Monday 23 October 2017

How the state agency's 80:20 deferred payment scheme works

ANYONE who wants to buy a property under NAMA's 80:20 deferred payment scheme will need a deposit of at least 10pc of the purchase price.

Say the property costs €200,000. This means a deposit of €20,000 will have to be paid.

A mortgage is then arranged for €180,000.

Full repayments are made on this €180,000.

This is despite the fact that 20pc of it, or €40,000, is set aside at the start in case there is a fall in the price of the property.

After five years an independent valuer assesses the property.

If the value has risen, or is unchanged, nothing happens.

This is because you have been making repayments on the full €180,000 over the last five years anyway. However, if the value has fallen then you gain.

Suppose the value has fallen by 20pc, then this is subtracted from the mortgage amount.

Over the last five years you have been making payments on the full €180,000, but you will now only owe €140,000 on the mortgage. You will have saved €40,000.

And the fact that you have been paying a mortgage on the full €180,000 you borrowed all along means this overpayment will also save you on some of the interest and knock a few years off the life of the mortgage.

Irish Independent

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