What is the Local Authority Affordable Purchase Scheme all about?
Click here to see current available properties within Ireland.
This initiative assists individuals with moderate incomes in purchasing new homes at discounted rates. Properties offered under this program are situated in regions facing the most pressing housing needs and where affordability poses a challenge. The local authority takes a percentage stake in your home that covers the reduction in price. So, if you buy the home at a 20% discount, the local authority will have a 20% stake in your home.
To qualify for this scheme you must meet certain income, property, and residency criteria.
Your income and savings:
Your income must be below a certain level. This is calculated by multiplying your gross annual income by 4. This figure is known as your ‘purchasing power’ and it must then be less than 85.5% of the open market value of the affordable home.
OR
You must have proof from a bank or financial institution that you cannot get a mortgage for 85.5% of the market value of the home. The applicant may not be able to get a mortgage for a number of reasons, for example, because of their age.
Note: The market value of the properties is agreed upon by the local authority running the scheme before the scheme is launched.
How Income is Assessed
Income assessment is based on the preceding 12 months’ average gross income of all applicants before the application date. Various sources are considered as income, including earnings from employment like overtime (usually capped at 10% of basic income unless it’s regular), bonuses (up to 10% of basic income), and commissions (limited to 30% of basic income where relevant). Additionally, income from self-employment, maintenance payments, rental properties, dividends, capital investments, and similar sources are included in the assessment.
Income that is not assessable
For income assessment, the housing authority may exclude temporary or irregular income that does not align with the regular annual income pattern. This includes specific payments from the Department of Social Protection such as Child Benefit, certain Guardian’s Payments, Carer’s Allowance and Benefit, and various allowances and one-time payments like Back to School Clothing Allowance and Funeral Grant.
For more info on Income assessment click here.
Deposit and savings
You must have a minimum deposit of 10% of the purchase price of the home. However, if you have savings above a certain amount, you may not qualify for the scheme.
You can have the money to cover the deposit for the home and an additional €30,000. Anything above this is added to your purchasing power. And, if this goes above 95% of the market value of the home you are not eligible for the scheme.
How can I submit my application?
The method of applying can differ based on the local governing body, and the specific instructions for application will be accessible on their website. Typically, applications are made through an online platform. Details regarding the process, including the commencement and conclusion dates for applications, will be specified in the advertisement for the development by the local authority.
To complete your application, you’ll be required to furnish the following information:
- Full name, date of birth, and PPS Number.
- Confirmation of being a First-Time buyer (or Fresh Start applicant).
- Verification of income.
- Proof of legal residency in the State.
- Evidence of savings or deposit.
- A pre-approved Mortgage Approval letter indicating the maximum mortgage amount available to you might be necessary.
- Confirmation of eligibility for Help to Buy, if applicable.
Please note: If utilizing the Help to Buy Scheme, your mortgage should not surpass a 70% loan-to-value ratio. This calculation is based on your home’s open market value before the local authority takes an equity share in your property.
The local authority will evaluate your application following the established regulations and their Priority Scheme. Details about the Priority Scheme for each development will be accessible on the local authority’s website. Successful eligible applicants will be offered properties based on the time and date of application, as well as the suitability of the property to meet a household’s requirements. Additionally, there might be an assessment related to local connections.
How much is the payment?
The payment amount is determined by the local authority and hinges on your financial capability. They establish both a minimum and a maximum purchase price for each home. Your payment will fluctuate because your financial capability dictates both the purchase price and the extent of equity share needed from the local authority. Your financial capability is determined by the combined sum of the following:
Maximum mortgage capacity (i.e., 4 times the gross household income), A minimum deposit equivalent to 10% of the affordable purchase price, Applicable savings (outlined below).
Any surplus savings beyond the required amount for your 10% deposit, along with an allowable additional €30,000, will augment your financial capability. You can utilize the Help to Buy Scheme alongside the Affordable Purchase Scheme to contribute to your deposit. If the total amount does not necessitate at least a minimum 5% equity share from the local authority, you will be considered ineligible.
Eligibility Indicator
When you have found an Affordable Purchase development you are interested in you can use the eligibility indicator to give you an indication if you will be eligible to purchase a home in that development. Click here for more on this.
Share Equity
The Equity Share represents the percentage of the property’s open market value that the local authority contributes towards the purchase of your affordable home. It’s provided as an affordable dwelling contribution, a monetary value granted by the local authority for your home purchase. This figure is depicted as a percentage to ascertain the affordable dwelling equity or equity share. Essentially, it signifies the reduction percentage from the open market value at which you’ll acquire your home. The local authority will compute the necessary equity share for your home purchase, ensuring a minimum equity share of 5%.
This equity share can be gradually repaid, either partially or in full, at a time of your choosing by making what is termed a “redemption payment” to the local authority.
The minimum amount you can pay as a redemption payment is €10,000. The local authority will maintain a record of all redemption payments you make, adjusting their percentage equity share in the home accordingly. Specific events, termed “realisation events,” automatically trigger the repayment of the equity share. The most common instance is when you sell your home. Other events that may prompt this include, but are not limited to, situations like bankruptcy, the property being subjected to a Compulsory Purchase Order, abandonment of the property after the long stop date’s expiry, or in the event of the homeowner(s)’ death.
The Local Authority Affordable Purchase Scheme helps moderate-income individuals buy discounted homes in high-demand areas. The scheme involves the local authority reducing home prices by taking a stake. To qualify, meet income, property, and residency criteria. Income assessment considers various sources over 12 months, excluding certain irregular income. You need a 10% deposit, but excess savings may disqualify you.
Understanding the Equity Share is crucial; it’s the local authority’s percentage contribution to the property’s reduced value. Repayments can be made gradually through redemption payments. Check eligibility for available properties using the local authority’s online tool.
This scheme aims to make homeownership feasible for moderate earners. For more information, click here.
At Midlands Real Estate, we endorse and support such beneficial schemes aimed at assisting individuals in achieving their dream of owning a permanent residence.
Should you require additional information or have any inquiries, please don’t hesitate to contact us.
