Nama mortgages

28 July 2011
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Nama announced a plan today to release property onto the market and provide purchasers with an effective insurance policy in regard a fall in value of up to to 20% of the purchase price.

We understand the proposal to work as follows:

Assume Nama sells a property for €200,000 .A buyer will require a deposit of €20,000 (10%) and agrees to borrow €180,000 from the bank.

If, in five years time the property retains its value or goes up in value, the homeowner keeps the property and repays the full mortgage as is the case in any normal transaction.

If the property reduces in price by anything up to 20% after 5 years, your mortgage balance is reduced by the amount of the fall in value .

If the property prices fall by 20%, you get a reduction of €40,000 on your home loan. If it falls by 10% your loan reduces by €20.000.

If the properties are well priced it could work very well.

The success or otherwise will be greatly influenced by the state of completion of the estates involved and the local amenities and community.

The fact that there is no special inducement in terms of smaller deposit requirements is likely to lead to a position where the properties will not be artificially overpriced, and this is in the interest of the consumer.