AS ANYONE who has ever purchased property knows, the easy part is choosing the right house; the hard part begins when you try to find the right mortgage and set the legal process in motion.
A new company, REA mortgage services, hopes to change all that with a new product that will provide a mortgage review and a conveyancing service, regardless of the value of the property, for one fixed fee, currently set at £500 plus VAT.
Richard Eberle is the managing director of REA Mortgage Services. An Irish-American and financial consultant who has lived here since 1989, he began his career in commercial real estate finance in Washington DC in the early 1980s. The high cost structure, but high profits associated with domestic mortgage lending here - and the healthy economy - convinced him that the time was ripe to introduce lower cost mortgage services, and ultimately lower cost mortgage products.
The first of these products, he says, is the mortgage review and conveyancing service. For a flat fee the new buyer can go to REA to have a mortgage they are considering buying - or already have - reviewed. REA will compare the rate on offer to other leading rates, examine how the lender calculates the mortgage interest, analyse all other costs and charges and provide the client with a written precis of the main contract clauses, such as penalty fees for non-payment, etc. The second part of the service is the legal conveyancing of the property which traditionally works out at about one per cent of the cost of the property plus £100 plus VAT. On a £75,000 property this can amount to over £1,000 in legal fees. The savings is even more significant on higher value properties.
"The mortgage review should result in savings for many borrowers because we will be able to direct them to the consistently cheaper mortgage providers," explains Mr Eberle. "The cost of conveyancing is being kept down to a minimum because we are using a panel of young solicitors who are keen to get volume business.
REA Mortgage Services is not a conventional broker, insists Mr Eberle. It does not physically arrange the mortgage and all the other trappings, such as the mortgage protection insurance. "At the fee we are charging it simply would not pay us to do the administrative work, but we can put you in touch directly with the recommended lender or an insurance broker." The fee buys independent, professional advice and conveyancing, he stresses.
Within the next six months the company plans to introduce at least two new mortgage products says Mr Eberle, which will provide discounted rates to new buyers. "The margin on mortgages here is considerably higher than in the US or Britain, despite the higher default rates in Britain. The interest rates charges to Irish borrowers simply does not represent the level of risk being taken by the lender.
"Let me give you an example. Two years ago, someone I know took out a 70 per cent mortgage, a very prudent loan, and now finds because of surging property prices that the value of the mortgage is now just 50 per of the value of the house. Yet the guy who buys an apartment down on the Quays with a 90 per cent loan is being offered a discounted rate for the first year and then the standard variable rate. Yet the second buyer represents a bigger lending risk than the first one."
REA's lower cost mortgages, which will also include the low cost conveyancing service, should be coming on stream over the next six months, says Mr Eberle. In the meantime, the company can be reached at 52 Lower Leeson Street, Dublin 2, telephone (01)676 1595.
