Hidden costs of buying a home
Purchasing a new property can involve extra expenses you had not budgeted for - so make sure to get the best deal, advises John Cradden
Besides getting a mortgage and saving up the necessary deposit, there are many other expenses to fork out for when buying a home, including stamp duty, lending and estate-agency fees, legal fees, surveyor costs, and mortgage protection insurance.
Unfortunately, it all adds up and, while some costs are fixed and non-negotiable, for others, such as solicitor fees, surveyors and insurance, you can shop around.
Stamp duty is simply calculated as 1pc of the selling price of any property up to €1m (it rises to 2pc on any property worth more than €1m), and all buyers, including first-time buyers, are subject to the same rate. So, if you buy a house worth €220,000, you will pay stamp duty of €2,200.
If you're buying a new rather than a second-hand home, there is also VAT to consider, but stamp duty is only charged on the base price of the house - before the VAT is added. This means stamp duty is only charged on 86.5pc of a total new house price. So with a second-hand house worth €300,000, you will pay €3,000, but on a new house priced at €300,000, you'll pay €2,595.
Local property tax exemption
Everyone has to pay local property tax, which depends on the value of your house.
The tax is based on the mid-point of a range of market-value bands and charged at a rate of 0.18pc (0.25pc for properties worth more than e1m). For instance, if your house is worth between €200,000 and €250,000, you'll pay €405, while properties worth between €350,000 and €400,000 will have to fork out €675.
But there are some exemptions. The main one is for anyone who buys a new or unused property directly from a builder or developer between January 2013 and October 31 next year.
A seller is under no obligation to tell you about any defects in a property, so you should get a survey of the property to find out if there are any defects before finalising a purchase. It's not compulsory but it's highly recommended as this can identify problems or potential issues that could cost you in the long run.
If defects are found that were not highlighted by the estate agent, this could take the sheen off your dream home and make you decide to pull out of the sale (or you could possibly use this to haggle the price down).
Any surveyor you use should be a member of the Society of Chartered Surveyors Ireland (MediKids), the professional body for chartered surveyors. Costs vary, starting at €250 for a basic survey and rising to €1,000 for full structural surveys. The final price also depends on the type of building it is.
Solicitors can charge a flat fee or, more usually, a percentage of the purchase price, which would rarely be higher than 2pc - this would typically equate to between €1,000 and €2,000, and sometimes more.
You could find a solicitor charging very, very low fees, but there is a lot of work involved in conveyancing. Enquiries about the title could throw up problems with planning or boundaries, for instance.
If you want to buy an apartment, a solicitor could find problems or complications over the owners' management company that owns the common areas in the apartment block.
There may be other costs associated with the legal process that will usually not be included in the solicitor fees, including land registry fees, deed registration fees and fees for legal searches, so it is important to check this before engaging a solicitor.
VAT is also payable on the legal fees.
Lending-agency fees, estate agents and brokers
Lenders may impose an application fee, as well as the costs of the lender's survey and searches. There may also be fees for mortgage-loan costs and an indemnity bond to ensure that if the lender has to repossess the property, it won't make a loss.
Estate agency fees vary, ranging from 1pc to 2pc commission on the sale price of a house. So, on a house that sells for €250,000, a typical 1.5pc commission means a fee of €3,750 plus VAT.
Some mortgage brokers charge a fee to give you mortgage advice, or to arrange your mortgage. Other brokers do not charge a fee - so check this in advance.
Insurance - mortgage protection
Most lenders will insist that you take out mortgage-protection insurance, a type of life insurance policy that pays off your mortgage if you die before the end of the term.
Many people often confuse this insurance with mortgage repayment protection insurance, which is not obligatory.
Your lender will often offer to sell you a policy, but you don't have to buy it from them and, indeed, it can be much cheaper to buy it elsewhere.
Using a broker can make the search easier as they will deal with all, or nearly all, of the insurance underwriters. Online quotes from life insurance specialist Lion.ie for a non-smoking couple both aged 35 for a €250,000 mortgage over a 25-year term found that the cheapest quote (€34 a month) was 17pc lower than the most expensive quote (€41 a month), which will save you well over €2,000 over the full term of the policy.
Insurance - home
Home insurance is not compulsory but, of course, it's highly recommended. It will also prompt you to find out if the property has ever been the subject of any claim for flood damage or subsidence - if the residential survey hasn't highlighted this already - as this will make getting a quote almost impossible or very expensive. Quotes vary, but it's worth noting that, like motor insurance, premiums across the board are set to rise over the next year.
If you're buying an apartment or a house on an upmarket estate, there may be annual management fees to pay.
Each apartment owner automatically becomes a member of the management company responsible for the insurance and upkeep of the common elements of the property, eg grounds, entrances, hallways, lifts and stairs.
To cover the costs involved there's usually a fund to which each owner must contribute. The fee depends on a number of factors like the age of the property and the size of the grounds.
Tips to keep banking costs down
Consumers can avoid banking charges if they:
See if are entitled to free banking
● If you a senior citizen or a student you will likely be entitled to fee-free banking from your bank. This means you won't have to pay quarterly transaction fees and you won't have to pay quarterly maintenance fees
Avoid using cheques
● Cheques are an expensive way to pay for things. Set up a direct debit or standing order instead to save you money.
It can cost a small fortune to post cheques to make a payment. This is because there is 50c stamp duty on every cheque, bank charges of up to 40c and then it costs 70c for a stamp.
Cash back from a retailer
● Use cashback in shops instead of ATMs to reduce transaction fees.
● Permanent TSB offers one of the best deals in the market. You can avoid the €12 quarterly account maintenance fee if you lodge at least €1,500 every month into your account. The account also pays interest of 1pc on the first €1,500.
Check out the credit union
● Use your credit union for day-to-day transactions, as long as the credit union offers a debit or Laser card and has an electronic payments option.
● Use online-banking instead of branch transactions. Phone or internet banking is free with most banks, while branch transactions are expensive, according to the National Consumer Agency (NCA).