Monday 20 November 2017

Stamp duty and the other costs associated with buying a home

John Cradden

ASIDE from the basic purchase price and the deposit, it is easy to lose track of all the other additional costs associated with buying your first home.

As well as stamp duty, there are a myriad of other expenses to fork out for, including lending and estate agency fees, legal fees, surveyor costs, and mortgage protection insurance.

Stamp duty

The famous stamp duty relief for first-time buyers is now a thing of the past – abolished in December 2010.

Stamp duty is now simply calculated as 1pc of the selling price of any property up to €1m (2pc thereafter), and all buyers, including first time buyers, are subject to the same rate.

So if you buy a house worth €200,000, you will pay stamp duty of €2,000.

"A first-time buyer should remember that this cannot be included in the mortgage. It should be saved in addition to the deposit," says Liam Ferguson, of Meath-based financial advisors Ferguson and Associates.

Stamp duty and VAT

It is worth remembering that VAT is applied to sales of new homes, but not secondhand homes.

Darragh Duane of PricewaterhouseCoopers points out that when buying a new home, stamp duty is only charged on the VAT-exclusive price. In other words, stamp duty is only charged on 86.5pc of a total new house price.

So with a secondhand house worth €300,000, you will pay €3,000, but on a new house priced at €300,000, you'll pay €2,595.

Local property tax exemption

But while first-time buyers are no longer exempt from stamp duty, anyone who buys in 2013 will be exempt from the new local property tax until 2016, and any buyer of a new house from a developer at any point before October 31, 2016 will also be exempt.

Surveyor

A seller is under no obligation to tell you about any defects in a property, so you should get a survey of the property to find out if there are any defects before finalising a purchase.

The Society of Chartered Surveyors Ireland (SCSI) is the professional body for chartered surveyors. Costs vary, starting at €250 for a basic survey and rising to €1,000 for full structural surveys.

Legal fees

Solicitors can charge a flat fee or, more usually, a percentage of the purchase price, which would rarely be higher than 2pc, which would typically equate to between €1,000 and €2,000, and sometimes more.

"Fees vary from solicitor to solicitor, so make enquiries and bear in mind that cheapest isn't always the best," says Dublin-based solicitor Paula Duffy.

She says you could find a solicitor paying very, very low fees, but there is a lot of work involved in conveyancing, she says. Enquiries about the title could throw up problems with planning or boundaries, for instance.

If you want to buy an apartment, a solicitor could find problems or complications over the owners' management company that owns the common areas in the apartment block.

There may be other costs associated with the legal process that will usually not be included in the solicitor fees, including land registry fees and fees for legal searches. VAT is also payable on the legal fees.

Lending agency fees, estate agents, and brokers

Lenders may impose an application fee, as well as the costs of the lender's survey and searches. There may also be fees for mortgage loan costs, and an indemnity bond to ensure that, if the lender has to repossess the property, it won't make a loss.

Estate agency fees vary, ranging from 1pc to 2pc commission on the sale price of a house. So, on a house that sells for €200,000, a typical 1.5pc commission means a fee of €3,000 plus VAT.

Some mortgage brokers charge a fee to give you mortgage advice, or to arrange your mortgage. Many brokers do not charge a fee, so checking in advance is worthwhile.

Insurance

Most lenders will insist that you take out mortgage protection insurance, a type of life insurance policy that pays off your mortgage if you die before the end of the term.

Many people often confuse this insurance with mortgage repayment protection insurance, which is not obligatory.

Your lender will often offer to sell you a policy, but you don't have to buy it from them and, indeed, it can be much cheaper to buy elsewhere.

Liam Ferguson compared quotes from all the main players for a decreasing term protection policy for a couple both aged 35 for a €250,000 mortgage over a 25-year term, and found that the most expensive quote (€37 a month) was 37pc dearer than the cheapest (€27 a month).

"Over the full term of the policy, that's a difference of over €3,000."

Frank Conway, of Irish Financial Review, says that if you choose a mortgage broker, they should have agencies with a number of mortgage protection providers, while banks are likely to have a more limited range – often just one.

Irish Independent

Promoted Links

Promoted Links

Business Newsletter

Read the leading stories from the world of Business.

Also in Business