Purchaser's Property Guide
Purchasing a property is one of the most arduous transactions an individual will undertake and every buyer should be fully informed of the processes involved.
Selecting a Property
Once a buyer has found a desirable property, a viewing should be arranged with the auctioneer. If the buyer decides to proceed a booking deposit is then paid to the auctioneer who then forwards a sales advice letter to the solicitors acting for the respective parties.
A mortgage may be defined as a legal agreement by which a bank or lending institution lends money in exchange for taking the title to the borrower’s property. When the mortgage is repaid the bank will release the property to the borrower. If however, the borrower cannot repay the loan, the bank will reposes the property and sell it on the open market to pay off the borrower’s loan.
Applying for a Mortgage
Step 1 – Contact a bank/financial institution or mortgage broker to enquire about the range of products available.
Step 2 – Documentation checklist
The following information will be requested by all lending institutions.
- Photo I.D. (Passport or Driving Licence).
- 2 Proofs of address.
- 6 months original current account statements
- 3 recent payslips
- Employer’s certificate of income
- Evidence of all savings/investments
- Existing Mortgage Statement(s) (if applicable)
- Loan statements (if applicable)
- Letter from Landlord confirming monthly rent & duration of tenancy (if applicable)
- 2 years audited accounts (for self-employed only)
- Accountant’s letter confirming tax affairs are up to date (for self-employed only)
- 3 months business current account statements (for self-employed only)
- Statement of Affairs (for self-employed only)
- A signed tax relief at source form (TRS1)
Step 3 – Submission of Application
If a mortgage broker is retained a buyer need only sign one application which will be sent to various lenders. Within five working days from submission the lender will furnish a document referred to as an “approval in principle”. This document states the amount the lender will lend subject to certain conditions being fulfilled. If you deal directly with a lending institution, specific application forms will be completed by the buyer.
Step 4 - Retaining a Solicitor
Edward Healy Solicitors specialise in property transactions and will keep you fully informed of the legal processes and steps involved to ensure a convenient and stress free experience.
Step 5 – Securing Loan Offer
Once you have obtained your approvals in principle from the various financial institutions, you may choose your preferred lender. A loan offer is then obtained from this lender, either through your broker or yourself. The loan offer needs to be read carefully and should not be accepted without prior consultation with your solicitor.
Step 6 – Loan Offer Conditions
The standard loan offer conditions are as follows:
- Property Valuation
All lending institutions require a property valuation. The buyer is generally responsible for the payment of the valuation fees, which usually cost in the region of €150 plus VAT. Where second hand properties are concerned, it may be advisable to arrange a structural survey before signing contracts. This survey is optional but it is recommended that one is carried out.
- Life Insurance
Section 126 of the Consumer Credit Act 1995 governs the requirement to have life assurance if you are taking a mortgage out on your home. There are two main types of life assurance: mortgage protection and term assurance. A mortgage protection policy is designed to protect your partner, family or dependants if you die before you have finished paying off your mortgage. The policy is designed to cover the amount outstanding and the proceeds are paid directly to the mortgage lender.
Term Assurance is life assurance that does not reduce during the term of the loan. In the event of death, the mortgage is repaid and the rest of the money goes into the estate of the deceased.
- House Insurance
This is also compulsory when you are taking out a mortgage. This insures you against damage to your home, up to and including rebuilding your home should it be destroyed.
Your valuer should have noted the amount of the rebuilding cost in his/her valuation. The buildings should be insured for this amount. If you have bought an apartment then you do Not need to take out building insurance as it will be included in the block policy. We would, however, advise you to take out contents insurance.
Step 7 – The Mortgage Pack
Once you have accepted the loan offer, a mortgage pack will be sent to your solicitor containing all the necessary documentation. It is important that you discuss the contents of the mortgage pack with your solicitor before exchanging contracts.
Step 8 – Closing of Sale
The lending institution forwards the loan cheque to your solicitor once the completed mortgage documentation has been received and approved. The loan cheque is then forwarded to the seller’s solicitors. The sale is then closed and keys of the property released to the purchaser. Your solicitor will register the details of the sale in the Land Registry and forward the title deeds to the lending institution which will be held as security for the loan.
Stamp duty is a tax charged on instruments transferring property from one person to another. It is the primary tax payable on property purchases. The rate of stamp duty payable is dependent on the value and type of property. Different rates of stamp duty apply to residential property as compared with commercial property.
Residential property is defined in Section 1 of the Stamp Duty Consolidation Act, 1999 as including:
1.A building or part of a building, which at the date of the Instrument, Conveyance or Lease
(a) was used or was suitable for use as a dwelling,
(b) was in the course of being constructed or adapted for use as a dwelling, or
(c) had been constructed or adapted for use as a dwelling and had not since such construction or adaptation being adapted for any other use.
2.The cartilage of the residential property up to an area (exclusive of the site of the residential property) of one acre.
What rates of stamp duty are applicable to residential property?
The rates of stamp duty for conveyance on sale or lease premiums of residential property for:
- Property valued up to €1,000,000 the rate is 1%
- Property valued over €1,000,000 the rate is 2%
Steps in Purchasing a Property
Steps to be followed by your Solicitor in the Purchase of your property:
- Obtain instructions from Purchaser and enquire about loan approval.
- Request Contracts from Vendor’s Solicitor.
- On receipt of contracts, arrange with purchaser to sign and pay balance of 10% deposit – discuss the inclusion of conditions re loan approval, structural report etc.
- Return signed contracts and cheque to the Vendor’s solicitor.
- Await return of contract signed by the vendor.
- Raise Requisitions on Title with Vendor’s solicitor – a long series of questions about the title to the property.
- Requisition purchaser’s loan cheque and deal with queries from the lending institution.
- Arrange to close and forward the balance purchase monies to the Vendor’s solicitor.
- Await title deeds from vendor’s solicitor.
- Authorise release of funds and arrange for purchaser to collect keys.
- This entire process takes 4 to 6 weeks on average.
- Prepare and send bill to the purchaser.
- Arrange to stamp title deed in Revenue Commissioners Office and register the Deeds in the Land Registry / Registry of Deeds Office.
- On completion of registration, forward the title deeds to the lending institution involved.