Buying a house will probably be the biggest purchase most people will make in their lives. The process is littered with the baggage of ages, you have to get your own engineer, a solicitor must check the title of the land even though it may be a new estate, money goes here, money goes there and it’s all very stressful.
I went through that hell almost 2 years ago but it was brought to mind again recently when I was asked for advice on the subject. I’m no auctioneer or lawyer but here is a list of what I think you need to do when making a house purchase. The list is tailored towards the first time buyer because that’s exactly what I was when I bought. If you already have a property you have the headache of selling that too.
How big is your mortgage?
Finding the best mortgage is a tricky problem and there are a number of options – go directly to a bank or go through a broker. Hopefully your broker will be independent and will give you the best mortgage he can find but seems unlikely in light of the fact that brokers receive varying commissions from different banks and lending institutions. Brendan Burges answers frequently asked questions about mortgages on the askaboutmoney.com forums covering topics as diverse as mortgage repayment protection, tax relief and insurance.
You have your mortgage but besides the cost of the house, there are fees for all the services you must use to make the purchase. A solicitor will normally charge 1% or even 1.5% of the house price for their services. An engineer will charge anything from €400 and up depending on the size and condition of the property. You’ll also have to set aside money to purchase furniture and all those things your parents had in the kitchen that you took for granted. I have to admit I completely misjudged how much this would cost. If you like spending money though, buying for your home can be as satisfying as buying the latest gadget or a new pair of shoes!
Hire a solicitor
Look up the Golden Pages and point your finger at the page and you’ll find a solicitor. Some are better than others, some are more paranoid and careful. You want the paranoid one on your side. Ask friends or family for recommendations. If you’re in Cork, email me and I’ll recommend the solicitor I used.
Find your dream home
It may seem strange that this is not top of the list but it’s useless dreaming about owning a mansion if you can’t afford it. Getting mortgage approval first and finding out what your budget is will help bring your dreams more in line with reality and possibly down to earth with a crash. Use myhome.ie, and use Google to find local auctioneers. Examine the prices in the area you’d like to live. If you are really diligent, go down to City Hall or the local council and find out what developments are in store for your area in the next five years. You don’t want a sewage plant opening next door.
Hire an engineer
Your broker or bank, or solicitor, or somebody will recommend an engineer or architect. He’s important because he’ll spot the damp wall that means you may have to spend thousands on a new heating system. It’s also a formality too because he can only do a visual inspection unless he rips up floor boards, moves built-in storage out of the way and peels back wallpaper. There will be things he misses that you’ll curse him for months later. You’ll have signed his disclaimer form so just live with it. The banks want someone qualified to certify that the building you’re spending their money on is something they can sell in the event that you default on the mortgage. Why the buyer can’t hire an engineer and provide that report to each buyer is beyond me, but that’s “how it’s done” here.
The bank will send someone out to value the house, but guess who pays? It’ll cost you, the buyer, about €100.
Haggle and Bargain
By the end of the process, you will regard auctioneers as the lowest form of … Let’s just say, they probably squeezed you for every penny you’re worth didn’t they? If you’re a first time buyer the auctioneer is going to love you. You can be a quick sale, he gets his commission and deal’s done. Use that when you’re haggling over the price of the property. I’m not very good at this, if you aren’t either, it might be worth doing some research and practicing. It could save you a few thousand Euro. You do not not sign a contract yet.
Why do I need house insurance before I’ve bought the house? It’s because you have an interest in the property. You will also want to have the house insured the moment you sign on the dotted line. What if someone burns down your new home the same day you buy it? It’s another requirement that you have house insurance before the bank releases the funds for your mortgage. You can buy from the bank or broker providing you with the mortgage, but you probably shouldn’t. Shop around. 123.ie is one site that springs to mind but almost every insurance company has a website these days where you can get an online quote.
Mortgage protection policy
Nobody likes to think about death but a life assurance policy is another of the bank’s requirements before you can get a mortgage. If you die, the bank wants the loan they made to you paid off quickly and without fuss. A life assurance policy does that. Like the purchase of house insurance, you should shop around. Rates and options can vary wildly, but the cheapest policy is one that covers only death, and where the amount paid out decreases with the life of the policy, in line with the mortgage value.
Sign on the dotted line
Once your mortgage has been finalised, your house insurance bought and all the land registrary checks made by your solicitor, then you can sign the contract to buy the house. If your mortgage isn’t ready, and on the off chance that something goes wrong (perhaps a problem with your life assurance?) that makes buying a mortgage impossible, the seller could sue you or make life very difficult for you by looking for the agreed price of the property. If all goes according to plan then well done, you’re on the property ladder! You’ll owe the bank a huge sum of money every month for the foreseeable future “but at least you own your own home”! I owe the bank a big fat mortgage too so I’m in the same boat. 800 mortgages are issued every day in Ireland and despite the rise in interest rates that doesn’t look like it’s going to slow down any time soon.
- Your local library will have a booklet called “Using the Internet for… Buying a home”. It’s part of the Life Steps Government scheme and the contents are available online too. Their quick guide is an excellent collection of links to sites such as Oasis.gov.ie, moving.ie and the independent Irish Financial Services Regulator (ifsra) who are an excellent source of advice.
- The mortgages and home buying forum on askaboutmoney.com is worth a visit too if you have questions to ask.
If you have any suggestions for improvements to this list don’t hesitate to leave a comment below. Thanks Mel for reviewing my original list and making suggestions!
PS. The bungalow pictured above is in Blarney, I won’t say where but the list price on the auctioneer’s website was €330,000. Apparently it finally sold for €375,000!
If you are selling a house, about.com have a guide on how to prepare your house for the sale and showing it off. This might be useful too when you’re buying. You’ll spot the tricks!
Kathy Foley warns that you may be paying too much for conveyancing. She advices that by shopping around you should be able reduce your bill to less than €1,800.
So I shouldn’t have to pay more than €1,200 or €1,300 if I go for the best deal?
You should be able to get the conveyancing done for this amount, although you might have to pay up to €1,800. “If you pay more than €1,000 plus Vat and outlays for a standard conveyancing, you are paying too much,” said Leonard.