The relaxation of loan to deposit requirements and the new Help to Buy scheme have made the prospect of buying a new home a very real possibility for a large tranche of first time buyers. However be careful not to get carried away and try to follow a few rules of thumb.
1. Do listen to other people
Buying your first home can sometimes feel like having your first baby; everyone will have something to say about it and won’t be shy about saying it. But people who’ve already been through the experience can be the source of invaluable tips, so don’t disregard everything they say.
2. Don’t be afraid to go it on your own
More and more singles are buying on their own, with Central Bank figures for 2015 showing that single buyers accounted for the majority (60 per cent) of mortgages taken out during that year. So if you don't have a partner, don't be afraid of taking on the burden on your own – remember, if your finances are straitened you can always rent out a room and earn as much as €14,000 a year tax free. Just not on Airbnb.
3. Don’t be dazzled by rebates and cashbacks
There are plenty of offers available on the market at present. The Government's Help to Buy scheme for example, will help you out with up to 5 per cent of your deposit on a new home, or €20,000 on a house worth €400,000. Banks too have some tempting offers to win your business, with Bank of Ireland offering as much as 3 per cent of your mortgage as a cash-back, and others, such as EBS and Permanent TSB, offering up to 2 per cent back. But incentives are only going to make sense if you have also done your fundamental financial homework on any investment and have decided it is a sound one.
4. Don’t buy a new house if it doesn’t suit you
There may be great incentives as a first-time buyer – the Help to Buy scheme for example applies only to new builds – but don’t overlook alternatives that might pay off in the long run. Second-hand properties are often larger and better located – as a consequence they didn’t lose their value as fast as new builds when the market collapsed last time out. Something to think about.
5. Don’t rush into it... but don’t delay either
There’s a lot of noise around at the moment, thanks to tales of new schemes selling out in a weekend, as well as the ongoing pressure in the rental market; but try and tune it out. Plan your purchase at your own pace, and consider what it is you really want. Conversely however, if you are keen to buy get moving, you’d be surprised how much time you can lose bidding unsuccessfully on properties and getting a fix on the state of the market.
6. Do work out how much you can afford
Before you even start perusing myhome.ie, or becoming addicted to Houzz – ok maybe soon after – you need to work out what your budget is. Thanks to the Central Bank’s new mortgage lending rules, this is 3.5 times your income (or combined income if you’re a couple) and you’ll need a deposit of 10 per cent.
7. Don’t be afraid to compromise
Yes, we've all seen those episodes of Location, Location, Location where a property buyer has continuously perplexed Phil and Kirsty with their unwillingness to compromise... and yet they end up finally finding a home that ticks all their boxes. In reality however, most home buyers will have to compromise on something, be that orientation, location, size of garden or number of bedrooms. Decide early on what your dealbreaker is – but be prepared to give up on something else.
8. Do shop around
From the sale price of the property, to the interest rate on your mortgage, to the fees charged by your solicitor or your snazzy new Smeg fridge – everything is negotiable. So don’t throw away your hard-earned money by accepting the first price. Remember, if you pay tax at the top rate, to pay solicitor’s fees of €1,200 you’ll have to earn almost €2,400 – so don’t give your money away easily.
9. The road won’t always be smooth
Buying a home may not be just the costliest transaction you’ve ever made; it can also be one of the most painful, tortuous experiences of your life. Indeed buying a new home, where you simply turn up one day with a cheque, pick out the number of your property and wait for it to be built, is a far more elegant way of buying a property than the private treaty process, which can get down and dirty. Getting outbid, time and time again, or finally going sale agreed only to see the deal fall apart due to being gazumped, finding a fatal flaw in the property, or the vendor changing their mind, can be soul destroying. But don’t lose heart; if you stick with it long enough eventually it should come good.
