Affordable Mortgages – Rebuilding Ireland

A  government-backed mortgage scheme – the “Rebuilding Ireland Home Loan”  (RIHL)  has been running since February 1st 2018. Some people call it the “affordable mortgages scheme

This RIHL provides mortgages at reduced interest rates to first-time buyers who have been refused a mortgage or were offered “insufficient” finance, by at least two lenders.  (not credit unions) . It is available from all local authorities in Ireland.
Important –  The two unsuccessful mortgage applications must have been for the same loan amount as the borrower is seeking to borrow under the Rebuilding Ireland Home Loan.

Tip – You could try using a mortgage broker to help you get a mortgage. It cuts down on all the paperwork and they can find the best rate for your personal circumstances.

One online broker that covers the whole country is Money Sherpa .
They work with all the major mortgage providers, and you get exactly the same rates as you would if you applied directly to the lenders. Best of all they are free to use. The lenders pay them a commission when you receive your loan.
(DFP Mortgages Limited trading as Moneysherpa is regulated by the Central Bank of Ireland.)

Find out more about Money Sherpa and book a free mortgage check here.

A reformed successor to the Rebuilding Ireland Home Loan Scheme has been promised by the Government. It will be called the ‘Local Authority Home Loan‘, and will be prepared later in 2021.  The Local Authority Home Loan will include an increase in the income ceiling for single applicants in counties Dublin, Cork, Galway, Kildare, Louth, Meath and Wicklow, to reflect the higher market prices in these areas, thus increasing the number of people eligible and increasing the borrowing capacity of applicants in these areas

According to the government figures, 621 home loans were approved in 2020 year at a total value of €103.4 million

The Rebuilding Ireland Home Loan  (RIHL) is targeted at people who have access to an adequate deposit and have the income capacity to repay a mortgage, but who are unable to access a mortgage big enough for them to purchase their first home. It is available to people who want to purchase a new or second-hand property, or to build their own home.
Borrowers will be able to borrow more than they would from the banks – it seems the Central Bank’s 3.5 times income rule doesn’t apply for this loan.

For example – with single applicants – mortgages of up to 5 times earnings seem to be possible under the RIHL scheme.

See here for how much you can borrow from the banks

Local Authority Mortgage Interest Rates :

The interest rates available on this scheme are lower than many of the mainstream lenders – and the rates were decreased in September 2021 but they are still good:-

  • 2495% fixed rate for up to 25 years
  • 2.745% fixed interest rate for up to 30 years

For comparison with the interest rates from the mainstream lenders – see our tables of the Best Mortgage Rates here.

You can use the loan for new and second-hand properties, or to build a home. It is possible to borrow up to 90% of the market value of the property – so you will need a minimum 10% deposit.

If you are buying a new build – you could also be eligible for the Help to Buy Scheme – and get up to 10% of the value of the home rebated.  Read more about the Help to Buy Scheme here

Maximum Property Value

The maximum values of the property that can be purchased or self-built with the RIHL scheme are :

  • €320,000 in counties Cork, Dublin, Galway, Kildare, Louth, Meath and Wicklow.
  • €250,000 in the rest of the country.

So – because of the minimum 10% deposit requirement – In Dublin, Kildare, Louth, Meath, Wicklow, Cork and Galway the maximum loan amount is €288,000.

For the rest of the country, the maximum loan amount is €225,000.

Other Conditions of the Rebuilding Ireland Home Loan

Applicants have to be :

  1. First-time buyers
  2.  Aged between 18 and 70 years
  3.  Have been in continuous employment for a minimum of two years, as a primary applicant or be in continuous employment for a minimum of one year, as a secondary applicant.
  4.  Have an annual gross income of not more than €50,000 as a single applicant or not more than €75,000 combined as joint applicants.
  5.  Provide evidence of insufficient offers of finance from two banks or building societies.
  6.  The property must be no more than 175 square metres (gross internal floor area)

Unlike Central Bank mortgage rules, which limit loans to 3.5 times salary, councils use different rules. They say that the affordable home loan repayments should be no more than 30 per cent of applicants net monthly income. However, this 30 per cent also includes the cost of mortgage protection insurance (MPI)

Mortgage Protection Insurance

It is also a requirement that a specific Local Authority mortgage protection insurance (MPI) is taken out in respect of these affordable loans. It seems that the price of this insurance is more expensive than others that are available – but apparently the local authority MPI scheme covers disability as well as death. The disability cover is for the full period of the disability and not just 12 months as is the case in the majority of MPI policies available.
The charge for this Local Authority MPI is currently 0.555% of the outstanding mortgage (Juy 2021). Therefore – on a €200k mortgage – this would cost about €92 a month. (Reducing each year as the mortgage is paid off).
The rate is the same for everyone regardless of age.

There are commercially available policies from around €15 to €50 a month  – depending on age and smoking habits. But these cannot be used on a Local AUthority mortgage.

Where to Apply for A Rebuilding Ireland Mortgage

Applications for the Rebuilding Ireland Home Loans can be made to local authorities. You can get a form online here or from your local council offices.
Important note – : You need to apply to the local authority in the area you want to buy the house, regardless of where you currently live.

Examples of Affordable Mortgage Amounts:

A single applicant in Leitrim earning €40,000 a year could borrow €172,800 –  to buy a house worth €192,000 with a deposit of €19200 – which would mean repayments of €774 a month for 25 years (fixed at 2.495% per year).
(Plus mortgage protection of about €80 a month). Total €854 a month.

A bank would probably only offer the same person a maximum mortgage of  €140,000 – which would only be enough to buy a property valued at €160,000 (assuming they also have a €20k deposit)

Joint applicants in Dublin earning €60000 could borrow €288.000  under the Rebuilding Ireland mortgage – which would mean repayments of €1291 a month fixed for 25 years.  (Plus mortgage protection of about €130 a month  – total of €1421 a month).
They could buy a house worth €320,000  with a deposit required of €32,000.
A mainstream bank would only be able to offer a maximum of €210,000 under the mortgage lending rules.

Further information is available from the REbuilding Ireland help desk at 051 349720 (8am to 5pm – Monday to Friday) or from your local authority.