As of the 1st February 2018 first time self-builders in ROI will be eligible to apply for a low interest Government-backed mortgage from their local authority, Minister for Housing Murphy announced today (22nd January 2018).
The Rebuilding Ireland Home Loan is only open to those on an annual gross income of €50,000 or less as a single applicant, or €75,000 for joint applicants. There’s also a cap on the value of the home you can buy or build. In the Greater Dublin Area, Cork and Galway, the maximum market value is €320,000. In the rest of the country, it is €250,000.
The scheme is replacing both the Home Purchase Loan and Home Choice Loan initiatives whose loan to value ratios were higher, at 92 to 97 per cent as compared to 90 per cent for the Rebuilding Ireland Home Loan.
The 10 per cent deposit must consist of at least 3 per cent savings (7 per cent can be gifted).
The Rebuilding Ireland loan can be used both for new and second-hand properties, or to build your own home.
You must however prove that you have had two insufficient offers or refusals for a mortgage from two lending institutions.
For self-builds the loan allows for stage payments. As with all house purchases under the Rebuilding Ireland Home Loan, a 10 per cent deposit equivalent to 10 per cent of the market value of the property is required, and the value of the site cannot be used towards this deposit.
The loan is eligible for self-build projects up to a maximum of 175 sq m gross internal floor area.
Under the loan, applicants can choose a fixed rate of 2 to 2.25 per cent interest for 25 to 30 years, for absolute certainty of the amount of repayments over the lifetime of the loan.
What this means essentially is that a person or couple can purchase a home, while ensuring that they can still keep their monthly repayments to one third of their net disposable income – with no risk of their mortgage rate rising and so no threat to their ability to afford repayments, giving them certainty and security.
So, for example, a person earning €40,000 a year and living in Mayo could afford to buy a house worth €224,920, provided they had the deposit of €22,400. They could then borrow €198,000 from their local authority and their monthly repayments would be in the region of €858 a month, or 33 per cent of their Net Disposable Income.
Up to the end of October of last year, Minister Murphy stated that that two-thirds (or over 5,300 homes) of the overall number of houses purchased by first-time buyers in the Greater Dublin Area, Cork and Galway were purchased for less than €320,000. Across the rest of the country, over 90 per cent (or 3,380 homes) of the overall number of houses purchased by first-time buyers were purchased for less than €250,000.
Other eligibility criteria apply, for instance, you must meet prudential lending analysis, i.e. must demonstrate that you are able to afford the loan repayments.
A Home Loan Calculator is available on rebuildingirelandhomeloan.ie so you can get an idea of how much you could borrow and what the repayment rates might be.
Full list of eligibility criteria according to the website are to:
- be a first-time buyer
- be aged between 18 and 70 years
- be in continuous employment for a minimum of two years, as a primary applicant or be in continuous employment for a minimum of one year, as a secondary applicant
- have an annual gross income of not more than €50,000 as a single applicant or not more than €75,000 combined as joint applicants
- submit two years certified accounts if self-employed
- provide evidence of insufficient offers of finance from two banks or building societies
- not be a current or previous owner of residential property in or outside the Republic of Ireland
- occupy the property as your normal place of residence
- purchase or self-build a property situated in the Republic of Ireland of no more than of 175 square metres (gross internal floor area)
- purchase or self-build a property which does not exceed the maximum market value applicable for the county in which it is located
- consent to an Irish Credit Bureau and/or a Central Credit Register search
Applications can be submitted to local authorities from 1st February 2018.
Eligibility is subject to submission of a complete Rebuilding Ireland Home Loan application form and confirmation by your local authority.
UPDATE 4th January 2022:
The income ceiling for single applicant was raised to €65,000 in in counties Cork, Dublin, Galway, Kildare, Louth, Meath and Wicklow.
A Fresh Start principle now also applies which means that people who are divorced or separated and have no interest in the family home, or who have undergone insolvency proceedings, will be eligible to apply.
In September 2021 Minister for Housing Darragh O’Brien lowered the interest rate for local authority lending by 0.25 per cent and this lower interest rate will continue to apply to loans issued under the Local Authority Home Loan.
The introduction of the Local Authority Home Loan was announced as part of Housing For All. The Statutory Instrument was signed on December 14th and commences the scheme on 4 January 2022.
The Scheme is open to all First Time Buyers and to Fresh Start applicants on low or modest incomes who cannot get sufficient funding from commercial lenders to purchase new or second-hand properties or to build your own home.
