The NAMA 80:20 Deferred Payment Initiative – EXAMPLES

Posted on 08/05/2012 by Admin

Sample Mortgage:

A First Time Buyer purchases a property under this scheme for €200,000 and has a 10% deposit….
Property Price €200,000
Your Deposit (10%) €20,000
Approved Mortgage (90%) €180,000

Your “Approved Mortgage” amount is split into:
Initial amount drawn down €140,000
Deferred Payment amount 20% of the €200,000 purchase price) €40,000

We’ve used illustrative figures in the 3 examples below to explain what will happen to your mortgage in year 5. These figures are based on an illustrative rate of 4.1% Annual Percentage Rate (APR), a mortgage amount of €180,000 and a term of 30 years.

This means that your monthly repayments would be €859 for the first 5 years. Also, it assumes that the variable rate does not change over the life of your mortgage.

Warning: The cost of your monthly repayments may increase.

Warning: The payment rates on this housing loan may be adjusted by the lender from time to time.

So what could happen after 5 years?
After 5 years, the value has decreased by 20% or more…

This means you do not owe the Deferred Payment amount. As your approved mortgage is now reduced by €40,000 you can choose either of the following options:

Reduce your term by 10 years and 4 months, keeping your monthly repayments the same.
Reduce your monthly repayments by €258, keeping your term the same.

or after 5 years, the value has decreased by 10%…

After 5 years, as the value has decreased by 10% (€20,000), only €20,000 of the Deferred Payment amount of €40,000 is now drawn down and added to your outstanding mortgage balance. As your approved mortgage is now reduced by €20,000, you can choose either of the following options:

Reduce your term by 6 years and 7 months, keeping your monthly repayments the same
Reduce your monthly repayments by €152, keeping your term the same

or after 5 years the property value has remained the same, or increased…

The full 20% Deferred Payment amount is now drawn down (in line with initiative) and added to your outstanding mortgage balance. As you’ve effectively overpaid (see the How does it work section for details on overpaying), you can choose either of the following options:

Reduce your term by 2 years and 2 months, keeping your monthly repayments the same
Reduce your monthly repayments by €47, keeping your term the same.

Warning: If you do not keep up your repayments you may lose your home.

Warning: If you do not meet the repayments on your loan, your account will go into arrears. This may affect your credit rating, which may limit your ability to access credit in the future.

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NAMA 80/20 Deferred Payment Initiative Explained

Posted on 08/05/2012 by Admin

What is it
The 80/20 Deferred Payment Initiative is a NAMA initiative that you can avail of if you’re looking to buy a property included in this scheme.

It offers you a 20% protection from the risk of further house price declines for the first 5 years of your mortgage. This means that if the value of your property after 5 years is lower than it was when you purchased it, your mortgage balance is reduced by the amount of the fall in value, up to a maximum of 20% of your purchase price.

How does it work?
For the first 5 years 20% of the purchase price of the property (which is known as the Deferred Payment amount) is held back from your approved mortgage and not drawn down, however, your monthly repayments will be based on your total approved mortgage amount, including the 20% Deferred Payment amount.

Although your payments are based on the full mortgage amount you’re not actually being charged interest on the 20% Deferred Payment amount for the first 5 years. This works similar to an ‘overpayment’ on your drawn down mortgage which gives you the option of either reducing your term or your repayments in year 5. This protects you from a possible step-up in repayments after 5 years should the value of your property stay the same or increase and the Deferred Payment amount is then drawn down.

What happens after 5 years?
Firstly, NAMA will be in contact with you to arrange a valuation of your property to establish if the value has decreased, increased or stayed stable. NAMA will advise us once this valuation has been completed and the lender will then get in touch with you to outline your options.

Value decreases by 20% or more: If the value of your property decreases by 20% or more then the 20% Deferred Payment amount is not paid over to NAMA by permanent tsb and will not become part of the outstanding balance on your mortgage account. How would this affect my repayments?
Value decreases by less than 20%: If the value has decreased by less than 20% a portion of the Deferred Payment amount is drawn down and added to your mortgage. For example, if the value decreased by 10%, only half of the Deferred Payment amount is paid over to NAMA by permanent tsb and becomes part of the outstanding balance on your mortgage account. For example, if the value decreased by 10%, only half of the Deferred Payment amount is drawn down.
Value doesn’t decrease: If the value of your property stays stable or increases then the 20% Deferred Payment amount is paid over to NAMA by permanent tsb, on your behalf and becomes part of the outstanding balance on your mortgage account. How will this affect me?

In all cases above, you will see no increase in your monthly repayments. Also, the ‘overpayment’ benefit enjoyed in the first 5 years now ceases. If you don’t meet your full repayments however, your mortgage account will go into arrears.

If the value of your property is such that the Deferred Payment amount (or any part of it) is not paid to NAMA after 5 years (or earlier where there is an Early Valuation Event), the amount, not paid to NAMA, cannot be drawn down or used by you but will be applied towards reducing the approved mortgage amount.

What happens if I want to sell before 5 years?
You will need to contact NAMA and get written consent from them. Once you have this, they will arrange a valuation of your property and, once completed, will advise us how much of the Deferred Payment amount, if any, is payable. If you do not receive written consent from NAMA, the full Deferred Payment amount will be payable. Please also refer to the ‘Early Valuation Event’ information in the Key Information section.

How To Apply
Simply call Home Brokers 01 8280012

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The NAMA 80:20 Deferred Payment Initiative – What is it?

Posted on 08/05/2012 by Admin

NAMA has launched a pilot scheme for its “80:20 Deferred Payment Initiative”. The agency hopes that the scheme will protect buyers from decreases of up to 20% in the value of their property over the next five years.

The pilot phase of the programme will see the initiative available on more than 115 houses located in 12 developments in Dublin Meath and Cork.

Under the scheme, potential buyers will be asked to pay 80 per cent of the value of the home up front, including at least 10 per cent provided by means of the purchaser’s own deposit. The remaining 20 per cent will then be due in five years’ time, but will be discounted depending on if the value of the property falls in the meantime.

For example, if a house is bought for €200,000, the purchaser would be asked to provide €20,000 themselves, and be given a mortgage initially worth €140,000 – leaving the other €40,000 to be borrowed in a second tranche in five years’ time.

If the value of the house falls to €175,000 in five years, the deferred tranche of the mortgage will be reduced to €15,000 – while if it had fallen to €160,000, there would be no second tranche to the mortgage at all.

NAMA said any mortgages issued under the scheme would, for the first five years, be based on a mortgage including the second tranche – meaning that if the value of the house falls over the first five years, they will effectively have accelerated their repayments meaning they will accrue less interest over the lifetime of the mortgage.
What is it?
How To Apply – Simply call 01 8280012 to make an appointment with one of our Mortgage Advisors or drop us an email info@homebrokers.ie

READ MORE – How does it work
READ MORE – Examples

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Revenue remove TRS from hard pressed Home Owners in arrears

Posted on 04/05/2012 by Admin

The Irish Independent reports that the Revenue is examining the cases of 6,565 people who have been in mortgage arrears for more than a year-and-a-half. The Revenue has predicted that half of these people — around 3,282 — will lose their mortgage interest relief entirely due to the fact they are not making any repayments.

It comes with more than 150,000 people either in arrears or requiring a restructuring of their mortgage repayments.It is the banks who inform Revenue about homeowners who have not been making their repayments for 18 months or more.

The Revenue has recently carried out a sample review of these cases — and has concluded around half are making no mortgage repayments. These homeowners would no longer be getting any financial benefit from the mortgage interest relief. But as a result of being cut off, they will have to reapply for mortgage interest relief if they start making repayments again.

But the Revenue has also been accused of cutting off payments to homeowners who are still making some repayments. It said that as part of its “prudent approach”, it did ask the banks for information about homeowners who were making some repayments — such as the level of interest they are paying.

“Each case is considered on its individual merits before a decision is made on the appropriateness of continued mortgage interest relief on a particular mortgage account,” a spokeswoman said.

Fianna Fail finance spokesman Michael McGrath said he had come across cases where people were making some contribution to their mortgage but had lost their mortgage interest relief entirely. He said the Revenue should try to help borrowers who were making some repayments.

“It is in nobody’s interest for interest relief to be taken from vulnerable families and to reduce further their chances of holding onto the family home. It will end up costing the State more,” he said.

There are around 353,000 homeowners receiving mortgage interest relief at a cost this year of €414m. That includes the members of the “negative-equity generation” who were given extra mortgage interest relief in the last Budget to help them with repayments on houses bought during 2004-2008. They get the highest 30pc relief, while other homeowners get lower amounts.

Mortgage interest relief is paid using the “tax relief at source” system, so that the banks can reduce mortgage repayments by the correct amount. It is paid based on the amount of mortgage interest a person is repaying — with the maximum relief being €3,000 per year for a single person or €6,000 for a couple.

The Revenue does not notify homeowners directly about the withdrawal of their mortgage interest relief — it said that was up to the banks who operated the relief. The Revenue also confirmed that it was possible for homeowners to retain the same level of mortgage interest relief even if they reduced the size of their mortgage repayments. This would apply in cases where the interest they are paying is still equal to the maximum interest relief they can claim. “In such an instance the mortgage interest relief would not drop,” a Revenue spokeswoman said.
Source Irish Independent

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Housing Market Stability

Posted on 03/05/2012 by Admin

After five years of almost constant falls, property prices were unchanged in March, with prices actually rising in Dublin, according to the Central Statistics Office (CSO).

It will give hope to tens of thousands of homeowners who are paying back mortgages far bigger than what their property is now worth with indications that the devastated property market is beginning to stabilise.

The CSO released statistics that showed property prices were stable for a month — only the third time this has happened since 2007.

The latest official CSO figures mean that the average price of a residential property nationally remained stable for the past month, at around €160,000. It is a contrast to almost every other month since the market peaked, when prices plunged.Experts said the latest figures may indicate that property prices were close to stabilising after five years of sharp falls.Prices have fallen by 49pc on average during the crash. In the past 12 months prices have fallen by 16.3pc, but the pace of the fall has slowed.

Significantly, Dublin prices rose by 0.7pc in March — the largest rise since August 2007. And there was an even larger 2.3pc rise in apartment prices in the capital.

Earlier this month the Daft.ie price index picked up price rises in urban areas. Properties were selling faster and there was a shortage of homes for sale in some parts of the country.

The Government is offering extra mortgage tax relief for those who buy this year and there is a low level of European Central Bank interest rates.

In the capital city, the average property is now worth €186,000, a rise of about €1,300 on the February valuation.
However, prices in Dublin are down 57pc from the peak, when the average house or apartment was commanding a price of €431,000. Outside of Dublin, prices continue to fall, with a 0.6pc decline recorded in March by the CSO.

The average residential property outside of Dublin is now worth €146,000, down from €268,000 at the peak.
Economist with Goodbody Stockbrokers, Juliet Tennent, said prices in the Irish Independent, that were now close to the bottom.

With falls of close to 60pc, Dublin is set to be over the worst of the falls. There was a low level of housing stock available in the capital and the percentage of properties that are vacant at 8pc was lower than in 2006, she said.
However, some analysts warned that while the price drop was slowing, there was some way to go yet.
Davy stockbrokers’ David McNamara said prices were close to “sustainable levels” but were likely to fall further.

Alan McQuaid of Bloxham Stockbrokers warned of a further 15pc fall in prices this year.
Irish consumers will want to see the housing market stabilising before they feel confident about the economy overall, he said.
Source Irish Independent

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