NAMA 80:20 Initiative

NAMA 80:20 Initiative

The National Asset Management Agency (NAMA) has today launched the second phase of its residential mortgage 80:20 Deferred Payment Initiative.

There are a range of house types available suitable for first time buyers and owner occupiers. The homes range in size from two beds to five beds, with prices starting from €100,000.

There are 180 houses in the new phase of the scheme located in 12 counties – Carlow, Galway, Limerick, Clare, Kerry, Meath, Cork, Kildare, Sligo, Dublin, Kilkenny and Waterford.

The 80:20 scheme offers potential buyers the ability to own and move into a new home now instead of renting while they wait for the market to stabilise. It protects buyers from decreases of up to 20% in the value of their property over the next five years.

Under the scheme 80% of the agreed sale price of the property is paid upfront. The remaining 20% will only be due in five years’ time.

How much, if any, of that 20% is then due will be calculated on the basis of an independent assessment of the property’s value at that point.

”This initiative is still at an early stage, but it has been favourably received by the prospective purchasers,” commented NAMA’s chief executive Brendan McDonagh.

”It is aimed at instilling confidence in people that they can buy a home without the immediate worry of falling values and facilitating greater price discovery,” he added.

The key features behind the new initiative include:

  • NAMA does not own the properties and is not itself issuing the mortgages.
  • This is a targeted initiative aimed solely at potential home buyers who may have a concern that house prices may fall further and are consequently postponing their purchase.
  • It offers potential buyers the ability to own and move into a new home now instead of renting while they wait for the market to stabilise.
  • The product will protect buyers from decreases of up to 20% in the value of their property over the next five years.
  • Three banks – Bank of Ireland, AIB (through their subsidiary EBS) and Permanent TSB bank – will participate in the initiative. Buyers should approach these banks to obtain a mortgage, which will be subject to typical lending criteria.
  • 80% of the agreed sale price of the property will be paid over upfront. The remaining 20% will only be due in five years’ time. How much, if any, of that 20% is then due will be calculated on the basis of an independent assessment of the property’s value at that point.
  • As normal, each of the three lenders will require buyers to part-fund their purchase with a deposit of at least 10% of the value of the house.
  • A key benefit for buyers is that, for the first five years, their repayments can be calculated based on a mortgage that includes the deferred payment element. If the price of their house falls over the five years and they may not be liable for the deferred payment element, they will have, in effect, been accelerating their mortgage repayment and achieving considerable savings on the interest accruing on their mortgage.
  • This is a targeted, limited initiative supported by NAMA.
  • The initiative is not aimed at buyers who cannot get a mortgage or at investors.
  • Only certain properties in the housing developments identified are eligible for the Deferred Payment Initiative.

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