Costs associated with a mortgage

16 September 2008
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There are several costs associated with the buying a home both before you close and after you move in.

Pre closing costs

Savings / Deposits

Currently the maximum loan is 92% of the purchase price and the deposit required is 8% of the purchase price.

Savings are a key part of the house buying process.

A steady savings record helps an application. It demonstrates financial discipline which is one of the most important criteria underwriters look for when assessing an application.

Banks will require evidence of your deposit. Gifts from parents very often form a part of the deposit but as a general rule you should save at least half the deposit yourself

Avoid all forms of borrowing wherever possible if you are contemplating buying a new home. The level of any existing loans will affect the amount you will qualify for.

Stamp Duty Rates

The first Million is charged at 1% of the purchase price .

The excess over €1 million is charged at 2%

Legal fees

Solicitors act as your legal advisers in the buying transaction and provide you with comfort in regard to the title of the property you are buying.

Choosing a solicitor is not all about choosing the lowest price on offer.

A first time buyer should budget in the region of €2,000 for legal fees.

Surveyors Fees

It is recommended that you employ the services of a qualified surveyor to check the property for any structural problems or to advise you on any matters that may involve significant outlay e.g. dry-rot, subsidence, dampness etc.

The structural survey is usually not a condition of the loan offer and is a completely different matter to the valuation, which is carried out on the lenders behalf.

Use a reliable firm, agree their fees at the outset and insist on a written report. Budget €300 approx.

Valuation Fees

Before a lender will issue a formal offer letter in respect of a property, they require an independent valuation from a qualified valuer. We will arrange this for you. Budget €135 approx.

Post purchase expenses

These costs will be ongoing from the first month of your new mortgage.

Life Assurance

All home loans require mandatory life cover. This means if you or a joint applicant dies during the term of the mortgage, an insurance policy covering death, is payable and repays your mortgage ensuring you need not worry about the repayments.

Premiums depend on age, health status, occupation, smoking habits and can vary from one insurance company to another. Mortgage company of Ireland will be pleased to provide quotations.

The minimum cover you will need is as follows options for life and health cover are as follows:

1. Decreasing life cover (mortgage protection) - as the name implies, your mortgage balance is covered and as it decreases through capital being repaid, so does the life cover. This is the cheapest of the types of life cover available.

Typical monthly premiums for First time buyers are around €20.

Optional cover includes:

  1. Level term assurance - this means whatever the original sum borrowed is covered for the entire term irrespective of what the balance is when the life assured dies. This is therefore more expensive than decreasing cover.
  2. Total care cover - this is top of range and you are covered both on a level term basis against death but also on a level term basis for serious illness cover. Effectively, should you receive a serious illness during the term of the loan, the full original sum borrowed is payable. In this case, you do not have to die to receive the benefit. However, this is the most expensive of the types but it is also the most reassuring!
  3. Serious illness cover - covers the assured against most of the serious illnesses for the specified period. Illnesses include heart attack, stroke, cancer and a list of others. Separate and stand alone cover can be obtained.
  4. Income protection insurance - if you are incapacitated and unable to work, this cover will pay up to two thirds of your income until either you can resume employment or you retire and your pension kicks in. This is also expensive, but again reassuring.
  5. Mortgage repayment protector - this covers your repayments for up to one year in the event of accident, illness or redundancy.

Budget around €35 per month.

All mortgage lenders in Ireland require that properties they are lending against be insured for fire and perils risk (earthquake, storms, flooding etc) and they have their interest in that property noted by the insurance company.

Virtually all borrowers require that their personal possessions, furniture, clothes and other belongings are insured against the same risks. Whereas this is not compulsory from the lender's viewpoint, it is advisable to cover potential personal losses in the event of fire for example, items over €5000 must be valued separately and listed on the policy.

Your home insurance depends upon:

  • Location
  • Required insurance amount
  • Contents cover
  • Extra all risks cover Discounts may be applicable depending on:
  • Age
  • Smoke detectors
  • Alarm
  • Security
  • Occupation and
  • If your home is occupied during the day.
  • Neighbourhood watch