with many providing a 10-year guarantee against major structural defects which buyers should look out for.
Such warranties are “a significant benefit and comfort factor which you would expect to be able to get with most new houses and your solicitor should be able to advise you further on this”, O’Brien says.
In the meantime, you can consult a snag list, such as Pat McGovern’s on The Irish Times website, to check for issues yourself.
