Personal Finance

Barry McCall reveals the costs of trading up and St. Patrick’s Credit Union highlight how they provide their loans.

The high cost of moving

Most people with growing families will, at some stage or another, have to at least consider moving home. If they don’t have space for an extension or scope to convert an attic or garage into an extra room they will probably be forced to look at trading up, particularly when the children reach their teenage years.

This can appear a very attractive option if you’re in a three bed home valued at €450,000 and are moving to a significantly larger four bed house valued at €650,000. You get all that extra space and the additional mortgage payments will be reasonably affordable at current relatively low interest rates.

Before you rush out to put up the For Sale sign stop and think for a few moments about the other costs you are letting yourself in for. These include stamp duty, legal fees, solicitors fees and so on. They could well end up costing more than €80,000 on top of the cost of your new home.

Let’s start with the estate agent. The standard fee here is between 1.5% and 2% of the property being sold. If you shop around and negotiate you’ll probably be able to get one at the lower end of this scale and this will set you back €6,750 for the sale of your €450,000 home. But it doesn’t stop there. This is subject to VAT at 21% so the eventual bill will be about €8,100. Also, be careful when negotiating. Sometimes you might appear to be getting a good deal but it turns out that advertising costs are not included in the quotation and these will be added at the end. Make sure the quote you get is inclusive of advertising to avoid nasty shocks.

Next come the legal fees. Prepare for a nasty shock here. While there is no industry rate for conveyancing, thanks to the Competition Authority, the fact is that most solicitors will try to charge 1% of the cost of the home being sold as well as 1% of the one being bought, plus VAT at 21% of course.

In this notional example the fees would end up at €11,000 plus VAT giving a total of about €13,300. In the past there were also considerable lending agency fees involved. These included the application fees, the lender's survey, search costs, mortgage loan costs and an indemnity bond for mortgages of more than a certain proportion of the value of the home. Fortunately, thanks to increased competition in the market most, if not all, of these have disappeared. If any institution is trying to charge any of these fees don’t hesitate to shop around for a better deal.

There are some fees that are unavoidable. One of these is the buyer’s survey. You really have to have one conducted and this will cost around €350.

Then comes the really big one – stamp duty. Despite the rumours the recent budget made no changes to this quite onerous tax and in this example it would be levied at a rate of 9%. This will cost the purchaser a shocking €58,500.

Finally, there’s the cost of actually moving house. If you don’t have a friend with a large van or truck to help you this is going to set you back somewhere in the region of €800 if you are staying in the same town or city and a lot more if you are moving further.

This adds up to €81,000, a sum that would go a long way towards building a decent sized extension, and you haven’t even started paying the new mortgage yet. There are some ways to reduce costs, particular in the areas of the legal and estate agency fees. Don’t accept the first quote you get from a solicitor. Shop around, look in the Golden Pages for firms that advertise as specialising in property. Some of these will offer all in packages for around €2,000 plus VAT for each house being bought or sold and this is also subject to negotiation depending on the value of the homes and the complexity of the transactions.

If you strike a hard bargain you could get this cost down to around €4,000. After that you could consider selling the house yourself. There’s no rule that requires you to use an estate agent. You can put an advertisement in a local paper yourself and with the help of your solicitor look after the whole sale process. This could save you up to €7,000 when advertising and potential additional legal costs are taken into account.

However, even with these savings trading up is still going to cost an additional €65,000. This is certainly something to think about before making any final decision.

The extra costs

Estate agent €8,100 Solicitor €13,300 Surveyor €350 Stamp Duty €58,500 Removals firm €800 Total: €81,050

St. Patricks Credit Union - Jane’s story

Jane joined esb as a new graduate. She started working in Dublin but very soon her position required her to buy a car. She worked out she could afford to spend around €300 per month, so she looked around and the best deal she could find was with St. Patrick's Credit Union whose interest rate of 6.5% is the cheapest unsecured loan rate available in Ireland.

As she was not already a member she completed a Membership Application form and sent it off. When she was accepted as a member and deductions for the Credit Union began from her salary at source; she completed a loan application form, online, for €10,000 at www.stpatrickscu.ie.

Within five days she was notified that her loan had been approved and the cheque was sent to her at home after completing the usual documents. Her repayments for the loan worked out at €306.49 over three years (36 monthly payments). Jane was pleasantly surprised that free loan insurance was a feature of all loans taken out with St Patrick's Credit Union.

14 months after taking out the loan she got a letter from her sister in Australia advising that she had found the man of her dreams and was getting married in six weeks time. Jane wondered where she would get the money for the trip and immediately thought of the Credit Union.

She submitted a loan application for €3000, again on-line, and waited. In a couple of days her application was approved, and she also found out that she could get the Australian Dollars at St. Patrick CU with their foreign currency facility. The Credit Union agreed to keep her loan repayments at €306.49 per month which was great news for Jane.

Jane is now busy telling her colleagues that St. Patrick's Credit Union is the best one-stop shop for all personal borrowing requirements - Thanks Jane