Mortgage Allowance Scheme
The Mortgage Allowance Scheme is a social housing option which facilitates tenants and tenant purchasers of local authority dwellings, who wish to return their dwellings to the authority and purchase or build a private dwelling for their own occupation by reducing their mortgage repayments over the first five years of the mortgage.
Tenants of approved voluntary housing bodies, with tenancies of dwellings provided under the Rental Subsidy Scheme, are also eligible for the scheme. The amount of the allowance is €11,450 payable over five years.
The Mortgage Allowance Scheme for tenants/tenant purchasers of Local Authority dwellings.
- What is the purpose of the mortgage allowance
- Amount of allowance
- Who qualifies for the allowance
- How the allowance is paid
- To whom should application for the allowance be made
- Suitability of private dwelling
- Occupancy of private dwelling
- How does the scheme operate
- Information on loans
- Documents required in Mortgage Allowance Scheme applications
- Application form
The allowance assists tenant purchasers of Local Authority dwellings and certain tenants of houses provided by voluntary housing bodies under the Rental Subsidy Scheme who wish to return their dwelling to the authority or voluntary body and purchase or build a private dwelling for their own occupation by reducing their mortgage repayments over the first five years of the mortgage.
For mortgages created on or after 15th June 2000, the amount of the allowance is €11,450, payable over five years as follows.
- Year 1 = €3,560
- Year 2 = €2,800
- Year 3 = €2,040
- Year 4 = €1,780
- Year 5 = €1,270
The allowance or the allowance plus income tax relief on mortgage interest cannot, in any year, exceed the amount of the loan charges due.
The allowance is payable to persons who:
- Are tenants or tenant purchasers of Local Authority dwellings or are tenants with tenancies that are not less than one year’s duration, of houses provided by an approved voluntary body under the Rental Subsidy Scheme and
- Return their existing dwelling to the authority or the voluntary body, as applicable, in a fit and tenantable condition (having regard to reasonable wear and tear and any repairs for which the tenant is not responsible and free of arrears of rent or tenant purchase annuities
- Purchase or build a private dwelling for their own occupation and
- Provide the private dwelling by way of a mortgage loan of not less than €38,092.
- The spouse of a tenant or tenant purchaser, or a person who has been bona fide resident with a tenant/tenant purchaser may qualify for the allowance if s/he otherwise complies with the conditions of the scheme and the dwelling is returned to the Local Authority or the voluntary body, as applicable. The allowance is not available to occupants of demountable dwellings provided by local authorities or to persons providing a dwelling under the Shared Ownership System. Tenant purchasers to whom the allowance is given will not be compensated in respect of any annuity payments made in respect of the dwelling being returned to the Local Authority. A person availing of the allowance may purchase or build a new dwelling or purchase an existing dwelling in the private sector (including dwellings formerly owned by a Local Authority).
The allowance will be paid by the Department of the Environment, on behalf of the person qualifying for it, to the Lending Agency, i.e. building society, bank, Local Authority etc. The lending agency will calculate the borrower’s monthly mortgage payment in the normal manner and then deduct the appropriate installment of the mortgage allowance i.e.
- Year 1 = €296.67 per month
- Year 2 = €233.33 per month
- Year 3 = €170.00 per month
- Year 4 = €148.33 per month
- Year 5 = €105.83 per month
The amount as so reduced will be the monthly amount due by the borrower of the agency.
Application should be made to the Local Authority for the area in which the private dwelling is being purchased or built.
The Local Authority must be satisfied that the dwelling being purchased or built is free from structural defects and is of suitable size and standard to cater for the applicant's household. In the case of previously occupied dwelling, it must have hot and cold water systems, a fixed shower or bath and an indoor toilet.
If it is a new dwelling, it must meet the requirements for new house grants as set out in the Department of the Environment's Memorandum HA1, (see Paragraph 9 of this memorandum). However, the upper limit on the floor area of a new house will not apply for the purposes of the mortgage allowance although it will continue to apply in relation to the new house grant.
The applicant must continue to occupy the private dwelling as his/her normal place of residence throughout the five year period to which the allowance relates.
The Local Authority will issue to an eligible applicant a letter of intent indicating that s/he will qualify for the mortgage allowance subject to the return of the existing dwelling and compliance with the terms of the scheme. It is in the applicant's own interest to obtain this letter of intent before entering into any commitment in relation to the private dwelling.
The letter of intent should be presented in support of any application to a lending agency for a mortgage loan. It is, however, a matter entirely for the lending agency to take a decision on individual loan applications.
The agency will advance the loan to the applicant in the normal manner. When the applicant has returned the existing dwelling or has given an irrevocable undertaking to return it within a period agreed with the Local Authority, and the authority is satisfied that the terms of the scheme will otherwise be complied with, the authority will issue a Certificate of Approval to the applicant certifying his/her entitlement to the allowance.
This certificate should be given to the lending agency to enable them to claim the allowance from the Department of the Environment. As long as the applicant, having returned the dwelling, continues to meet the reduced mortgage repayments and to occupy the private dwelling as his/her normal place of residence, the allowance will be paid to the lending agency by the Department without the need for further action by the applicant. The allowance will cease to be payable by the Department from the date on which:
- Application for a Court Order for repossession of the dwelling is made by the lending agency
- The dwelling ceases to be occupied as the applicant's normal place of residence.
Loans for the purchase or building of dwellings may be obtained from the commercial lending agencies (e.g. building societies, banks, etc) subject to meeting the conditions they lay down. Enquiries concerning the qualifying conditions for a loan from a commercial agency should be made directly to them. If an applicant is unable to obtain a loan suitable to his/her requirements from a commercial agency, s/he may apply to the Local Authority for a loan. Evidence must be produced to the authority of a genuine refusal of a loan from both a building society and a bank. Details of the Local Authority house purchase loan scheme may be obtained from the authority.
- It is essential to give a minimum of one weeks notice in writing of your intention to return your Council dwelling.
- Letter from the Letting Agency confirming the amount of mortgage and the date that the mortgage created.
- Purchasing: Letter from your Solicitor confirming the date that the contract was signed to purchase your new dwelling and the purchase price of your new dwelling.
- Building: Receipts to the value of €19,050, i.e. €12,700 from VAT registered supplier €6,350 from VAT registered contractor.
- Income Details of applicant(s) i.e. if working, a P60 Certificate for the tax year or if unemployed the total amount of assistance/benefit claimed in the last tax year.
- Application fee of €130.
Applicants should note that the payment of a mortgage allowance involves no warranty on the part of the Minister for the Environment or the Local Authority as to the work carried out or the structural soundness of a dwelling.