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Tenant Purchase Loan
Who can apply?
A person who is:
- A Tenant of a Local Authority dwelling who has accepted an offer from the Local Authority for the sale of the dwelling and
- Aged between 18 and 70 years and
- Earning under €50,000 as a single applicant or under €75,000 as joint applicants and
- In the case of the primary earner on the application, in continuous employment for at least two years (this can be self employment) and in the case of the second applicant, (whose income is being relied upon to fund the mortgage repayment), in employment for at least one year and
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Unable to get adequate finance from a Bank or Building Society to purchase the dwelling may be eligible for a Local Authority Loan.
Are there exceptions to the age limits?
Where an applicant(s) is over the age of 70, they can apply for a tenant purchase loan in their own name and a named individual, provided the said named individual is residing in the house. In these cases, it is necessary to appoint the named individual as joint tenant before the loan can be approved. The test to be satisfied regarding residing in the house includes the requirement that the said named individual was named on the most recent rent review forms submitted by the applicant.
Are there exceptions to the employment requirement?
In instances where the income of the second applicant is being relied upon to fund the mortgage repayments, where there is a primary income of a permanent waged/salaried nature, and where the secondary income is from the Department of Social and Family Affairs, then long term social welfare payments can be considered, provided the long term nature of the payment is confirmed by the Department of Social and Family Affairs or other relevant Government Department. Independent confirmation is required in such circumstances.
Inadequate funding from two lenders
Applicant(s) must have sought their mortgage from two lenders (banks or building societies) and have received inadequate funding offers or refusals from each before making application to the Local Authority for a loan.
How much can be borrowed?
A Loan can be up to 97% of the price of the house subject to a maximum of €220,000 and subject to the applicant(s) ability to repay.
What is the loan term?
The maximum loan term is 30 years. In the case of a loan issued to an applicant(s) who is over the age of 40, the maximum loan term is restricted to the number of years remaining until the applicant(s) reaches the age of 70.
What about a Deposit?
The applicant(s) must have a 3% deposit with regular cash savings making up half of this amount.
What is the Interest rate?
A variable interest rate applies to all loans. An applicant may however opt to avail of a fixed rate for the first five years of the mortgage. In the case of the fixed rate, where an applicant redeems the loan or converts to a variable rate within the five-year period, a “breakage” charge will apply.
Tax Clearance
The Applicant - All applicants approved for a loan must have a current Tax Clearance Certificate issued by the Revenue Commissioners (If on PAYE, this can be obtained from the Inspector of Taxes, High Road, Letterkenny or if Self-employed, this can be obtained from the Office of the Collector General, Tax Clearance Section, Sarsfield House, Limerick).
What information must be submitted with the application?
A Standard Loan Application Form is available for all the major Loans including Tenant Purchase Loan. The Application Form contains a checklist (copy attached) of requirements, which must be submitted with the application. Where an application is submitted which does not include all of the required information it will be returned to the applicant setting out the missing information.
Evaluation
As part of its investigation of applications, the Local Authority will arrange for Credit and Judgment checks to be carried out. For this to take place, the Local Authority requires the applicant(s) consent (the consent clause is contained within the application form). If an applicant(s) does not give such consent(s) the Local Authority may not be able to consider the application. Where, on investigation, the Council considers that an applicant(s) qualifies for a Mortgage, notification of Loan Approval will issue.
Are there any additional requirements that must be met prior to loan issue?
Building Insurance and Mortgage Protection Insurance must be in place prior to Loan issue. The Local Authority will issue an application form for the Mortgage Protection Insurance, which must be completed and returned. Building Insurance must also be in place and the Local Authorities’ Solicitors will request this in the context of the finalisation of the legal documentation associated with the mortgage.
Buildings Insurance
Building Insurance in the amount of the rebuilding cost specified on the valuer’s report must be in place prior to loan cheque issue. The local authority’s interest should be notified to the insurer by the borrower and must be noted on the policy.
Mortgage Protection Insurance
Mortgage Protection Insurance, for the loan amount and the term of the loan, must be in place prior to loan issue. The Local Authority Mortgage Repayment Protection Plan, as administered by Marsh Ireland and underwritten by Friends First Life Assurance Company, must be availed of in all cases, unless none of the parties to the mortgage can declare that they meet any of the eligibility criteria. The eligibility criteria apply to all parties to the mortgage. In the case of life cover, this is mandatory in respect of all parties to the mortgage including joint borrowers and any other person whose income has been taken into account in determining ability to repay the mortgage. Where any party to the mortgage is in employment and income from that source was taken into account in determining ability to repay, Disability cover for that party is also mandatory.
Eligibility Criteria for Local Authority Scheme:
On the date the declaration for inclusion in the Local Authority Mortgage Repayment Protection Plan is signed by a borrower, they must be in a position to declare that they met the following eligibility conditions:
- attained the age of 18 years but not 55 years,
- was at Work, and
- had not been in receipt of medical treatment or advice (other than for colds, influenza or backache) lasting more than 3 continuous weeks within the past 2 years,
- had not been absent from work, in the last 2 years through illness for more than 3 continuous weeks (other than for colds, influenza or backache),
- had not be declined for Life or Health Insurance,
For Death benefit, it is not necessary for a person to have met the “At work” condition whereas for Disability cover, it is.
If any party to the mortgage can declare eligibility for any part of the “Local Authority” scheme, they must avail of such cover and arrange for any other additional mandatory cover as appropriate by way of a separate standalone policy for themselves and for any other party who cannot declare eligibility.
Tax Relief at Source
Applicant(s) must apply for Tax Relief at Source by completing and submitting an application form to the Local Authority, who then enters the mortgage details and submits it to the Inspector of Taxes for assessment. Where an applicant(s) qualifies for tax relief on mortgage repayments, this will be given by the local authority in the form of a reduced mortgage payment where applicable.
Loan Repayments
All borrowers are required to make repayments by Direct Debit. Applicant(s) will therefore be required to submit the relevant account details/payment instructions prior to loan issue.
Inspections
Dwellings offered for sale by the Local Authority under the Tenant Purchase Scheme contain the proviso that no warranty shall apply or be deemed to be implied as to the state of repair or condition or the fitness for human habitation of the dwelling. It is therefore in the applicant’s own interest to employ a suitably qualified person to ensure that the property has been properly constructed and is free of defects.
The Local Authority reserves the right to carry out any inspections/investigations it deems appropriate in the context of the consideration of the application. Applicants should be aware that any such inspections by staff employed by the Local Authority or by any of its agents is purely for the information of the Local Authority. The Local Authority does not accept any statutory or common-law duty of care to the applicant to ensure that the property has been properly constructed or is free of defects.
Consumer Credit Act 1995
The Consumer Credit Act 1995 requires that information documents, application forms and approval documents in relation to Mortgage lending include the following notices:
“WARNING YOUR HOME IS AT RISK IF YOU DO NOT KEEP UP PAYMENTS ON A MORTGAGE OR ANY OTHER LOAN SECURED ON IT”.
“THE PAYMENT RATES ON THIS HOUSING LOAN MAY BE ADJUSTED BY THE LENDER FROM TIME TO TIME”.
