Buying a new home involves paying much more than simply the agreed asking price, so it’s wise to budget accordingly.
After settling on the purchase price with a mortgage in place and the required deposit ready and waiting, a buyer will need to address a number of outlays including taxes, legal fees, survey costs and more.
Fees such as stamp duty are fixed, but others – including payments to solicitors or insurance providers – may differ greatly, so it will pay off to spend time shopping around.
It’s surprising how many people fail to factor in these somewhat hidden but nonetheless necessary costs before shaking hands on a property sale. The result can often see buyers frantically trying to gather up the money needed before the transaction date.
To help house hunters in Donegal to avoid this scenario, I’ve compiled a simple checklist of additional costs that you will incur when you find the home you want.
Stamp duty is a non-negotiable fee for anyone buying a home in Ireland.
For most homes in Donegal – those sold for less than €1m – the rate of stamp duty is 1%. This means that if you buy a home for €180,000, the stamp duty due to Revenue will be €1,800. For residential property sold for more than €1m, the rate payable increases to 2%.
Stamp duty must be paid on all residential property transactions, whether the home is a new build or not. Unlike the UK, all buyers – including first-time buyers – must pay the same rate. Stamp duty is not due on the VAT which is included in the asking prices of all new builds. Where VAT is included, stamp duty is paid on 86.5% of the total asking price. This means that if a new home costs you €180,000, you pay stamp duty of €1,557, which is calculated on the €155,700 base price of the property.
Local property tax (LPT)
All residential property owners in Donegal must pay local property tax unless they are granted an exemption under strict guidelines set down by Revenue.
LPT is calculated on the market-value band of your home (€0-€100,000, €100,000-€150,000, €150,000-€200,000 and so on) and taxed at a rate of 0.18% and 0.25% on property over €1m.
For example, if your home falls into the €200,000-€250,000 band, the LPT due will be €405.
The most notable exemption covers anyone who purchases a new or unused property directly from a developer or builder between January 2013 and October 31, 2019.
Many solicitors in Donegal charge a flat fee for conveyancing which is the term for the legal work associated with a property transaction. Some legal firms charge a percentage of the purchase price, typically around 1%. VAT is payable on legal fees when buying a property.
It is worth noting that the lowest fee may not be the best option. It would be prudent to shop around for best value for money rather than simply the cheapest price. A thorough exploration of the documentation could throw up problems regarding planning permission or boundaries and in those cases engaging an experienced conveyance solicitor could be worth a little extra outlay in the long run.
In the property market it’s a case of ‘buyer beware’ as there is no obligation on the vendor to reveal any defects in a home.
For this reason, it’s vital that you have the property surveyed by a fully qualified and experienced surveyor or engineer before sealing the deal. Having a thorough survey completed by an expert could uncover any issues that are not obvious to the untrained eye and save you a lot of money in the long run.
Your surveyor should be a member of the Society of Chartered Surveyors Ireland (SCSI). A standard survey for a home in Donegal will cost around between €300 and €500.
There are a number of fees that are associated with mortgage lenders. These include application fees, lender’s survey costs, mortgage arrangement fees and an indemnity bond to safeguard the lender against a loss should the property be repossessed.
Using an independent mortgage broker for advice or to arrange your mortgage often incurs a direct fee for the buyer. Having the expert advice of a good mortgage broker can facilitate a smooth mortgage application process. It’s important to check what fees are payable before engaging a broker.
A mortgage protection insurance policy is a standard requirement for lenders. This is basically a life assurance policy, which will pay the remainder of your mortgage in the event of the policy holder’s death. Mortgage protection policies are offered by lenders, but it is important to note that you don’t have to purchase from them. They are often not the cheapest option, so it’s worth shopping around for a better deal. A number of factors are taken into account when calculating mortgage protection premiums including the amount borrowed, the term of the loan, and the buyer’s health, age and gender. An independent mortgage broker will be able to advise you on the best deals available to suit your particular situation and needs.
Home insurance is required by many lenders and is clearly stated in mortgage terms of agreement.
In cases where it is not obligatory, it’s highly recommended that you take out a robust policy anyway.
The cost of insuring your home will vary according to the property’s claim history, location, size, rebuild value and other factors.
Apartment blocks are often subject to ongoing maintenance/management fees to ensure the upkeep of common areas.
As an apartment owner, you will automatically be obliged to pay into a management fund for the maintenance of the grounds, entrances, hallways, lifts, stairs and more.
Repayment protection (not obligatory)
Mortgage repayment protection is often purchased by buyers as an added extra, although there are no obligations on borrowers to take out such policies. Repayment protection will help with mortgage repayments in event that you become unable to do so.
Gareth McLarnon is Director of Glen Estates, Donegal’s fastest growing estate agents. He has worked in the property industry in Donegal for almost 20 years. Gareth is always available for expert advice on buying, selling or renting property in Donegal. Get in touch today on +353 74 910 2220 or firstname.lastname@example.org