Advice for First Time Buyers

Joanne is regularly on Dundalk FM where she gives practical advice on all things to do with Buying and Selling property – she also answers and listeners questions – you can see this weeks interview below or if you would rather listen to it you can do so here…

Dundalk FM 0:00
97.7 Dundalk FM town talk Joanne Lavelle. Good morning.

Joanne Lavelle 0:05
Maria on congratulations to mark. It was a lovely interview and it’s such a great venue I love so delighted for them.

Dundalk FM 0:11
Yeah, yeah, I can’t believe it. 20 years honestly. It’s like yesterday or anyway, we’re going to talk this morning about first time buyers.

Joanne Lavelle 0:19
Yeah, first time buyers and I suppose we can talk about where money might come from where you can get funding for first time buyers, but also just a bit of advice and sanity checking because it’s hot and pressured time for first time buyers. What made me think about this was I visited a friend of mine over the weekend, and she’s bought another friend’s house and just moved in. She was really embarrassed because the house wasn’t looking like a magazine feature. I said, you know, this should be a thing that you will enjoy over the years to make your house the way that you want it. Don’t be in a rush. It feels that sort of pressure of people to have everything looking fabulous at the beginning. It really shouldn’t be I mean, it should take Take your time, save up your money for your next project, decide, prioritise. This year I’m going to concentrate in the kitchen next year, I’ll concentrate on finding yourself. Whatever it is, there’s really no harm in just painting wooden floors until you can afford carpets. But I do feel like first time buyers are under pressure to have everything just looking lovely from the beginning. That’s hard. The other thing about and the simple reality check is I think you have to get into a house and get to know the house before you make big decisions about it anyway, and what the colour is like what the light is like, where you like to spend your time in the house, or your kitchen person or living in person. These things evolve over time. And if you have kids or if you don’t have kids, depending on your stage of life, get to know your house before you worry but spending all your money on getting it looking a certain way.

Dundalk FM 1:48
But it’s what we all do with and when you get your head first you just want to and then as time goes on, you go through periods there are times when you’re really enthusiastic and other times just you know have a bad to have a bad

Joanne Lavelle 2:00
The thing about it is at the stage in life that you’re in now isn’t the stage in life that you’ll be in forever, you know. So if you’re, for example, if we’re in the stage of life where you have small children, babies, you make decisions around that. But Time flies before you’re into a new stage, and you need a new set of requirements for your house. And the things change from having a nap at the table to having storage for the toys, to having homework desk for first year’s lecture has evolved like that. And don’t get too worried about change within the house because that’s what you’re there for.

Dundalk FM 2:30
Now, you said, first of all, first time buyers, how did they become first time buyers? And this is something that is possibly a lot more difficult now than it was, say maybe 20 or 30 years ago?

Joanne Lavelle 2:42
Yeah, it is. It’s really difficult, the cost of houses, the affordability, things are difficult. back before the recession, there were 100% mortgages. Now we are in a good situation that there’s tighter regulation around finance. So a first time buyer can borrow up to 90% of the purchase price, so you have to go and save or receive a gift or do something for the 10% but you can’t get a mortgage to cover that 10% so it’s it’s a kind of a safety mechanism built-in into the mortgage, to ensure that we’re not going back into hundred per cent finance. So there are really three different ways well two and one incoming that’s going to come in I think next year of ways to get financed for the first time by our home obviously have to help to buy scheme So pretty much every first time buyer is going to go for the Help to Buy scheme is worth up to 20,000 euro depending on your tax and the values of property and so on. And on, there is a ceiling on a tree houses that are caught that are valued up to 500,000. Now you’d kind of think that has over 500,000 wouldn’t be your typical first bullet at so it’s up to 500,000. And you get that money back, which is as I say, worth up to 20,000 on your income tax. Now it’s not going to change your USC or your other aspects of your tax but it’s on your income tax. So that How you, you get it back over time. And and you have to be borrowing a minimum of 70% on the purchase price, the value of the property, it is available for new property only not secondhand property, but it is also available on self builds. So, if you’re building one off, okay, and I always say to people, when they come to me looking for valuations for their one off, don’t think about this, they have to buy scheme afterwards, you have to have it right at the start so that you know exactly that you that you’re one off build fits in with the criteria of the health device get of the health device game, you know, so that, you know you don’t be sad afterwards that you’ve missed out on something. So that’s the health device game. It was extended in the budget, and a couple of weeks ago to go on for another two years, and no changes to us. So it’s business as usual for the health device game. Just make sure if you’re buying a new house that the builder is registered under the scheme, most of them are so you can see it on the website and make sure that the builder of the house you’re looking at is part of the scheme and And then you know, it’s paperwork system from there. The next one is the rebuilding Ireland scheme, okay, less well known as it is operating and county allows it’s not operating in every county. So it’s good that we’re here. And it’s really for people who have previously been refused by to Landry’s to get a mortgage. Okay, it’s a government-backed scheme. Okay. And you can borrow up to 288,000 Euro in this county for participating in the rebuilding Ireland scheme is the thing that’s different to the health device game is that it’s also suitable for secondhand houses. So you can apply it to a new house a second and has and itself build. So really, that’s the prize for the second hand, second-hand house that you find on the market. And as I say, you can borrow up to 288,000 for that,

Dundalk FM 5:46
and is that you have to be 90% that you can’t get over 90%

Joanne Lavelle 5:51
You can never borrow more than 90% on a mortgage,

Dundalk FM 5:54
who you borrowing from in that instance, then is it the local authority? Yeah,

Joanne Lavelle 5:58
it’s a local authority arrangement. Yeah. So it works in pretty much the same way insofar as the council will get the highest valued and the same way the Help to Buy scheme, you will still get the highest value by the mortgage provider. So that you know you have your paperwork in order

Dundalk FM 6:12
and the criteria you said you have to be refused by two lenders but is there any anything else that would be similar to when you’re applying for local authority housing are there to they take all the things that

Unknown Speaker 6:33
no, there’s a third option for that. So this isn’t for people who are on the housing list. And but there are it does have reduced rates, the mortgage rates are lower, and that’s attractive, but you wouldn’t want to proactively get yourself refused a mortgage in order to be eligible, because when you refused a loan, like a mortgage, that’s a credit rating matter. And you know what I mean, you want to be refused. it’s if you have been refused by two landers and you have legitimate and eligibility for that. The third one is an affordable purchase game. And it’s not really up and running yet. And but it’s interesting, we’ll see what happens when it comes to being. But it is basically to there’s a gap there for people who are eligible for Social Housing, but they’re on the housing list, and people who can’t get a mortgage. it’s the third one-third rundown. It’s for people between qualifying for social housing and the mortgage criteria. what is this difficulty there with being compliant with either the rebuilding Island or the Help to Buy scheme more so for the people who aren’t eligible for the rebuilding Ireland scheme, and as you say, it’s not quite up and running yet? Hopefully next year, we’re going to see more coming on about that. And, and I think that that will be particularly helpful. For example, if you think in the values in Dundalk properties from the 100 Well, up to say 150, hundred and 60,000 because a lot of those properties now have been purchased by investors. That’s a good thing. as well, because investors are putting the property back into the rental stock. So then there’s properties available to rent. And but it might create more of a balance in that particular price segments. So there are basically two-three ways that you might go about, looking at finance for your 90%. And obviously, when you’re in the hip device game, you still going back to the normal high street lenders and online lenders, I say online lenders, you know, those with no high street presence and for your 90% on the very competitive at the moment,

Dundalk FM 8:32
that road recommends anymore and in particular, and,

Joanne Lavelle 8:36
I don’t advocate anyone.

Dundalk FM 8:37
Yeah, I am. So the deposit then.

Joanne Lavelle 8:41
The deposit, so not so hard. Yeah. I mean, you know, I know people who have been saving for years to get their deposit together, and it’s difficult. One thing that people often ask me about is what they call the Bank of mom and dad. the the situation where your parents are giving you a cash gift if you like to go towards your deposit, Now it’s important to remember that you are allowed to receive from your parents 310,000 euro over your lifetime before your due for taxation, But if you receive a gift that could be part of the 310,000. And then if you receive an inheritance, you don’t have 310 left, you have to balance left, and then you get into the capital gains tax issue. So I do always say to people if they’re looking at receiving a gift from the parents, that everybody goes and gets some tax advice, because it’s not to say that you’re avoiding tax it’s that you’re being taxed smart. Okay. So for example, the parent can give anybody a gift every year of 3000 Euro in any year, they can simply give a cash gift of 3000 euro which is not subject to tax, so if dad gave 3000 year and mom gave 3000 a year, that’s 6000. Okay, now dad can also give 3000 a year to a child’s partner, and a mum can even give 3000 a year to a child’s partner. So that’s 12k Okay. It’s completely legitimate, and it’s allowable. And it’s just a really smart way, if you’re, if you’re going to be relying upon a gift from a parent to do that, okay, so if you know in reality, you’re not going to be saving in the short term for a deposit for how it’s going to take you an amount of time. Do that over and amount of time in order for you to accumulate if your parents are in a position in a lucky position of being able to give that kind of money. Then there’s also a lot of solutions out there for when you get the money where are you going to put us put it into a Smart saver account or put it into a life insurance account. So that it’s working out it’s possible hardest for you whilst you’re accumulating as I’m getting ready to find your house. So it’s not only how you get it, it’s where you put us when you get it to put it And let it work with for its interest gain its interest or whatever it is, until you’re ready to put it into a house

Dundalk FM 11:06
And if there was just just two fingers, you mentioned there you mentioned the 310,000 over a lifetime. But if say for instance, you needed 30,000 for your deposits, can mom and dad give you 30,000? Or

Joanne Lavelle 11:22
what if mom and dad, if I was looking for a deposit and mom and dad, gave me 30,000 euro which day? Well, then that’s fine. I don’t have to pay tax on it. But then I only have 280,000 remaining situations where then I am in the future to inherit, for example of property from my parents. If you are over in that property’s value or at the stage I should say worth over 200,000 your straightaway into tax

Dundalk FM 11:46
where’s the 3000 gift doesn’t come out of that yet. Yeah. Okay. I’m with you on that one. What about mom and dad don’t have us but at Auntie Mary, our uncle Peter dollars and they don’t have their own children. Can they bestow the same amount of money or

Joanne Lavelle 12:05
Yes, as I understand it, Auntie Mary or a neighbour or anybody can give can go with the 3000 year situation. Yeah. And another is also a small threshold for Auntie Mary to gift to give a gift of cash or property or something. Before there is capital gains tax or inheritance tax, it’s a lot smaller than the parent to child tax, but it is there but that’s the sensible solution is 3000 year.

Dundalk FM 12:32
Okay, so you have your deposit. And then,

Joanne Lavelle 12:36
then you’re, you’re out into the wilderness looking at properties. And you know, and the weekends very quickly become taken up with looking at properties and making decisions. And I always say to first time buyers, listen to the advice around you. Okay, I know that people who first time buyers now they’re different generation, there may be two generations off the people who are giving the advice, but often the advice is sound. You know, think about This is a property something that you’re going to own for decades potentially. So think about it for the future as well as for the present and make sure that it’s future proof. You know, for example, if you’re going to buy a two-bedroom apartment because that’s within your affordability zone, that’s fine. Make sure that it’s a two-bedroom apartment, which in a few years is going to be something you can sell and upsized to something bigger if that’s something that you’re going to want to do

Dundalk FM 13:24
a couple questions in first one and yeah, this is something I think went on maybe before the crash to that you mentioned to get a loan for the deposit cuz I know people used to maybe go to the credit union and got their deposit there and then went back and went to the bank or building society for mortgage but cannot be done. No, no,

Joanne Lavelle 13:42
no, it can’t be done. And also, as I said earlier, that banks used to give 100% mortgages but no, it’s a sneaky, sneaky way to try and get a deposit. You can’t get a mortgage or you can’t get a loan for the deposit. And you know it all of our loans information. all that detail is stored centrally. It’s not as though one banks not going to check with the credit union, if they’re giving you a loan credit union doesn’t give a loan for a deposit anyway, saving is your only man.

Dundalk FM 14:12
Okay, I’m really Guys, can I get the have to buy scheme?

Joanne Lavelle 14:15
Yes you can, you can get to have device game, remembering that you have to be borrowing at least 70% of the value of the property on completion. Okay, that’s the property on completion, not the side value or anything like that. So say if you think that your house is going to be worth 300,000, when it’s finished, well then you need to be borrowing at least 70% of that. Okay, so that’s, that’s the real it has to be 70% minimum borrowed. And again, the 500,000 ceiling applies. And so if you’re building a big Whopper of a house that’s going to be worth over 500,000 Well, then you’re not going to get the Help to Buy scheme.

Dundalk FM 14:52
And finally, I think you’ve already answered this, but maybe we’ll just sort of clarify my daughter is saving like mad for deposit. I have Have some savings can I give it to work with that would

Joanne Lavelle 15:02
be the best not to do it over a bulk amount because the threshold – go with the 3000 euro year possible And remember, if she’s buying with somebody else, partner or friend, you can always big caveat about buying a operty with friends by the way…

Dundalk FM 15:18
And, and

Joanne Lavelle 15:19
yeah to 3000 can also be given to non family member

Dundalk FM 15:22
could you know, your mother gives you 3000 on your sister three times and on your brother 3000 and then your sister and brother who don’t need it right at that time. Give it over to you and then you’ve got 9000

Joanne Lavelle 15:36
Yeah, that’d be great.

Dundalk FM 15:40
You know, because there will be people out there who necessarily are by the road and you know, to try and

Joanne Lavelle 15:45
That can work that’s fine. Keep in mind as well that where you receive a gift or you receive money from somebody, you need to have a letter confirming that person is giving you the money because your mortgage provider will want that Because they want to know where you got it when we’re dealing with a non loan funds, ie cash, we always have to demonstrate where the money came from. That makes absolute sense. So

Dundalk FM 16:11
listen, Joanne and another great property chat I know you were back in two weeks but in the meantime just to let people know where you are if

Joanne Lavelle 16:19
Michael Lavelle Estate Agents down on Bridge street in Dundalk – www.lavelles.ie we’re always here for helpful advice if you need us, and we do sales, lettings and valuations. Its the valuations for mortgages where we mostly hear about people’s issues and we always offer advice – so we’re always there if you need us!

Dundalk FM 16:35
Excellent stuff that was Joanne Lavelle