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) .

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.

At the launch of this scheme  – there was only  €200 million of funding made available – so,  even based on an average loan of €250k – that would mean there would have been only be enough funding for around 800 mortgages.

According to the government figures, 235 home loans were approved in the first six months of 2020 year at a total value of €38.2 million

This compares to 574 loans approved in the first six months of 2019 at a total value of €95.7 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.
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

Interest Rates :

The interest rates available on this scheme were  lower than any of the mainstream lenders – buy the rates were increased in January 2020 but they are still good:-

  • 2.745% fixed rate for up to 25 years
  • 2.995% fixed interest rate for up to 30 years

For comparison with 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 5% 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

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 curently just under 0.5% of the outstanding mortgage – so on a €200k mortgage – this would cost about €83 a month. (Reducing each year).
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 habit.)

Where to Apply

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 €205,160 –  to buy a house worth €225,160 with a deposit of €20,000 – which would mean repayments of €864 a month for 30 years (fixed at 2.9955% per year).
(Plus mortgage protection of about €83 a month). Total €947 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 €255,656  under the Rebuilding Ireland mortgage – which would mean repayments of €1077 a month fixed for 30 years.  (Plus mortgage protection of about €105 a month  – total of €1182 a month).
They could buy a house worth €275,656  with a deposit required of €20,000.
A mainstream bank would only be able to offer a maximum of €210,000 under the mortgage 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.