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Home > Our Services > Housing > Promoting home ownership > House purchase/construction loan

House purchase/construction loan

Who can apply?

A person who is

  • A first time buyer and
  • Aged between 18 and 70 years and
  • Earning under €50,000 as a single applicant or under €75,000 as joint applicants and
  • In the case of the primary earner on the application, in continuous employment for at least two years (this can be self employment) and in the case of the second applicant, (whose income is being relied upon to fund the mortgage repayment), in employment for at least one year and
  • Cannot get adequate finance from a Bank or Building Society to purchase or build a house, May be eligible for a Local Authority Loan.

May be eligible for a Local Authority Loan.

Who is a First Time Buyer?

A First Time Buyer is a person, (or, where there is more than one buyer, each of such persons):

  • who has not on any previous occasion, either individually or jointly, purchased or built his/her own behalf a house (in Ireland or abroad) and
  • where the property purchased is occupied by the purchaser, or a person on his behalf, as his/her only or principal place of residence and
  • where no rent, other than rent under the rent-a-room-scheme, is derived from the property for five years after the date of the current purchase.

Is there provision for any special situations in relation to the scope of the definition of a First Time Buyer?

Yes. There are two particular situations where a person is deemed to be a First Time Buyer.

  1. The trustees of a trust (to which section 189A of the Taxes Consolidation Act 1997 applies), whose trust funds are raised by public subscriptions for the benefit of permanently incapacitated persons, in respect of the first house(s) bought after the establishment of the trust, for occupation by the beneficiary or if more than one, each of the beneficiaries.
  2. A spouse to a marriage the subject of a decree of judicial separation, a deed of separation, a decree of divorce or a decree of nullity in the case of the first acquisition of a house by the spouse following the separation or divorce provided that the spouse had, in relation to the former marital home
    • left that home;
    • not retained an interest in that home;
    • whose separated/former spouse continues to occupy that home, which home was occupied by both spouses prior to the separation or dissolution of the marriage.

Are there exceptions to the employment requirement in the case of the second applicant?

In instances where the income of the second applicant is being relied upon to fund the mortgage repayments, where there is a primary income of a permanent waged/salaried nature, and where the secondary income is from the Department of Social and Family Affairs, then long term social welfare payments can be considered, provided the long term nature of the payment is confirmed by the Department of Social and Family Affairs or other relevant Government Department. Independent confirmation is required in such circumstances.

Inadequate funding from two lenders

Applicant(s) must have sought their mortgage from two lenders (banks or building societies) and have received inadequate funding offers or refusals from each before making application to the Local Authority for a loan.

How much can be borrowed?

A Loan can be up to 97% of the price of the house subject to a maximum of €220,000 and subject to the applicant(s) ability to repay.

What is the loan term?

The maximum loan term is 30 years. In the case of a loan issued to an applicant(s) who is over the age of 40, the maximum loan term is restricted to the number of years remaining until the applicant(s) reaches the age of 70.

What about a Deposit?

The applicant(s) must have a 3% deposit with regular cash savings making up half of this amount.

What is the Interest rate?

A variable interest rate applies to housing loans.

What kind of Dwelling may be purchased?

An applicant approved in principle for a local authority house purchase loan may select a new or existing house or build a house. It is the applicant’s choice but the Local Authority must be satisfied that the dwelling being acquired is reasonably priced, of suitable size [gross internal floor area of 175sq metres (1883 sq feet) or less] and standard to cater for the applicant’s household and free from structural defects.

New Dwellings

In the case of a new house, it must meet the following criteria:

The builder and the building must be covered by Homebond or Premier Guarantee,or the dwelling must be covered by a Structural Defects Guarantee from the builder.

This requirement does not always apply where the property is being sold as an affordable home.

Self Builds

Self Builds under Contract

Where a local authority decides, at its discretion, to provide loans for self builds by direct labour, it must meet the following criteria:

  • Fixed price contract.
  • Appropriately supervised.
  • Appropriate insurance.
  • Construction covered by Homebond or Premier Guarantee.

Self Builds by Direct Labour

Where a local authority decides, at its discretion, to provide loans for self builds by direct labour, it must meet the following criteria:

  • Appropriately supervised.
  • Appropriate insurance.
  • Where the house is being built by direct labour receipts for at least €11,450.00 from VAT registered suppliers and at least €8,000.00 for labour carried out by persons who produce a current Tax Clearance Certificate must be produced prior to payment of final instalment of the loan.

Supervision of Construction

The construction must be supervised by a suitably qualified person as defined under the Law Society guidelines (hereinafter referred to as the “construction supervisor”) and set out in the certificate of inspection for House Purchase Loans.

The construction supervisor undertakes to provide a certificate of inspection in the format supplied by the local authority. This undertaking must be provided prior to loan approval. The construction supervisor must hold Professional Indemnity insurance cover of at least €1m on each and every claim basis with no aggregate cap. A copy of the certificate of Professional Indemnity must be provided prior to loan approval.

Tax Clearance

The Contractor

Where a dwelling is being built/acquired from a Contractor, the Contractor must have a current C2 or Tax Clearance Certificate.

What information must be submitted with the application?

A Standard Loan Application Form is available for all the major Loans including House Purchase/Construction Loan. The Application Form contains a checklist (copy attached) of requirements, which must be submitted with the application. Where an application is submitted which does not include all of the required information it will be returned to the applicant setting out the missing information.

Evaluation

As part of its investigation of applications, the Local Authority will arrange for Credit and Judgement checks to be carried out. For this to take place, the Local Authority requires the applicant(s) consent (the consent clause is contained within the application form). If an applicant(s) does not give such consent(s) the Local Authority may not be able to consider the application. Where, on investigation, the Council considers that an application qualifies for a Mortgage, an Approval in Principal (AIP) will issue.

The applicant(s) will be will then be required to submit additional information depending on the means of acquisition/construction.

A Final decision will be made on the application after these additional items are furnished and considered by the Council, whereon, if successful, notification of Loan Approval will issue.

What additional information must be submitted after approval in principal (A.I.P) is issued?

The type of additional information, which will be required, depends on the means of acquisition/construction of the dwelling. For example, in the case of a house purchase, a valuation report will be required whereas in the case of a new house being built by direct labour, evidence of supervision by a suitably qualified person will be required. The Local Authority will request the information relevant to the particular application as part of the approval in principal. Some of this information/documentation will be sought by the Local Authorities’ Solicitors in the context of the finalisation of the legal documentation associated with the mortgage.

 

The following are the types of information/documentation, which will be sought:

  • Homebond or Premier Guarantee
  • Structural Defects Guarantee. 
  • Fixed Price Contract. 
  • Certificate of Supervision/Inspection. 
  • Vendors Tax Clearance. 
  • Contractor’s Tax Clearance. 
  • Copy of Site Location/Layout/Floor Plans and Planning Permission. 
  • Contract of Sale. 
  • Valuation Report 
  • Certificate of Compliance with Planning Permission and Building Regulations. 
  • Building Energy Rating Certificate. 
  • Grant of Easement. 
  • Building Insurance. 
  • Mortgage Protection Insurance. 
  • Direct Debit Mandate 
  • Tax Relief at Source Application

Valuation Reports

Where the property is sourced by the applicant on the open market, a valuation report carried out by an approved independent valuer is required. The signed report must not contain significant disclaimers or concerns about the condition/saleability of the property.

Where the property is being sold as an affordable home or purchased under the tenant purchase scheme, the valuation will be carried out by a valuer on behalf of the local authority.

Compliance with Planning & Building Regulations

Certificates of compliance with planning and building regulations are required for all properties mortgaged prior to drawdown, and must be provided by suitably qualified architects, engineers or building surveyors. The forms of compliance shall be those approved by R.I.A.I., E.I. or S.C.S.

Compliance with European Communities (Energy Performance of Buildings) Regulations.

A Building Energy Rating (BER) Certificate is required for all properties mortgaged prior to drawdown, and must be provided by a specially trained BER Assessor, registered by Sustainable Energy Ireland.

The BER gives an objective scale of comparison for the energy performance of a dwelling ranging from A1 to G with A1 representing the most energy efficient, and G representing the least energy efficient.

Grant of Easement

Where it is a condition of the Planning Permission for a house to be built or purchased, that sight lines/vision lines shall be provided at the entrance to the house, and where the provision of such sight/vision lines requires agreement from adjoining landowners, it will be necessary for the adjoining landowners to give a formal grant of easement which will be registered on the title of the grantor.

Buildings Insurance

Building Insurance in the amount of the rebuilding cost specified on the valuer’s report must be in place prior to loan cheque issue. The local authority’s interest should be notified to the insurer by the borrower and must be noted on the policy.

Mortgage Protection Insurance

The approved local authority mortgage protection insurance, for the loan amount and the term of the loan, must be in place prior to loan issue.

Tax Relief at Source

Applicant(s) must apply for Tax Relief at Source by completing and submitting an application form to the Local Authority, who then enters the mortgage details and submits it to the Inspector of Taxes for assessment. Where an applicant(s) qualifies for tax relief on mortgage repayments, this will be given by the local authority in the form of a reduced mortgage payment.

Mortgage Allowance Scheme

Mortgage Allowance assists tenants and tenant purchasers of local authority homes and certain tenants of houses provided by Voluntary Housing Bodies provided under the Rental Subsidy Scheme who wish to return their homes to the Local Authority or Voluntary Body and purchase or build a private home for their own occupation by reducing their mortgage repayments over the first five years of the mortgage.

Inspections

The Local Authority reserves the right to carry out any inspections/investigations it deems appropriate in the context of the consideration of the application.

Applicants should be aware that any such inspections by staff employed by the Local Authority or by any of its agents is purely for the information of the Local Authority. The Local Authority does not accept any statutory or common-law duty of care to the applicant to ensure that the property has been properly constructed or is free of defects. It is therefore in the applicant’s own interest to employ a suitably qualified person to oversee the works where appropriate and to ensure that the property has been properly constructed and is free of defects.

Consumer Credit Act 1995

The Consumer Credit Act 1995 requires that information documents, application forms and approval documents in relation to Mortgage lending include the following notices:

Health & Safety

Applicants are reminded that construction works are a dangerous activity creating hazards and risks from the materials used and techniques employed. Contractors who undertake construction operations are required under Health and Safety Legislation to undertake their work without risk to safety and health of their employees, householders and members of the public. Applicants should therefore ensure that Contractors appointed to undertake construction work are competent to carry out the work safely and in accordance with health and safety legislation.

Related File(s)

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By email : housingloans@westmeathcoco.ie

By telephone : 044-9332119

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