AIB Mortgages for First Time Buyers

AIB Mortgages for first time buyers are available at very favourable rates of interest, and also generally come as a package designed to make purchase your first home as pain-free as possible. Most people dream of owning their own home, and when you are finally handed your keys, it is literally a dream come true.

If this dream is not to become a nightmare, it is important that you get the best mortgage deal you can, and AIB offer first time buyers a very attractive mortgage package that can be tailored to your own needs. Before discussing these, let’s have a brief look at what the law says about first time buyers and stamp duty.

Stamp duty is a tax paid when you purchase property, and is generally based upon the value of your property. If you qualify as a first time buyer you also qualify for stamp duty exemptions. To qualify as a first time buyer you must:

• Never before have purchased or built a house in Ireland or elsewhere, either jointly or individually,
• Live in the property as your only or main residence,
• Obtain no rent for a period of two years after purchase, other than under the ‘rent a room’ arrangement,

Since stamp duty can be quite a large sum of money to a young couple, this is a significant benefit to you. Now that you are aware of that, here are some recommended steps to take when purchasing your first home.

Review Your Budget

Before you can realistically apply for a mortgage, you have to know how much you can afford to pay. The amount granted to you will be dependant on your regular income, including overtime and bonuses, or your joint income in the case of a couple. You should calculate how much you need to live on, and then what you can afford to repay each month. Don’t commit yourself to the maximum, but allow some slack in case interest rates rise or you have some unexpected expenditure.

Additional Costs

You will have some costs associated with your house purchase, some of them in cash as opposed to being added to your mortgage. The largest will likely be the deposit, since most mortgage lenders will offer no more than 92% of the purchase price.

Some might offer 100%, but only with strict conditions regarding your income and the type of property. You will also likely have to pay the booking deposit required by the seller before the mortgage becomes available. This could be more or less than the deposit needed by your bank or building society, though is generally a good bit less. Then you have the legal fees which should be roughly 1% of the purchase price, plus any survey you will require before selling.

Don’t forget the cost of any redecoration and the furnishing of your new home. Being a first time buyer, you will likely be short on furniture until you are able to equip your new home. Relatives and friends often help with wedding gifts where appropriate, but this can still be a strain on your finances, particularly in an era when young couples have no desire to wait until they can afford their 50 inch plasma screen with surround sound, or to hand wash until they have enough for a washing machine.

Insurances

You are required by law to have life insurance in place before the mortgage cheque is issued. You will also likely have to arrange building insurance to cover any damage to the property and, for your own peace of mind, contents cover also. It might be worthwhile considering mortgage protection insurance, which maintains your interest payments in the event of illness or redundancy.

Making the Offer

Once you have come across a house that you would like to purchase, you will generally make an offer through your solicitor to the seller’s estate agent. Once the offer has been accepted, you will then probably have to make the booking deposit. However, there still no legal obligation for the seller to sell or you to buy. That does not happen until the contracts have been signed: make sure that you understand the situation regarding your booking deposit should the deal fall through.

Final Steps

The final step involves signing the contracts. You will have to pay your final deposit now, and then a completion date will be set. On signing the contracts, your lender will send the cheque to your solicitor who will then finish the process. You will then be given the keys, but the deeds will be held by the mortgage lender until it has been repaid in full.

Solicitors

Your choice of solicitor is very important, and if you can get a reference from somebody you know who has recently purchased their house then use it. A personally referred solicitor is far better than seeking your own. Your solicitor acts as the intermediary between you and the seller, and will also deal with the lender’s solicitor and your mortgage lender.

Your solicitor will carry out the legal side of house purchase, carry out a search to make sure that there are no ownership disputes and carry out the conveyance that transfers ownership of the property to you.

FIRST TIME BUYER’S PACKAGES

As a first time buyer you will be offered a competitive interest rate, and a choice of repayment options. Examples of the options available on mortgages for first time buyers are:

1. Reduced Initial Payments

AIB understand the financial pressures on young people when buying their first home, so there are two ways in which you can pay less in the first months after your purchase. This gives you a bit extra cash for furniture and everything else needed to set up home.

a) Interest only repayments. For a fixed period you pay only the interest, leaving you more money for yourself when you most need it – right after purchasing your first home.

b) 3 Months deferred start: you pay nothing for the first there months, the interest being added to your mortgage. This is another way of allowing you extra money to help set up your new home. You cannot, however, get both of these options – just the one.

2. Extended Repayment terms

You can pay your mortgage over any time period, although many banks like to keep it to 210 or 30 years at most. AIB can offer you a 35 year mortgage that means you are paying less each month. However, keep in mind that the longer the repayment period, the more interest you will eventually pay.

3. First Time Buyers Insurance Discount

If you also use AIB for your home insurance, you will be given a 20% discount. AIB will also offer a free consultation with an advisor to discuss your Life Insurance requirements.

4. Easy Budgeting

AIB can also offer first time buyers a Masterplan Account to make managing your monthly bills much easier. This is particularly valuable to young couples who have to handle their own finances for the first time.

PARENTAL SUPPORT MORTGAGE

The parental support option is a good one for a first time buyer’s mortgage. This allows your parents to contribute as a co-buyer, or to guarantee your payments. It is a useful option if your income is not enough to get you the mortgage sum you need to buy the home of your choice, and your parents are willing to help you out.

Everything considered, AIB offer good flexible terms with their mortgages for first time buyers, since not only can you get flexibility in interest rates, initial repayment terms and the length of your mortgage, but they also offer you good insurance deals and the possibility of your parents helping out.