Monday 19 February 2018

Don't end up with a money pit of a home

Only borrow what you are comfortable with
Only borrow what you are comfortable with
Louise McBride

Louise McBride

The dearth of homes coming on to the market has led to a scramble for property. Be careful about getting caught up in this tussle – otherwise, you could end up with an expensive mortgage and a money pit of a home.

"In the rush to get your bid accepted, you may not do the due diligence on a property which you should," says Trevor Grant, chairman of the Association of Expert Mortgage Advisers (AEMA). "You may also end up borrowing more than you really need."

Lenders are much more cautious today than they were during the boom years. All the same, your bank may still be willing to lend you more money than you're comfortable with – particularly if you are in a well-paid, solid job.

It's important not to panic and take on a larger mortgage than you really want. "While a bank may be willing to lend €500,000, you might be only comfortable borrowing €400,000," says Mr Grant. "You may end up borrowing the €500,000 – simply so you get the house you're after. That will put you under a bit of financial stress."

Panic buying could also send you into the arms of an expensive lender.

"There's huge pressure on house hunters to prove that they're either cash buyers – or that they've just been approved for a mortgage," says Mr Grant. "Typically it takes between two and four weeks to get full formal mortgage approval – which might be too long for you to wait if you're after a particular house.

"In the rush to get mortgage approval, you could go to a more expensive lender – simply because you'll get the loan approval faster."

This could cost you dearly. You could pay thousands of euro more interest over the lifetime of your mortgage.

The rush to become the winning bidder for a home could also tempt you to skip the structural survey – where you hire a professional to examine a property for any major defects. This is a big mistake. Surveyors won't pick up every flaw in a property – but they will usually identify the ones that could burn a hole in your pocket. They may even warn you off a property.

It's important not to rely solely on a surveyor – you also need to inspect the property yourself and nothing beats the careful eye of a friendly architect, builder or electrician.

Discovering the pitfalls after you move in is too late – at that stage, you will have either blown your valuable cash buying the home or you will have drawn down a mortgage. Repair bills could easily run into tens or even hundreds of thousands if it's a major structural problem, such as pyrite.

What warning signs should you look out for to ensure you don't buy a money pit?

Well, a musty or damp smell could be a sign that there is a problem with the roof.

"Use your nose," says Tom Dunne, head of the school of surveying and construction with DIT. "Smell is often an indicator that there's a problem. If you're buying a house that is more than 50 or 60 years old, pay attention to the roof. Older roofs were not built to the standard that modern roofs are."

It could cost tens of thousands of euro to repair or replace a roof. However, if your roof is not watertight, you will most likely have leaks. Dampness can lead to mould – and mould is a killer to get rid of. Mould can also be a health hazard.

Chimney breasts that are wet – or covered in white salt crystals – are another danger sign. A quick stroll around the attic should allow you to check. If water is leaking through the flashing around the chimney, or through cracks in the chimney itself, it could cost thousands to repair.

This is something you can easily check yourself before you buy – don't rely on the surveyor. (Even the surveyor didn't spot the dampness in the chimneys of our current home. My husband discovered it himself when putting insulation down in the attic shortly after we bought our home – the repair bill came to more than €3,000.)

Watch out for signs of staining on walls, ceilings or under pipes as this could be a sign of a leak. Check if the paint at the bottom of a wall is bubbling or flaking off – this could be a sign of rising damp.

Remember, damp and mould stains can be painted over, so bear this in mind. It's always worthwhile bringing a hygrometer or moisture meter along with you when viewing properties as this will help you to detect dampness.

"If someone spent a few bob redecorating an old house, you have to ask why they tarted the property up," said Mr Dunne.

An old property may need to be rewired and replumbed. It could cost about €10,000 to rewire a four-bed semi-detached property; and another €10,000 to replace the plumbing and heating system.

It's relatively well-known where the houses with pyrite are – but it's still worth checking for any tell-tale signs. Watch out for cracks on walls, uneven floors and doors and windows that don't fit.

It is your responsibility to find out about the condition of a property before you buy it.

A seller is under no obligation to reveal the horror stories lurking in a property – though he is not supposed to deny or lie about any defects he knows about.

In short, buyer beware.

Sunday Indo Business

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