NAMA have set up a pilot scheme that offers house buyers in Ireland a 20% protection from the risk of further house price declines for the first 5 years of the mortgage. This means that if the value of the property after 5 years is lower than it was when it was purchased , the mortgage balance is reduced by the amount of the fall in value, up to a maximum of 20% of your purchase price. Only 115 properties are eligible for the scheme - see here for the pilot scheme list of Nama Houses
Sample Mortgage:
A First Time Buyer purchases a property under this scheme for €200,000 and has a 10% deposit....
| Property Price | €200,000 | |
| Deposit | (10%) | €20,000 |
| Approved Mortgage | (90%) | €180,000 |
| The "Approved Mortgage" amount is split into: | ||
| Initial amount drawn down | €140,000 | |
| Defferred 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 a rate of 4.1% Annual Percentage Rate (APR), a mortgage amount of €180,000 and a term of 30 years.
This means that the 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..
| After 5 years, the value has decreased by 20% or more... |
This means the buyer does not owe the Deferred Payment amount. As the
approved mortgage is now reduced by €40,000 they can can choose either of the
following options:
|
| 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 the outstanding mortgage balance. As the approved mortgage is
now reduced by €20,000, the buyer can choose either of the following options:
|
| 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 the outstanding mortgage balance. As the buyer has
effectively overpaid they can can choose either of the following options:
|
