Securing a new home goes beyond just closing the sale; optimizing how you finance it is crucial. This involves leveraging government incentives, exploring green mortgage options, and selecting the best lender. With upcoming budget announcements on October 1st, additional opportunities might arise.
Government Help
Help to Buy Scheme
The Help to Buy scheme offers a tax rebate of up to €30,000 for first-time buyers (FTBs) on new homes valued up to €500,000. This scheme, set to expire at the end of 2025, may be extended or adjusted in the upcoming budget. Note that working abroad might affect eligibility for a full rebate.
Shared Equity Scheme (First Home Scheme)
This scheme helps FTBs and some second-time buyers by bridging the gap between affordability and desired purchase price. The government can take up to a 30% stake in the property (20% if combined with Help to Buy). Recent increases in price ceilings make this scheme more accessible in various counties.
Local Authority Home Loan
For those rejected by traditional lenders, the Local Authority Home Loan offers a fixed rate between 4-4.05% over 25 to 30 years. Additionally, the Local Authority Purchase and Renovation loan supports buying and renovating derelict properties, in conjunction with the vacant property refurbishment grant of up to €50,000.
Cashback Mortgages
These mortgages provide either a fixed sum or a percentage of the loan value back. While this can be useful for immediate expenses, such offers may come with higher long-term costs due to typically higher interest rates.
Go Green
Green Mortgages
Green mortgages are available for homes with high energy efficiency ratings (BER A1-B3). These mortgages often offer lower interest rates, potentially saving thousands annually. For instance, AIB’s Haven offers a green rate of 3.45% while Bank of Ireland offers 3.6% for a four-year fixed term.
Impact of Rate Variations
With the average mortgage rate at 4.11%, choosing a green mortgage could result in substantial savings. For example, a green rate could lower monthly repayments significantly compared to a standard rate.
Keep It Tight
Mortgage Term and Interest
Reducing the mortgage term can lead to significant interest savings. For instance, shortening a 30-year mortgage to 20 years could save around €79,000 in interest over the loan’s lifetime.
Flexible Payments
Maintaining a longer-term mortgage while overpaying when possible combines flexibility with interest savings. This approach allows for lower payments during financial strain and higher repayments when feasible.
Fixed vs. Variable Rates
Fixed Rate Mortgages
Fixed rates have become popular due to higher variable rates. As of May this year, 66% of new home buyers opted for fixed rates. However, some flexibility remains with options to allocate part of the loan at a variable rate.
Variable Rate Considerations
Variable rates might adjust with ECB changes, but banks often delay such adjustments. Allocating part of the mortgage to a variable rate might offer benefits if rates drop.
Conclusion
Navigating the financing of a new home involves leveraging government schemes, exploring green mortgages, and carefully managing the mortgage term and interest rates. Staying informed about upcoming budget changes and lender options can significantly impact the cost and affordability of your new home.
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