New Home Choice Loan For First Time Buyers
18th October 2008Minister for Housing Michael Finneran TD has announced the launch of a new Government-backed mortgage for first-time buyers. Home Choice Loan is a mortgage provided through a number of local authorities for first-time buyers who can not get sufficient finance from a bank or building society.
Home Choice Loan will provide up to 92% of the market value of a property purchased. The maximum loan amount will be €285,000. The loan is a normal Capital and interest bearing mortgage which is repaid on a monthly basis.
The mortgage term will be for a maximum of 30 years and Home Choice Loan will only be available for newly built homes.
What is Home Choice Loan?
- Home Choice Loan is a mortgage provided through a number of local authorities for First Time Buyers who cannot get sufficient finance from a bank or building society.
- Home Choice Loan will provide up to 92% of the market value of a property purchased. The maximum loan amount will be €285,000. The loan is a normal Capital and Interest bearing mortgage which is repaid on a monthly basis.
- The Mortgage Term will be for a maximum of 30 years.
- Home Choice loan will only be available for newly built homes.
- The Home Choice Loan is a normal Capital and Interest repayment mortgage.
- Four designated local authorities, Cork City Council, Dublin City Council, Galway County Council and Kilkenny County Council will act as lending authorities acting on a regional basis for the entire country.
- These authorities will draw down funds from the Housing Finance Agency and lend on to successful applicants from within their own and other local authority areas within designated regions.
- The four authorities will be supported by a Central Processing Unit, staffed by appropriately skilled personnel, including qualified underwriters, and operated with administrative assistance from the Affordable Homes Partnership.
- Recommendations on specific loan applications made by a Central Processing Unit will be made to the relevant authority. These authorities will oversee the conveyancing process, ensure mortgage charges are put in place, that adequate security is obtained and issue the loan.
- A Steering Committee will oversee the operation of the system.
- A network of approved mortgage brokers will be established. Prospective house purchasers will apply for a Home Choice Loan through one of these brokers.
To qualify for a Home Choice Loan applicants must:
- Be a first time buyer (some exceptions may apply).
- Earn over €40,000.
- Be in permanent employment for two years; If self-employed be able to submit two years financial audited accounts.
- Have proof that you have been unsuccessful in securing a sufficient mortgage from a bank or building society to buy your home.
- Further information on how to apply will be made available in the coming weeks.
Home Choice applies to newly built homes only. In addition, the property must:
- be acceptable for mortgage purposes
- be in the Republic of Ireland
- be for sale on the open market
- be a residential property
- be covered by Home Bond, Premier Guarantee or equivalent.
- A new single streamlined Government Equity product is to be introduced. In the first instance, this will replace the current approach through which affordable housing is made available under Part V, the 1999 Affordable Housing Scheme and the Affordable Housing Initiative.
- Its implementation will introduce greater equity into the system and provide a basis for achieving greater consistency across the schemes and across different areas of the country.
- In essence, the Government Equity Scheme would provide a single mechanism through which homes would be purchased by eligible purchasers under all of the schemes for supply of affordable housing (which would continue to operate unchanged as means of supplying affordable units). The timing of the introduction of an open market component of the scheme will be kept under review in light of developments in the housing market.
- In the case of units provided through the affordable housing schemes (e.g. Part V and the 1999 Affordable Housing Scheme), from the buyer's perspective, the purchase transaction under the new arrangements would be largely unchanged. However, instead of the property being sold subject to a reducing clawback, it would be sold subject to a permanent charge involving an obligation to repay an equity stake equivalent to the amount currently allowed as a discount (i.e. the percentage below the market value at which the property is sold). The various affordable housing schemes would continue to operate unchanged as means of supplying affordable units.
- The Government Equity would be registered as a permanent charge against the property, as a set percentage of the prevailing market value. It would remain as a charge on the property until it is fully repaid. The equity loan would be recoverable on sale of the property.
- In the final phase, by enabling eligible buyers to access housing on affordable terms in the open market, the Equity Loan Scheme could replace the Shared Ownership Scheme, which currently enables eligible buyers to purchase a proportion of the equity in a dwelling (new or second hand) on the private market and to rent the balance from the local authority, which is bought out over time. The issue of introducing this 'open market' equity loan product will be kept under review in light of changes in the market.