The new Rebuilding Ireland Home Loan is designed to enable credit-worthy first-time buyers to access sustainable mortgage lending to purchase new or second-hand properties in a suitable price range. The scheme is targeted at first-time buyers who have access to an adequate deposit and have the capacity to repay a mortgage, but who are unable to access a mortgage sufficient for them to purchase their first home.
It is a statutory requirement that mortgage protection insurance (MPI) is taken out in respect of all local authority housing loans. The Local Authority MPI scheme is a group scheme that is designed to provide an appropriate level of insurance cover to those who wish to avail of the Rebuilding Ireland Home Loan. This cover provides certainty to both the applicant and the local authority regarding all Rebuilding Ireland Home Loans that are issued, and it is prudent financial practice. Given this requirement that applicants must take out MPI, continuing to include its monthly cost when assessing an applicant's ability to repay a loan under the scheme is also a financially prudent approach that I have no plans to change.
I am aware that there had previously been issues concerning the inclusion of the cost of MPI in the on-line calculator. This calculator was amended in order to take the cost of mortgage protection insurance into account, and this facility gives potential applicants a clearer indication of the amount that they could be eligible to borrow under the scheme, prior to their submitting an application.
Regarding the minimum savings record required under the scheme, in order to support prudential lending and consistency of treatment for borrowers, a Loan to Value ratio of 90% applies to the Rebuilding Ireland Home Loan as per the Central Bank's prudential lending guidelines. Therefore, in order to avail of the loan, applicants must have a deposit equivalent to 10% of the market value of the property.
Applicants must provide bank or similar statements (such as post office, credit union etc.) for a 12-month period immediately prior to making an application, clearly showing a credible and consistent track record of savings. The cash savings of the applicant should be no less than 3% of the market value of the property. Gifts are permissible up to 7% of the market value of the property, where their source is verified.
The final decision on loan approval is a matter for each local authority and its Credit Committee on a case-by-case basis. In order to ensure consistency of treatment for all applicants, decisions on all housing loan applications must be made, in accordance with the Regulations establishing the scheme, the statutory credit policy issued in accordance with the Regulations and have regard to the recommendations of the Housing Agency, which assesses applications on behalf of the local authorities. Loan applicants who are dissatisfied with a loan application decision of a local authority Credit Committee may appeal that decision to the local authority. Details of the appeals process can be obtained from the relevant local authority.
