If you sell your affordable home within 20 years, you must pay back to the local authority a percentage of the sale price. This is known as the ‘clawback’. This applies whether you have a local authority mortgage or a mortgage with a bank or building society.
How Does the Local Authority Calculate the Clawback?
- When you buy your affordable home, you get it at a discount to other similar properties in the market. The clawback is based on the percentage discount you get when you buy your affordable home. If you decide to sell
your home, the local authority applies this percentage to the price you get for the sale.
- If you sell within the first 10 years, you must pay back the full percentage from the sale that you got as a discount when you bought your home.
- After 10 years, the percentage you must pay back reduces by one-tenth for each full year you live in your home.
- If you sell your home after 20 years, you do not have to pay any ‘clawback’ to the local authority.
Example of How the Clawback Works
John and Mary buy an affordable home. The market value of this property is €280,000, and they buy it at an affordable price of €196,000. So, the market value discount to John and Mary, which is known as the clawback, is 30%.
Scenario 1
- If John and Mary sold their affordable home for €330,000 after five years, the clawback would be €99,000 (30% of €330,000). They would have to pay back €99,000 to the local authority. They would also have to repay any money owed to the mortgage lender to clear their mortgage.
Scenario 2
- If John and Mary sold their affordable home for €430,000 after 15 years, the clawback would have reduced to 15% and they would have to pay back €64,500 (15% of €430,000) to the local authority. They would also have to repay any money owed to the mortgage lender to clear their mortgage.
Scenario 3
- If John and Mary sold their affordable home after 20 years, they would not have to pay any clawback, but they would have to repay any money owed to the mortgage lender to clear their mortgage.
Scenario 4 - If the Market Value of the Affordable Home Decreases
- If John and Mary sell their home and the market value has decreased from €280,000 to €260,000 then the clawback would be based on the lower market value of €260,000 less what they paid €196,000, which is €64,000. So they have to pay back €64,000 to the local authority when they sell in addition to any money owing on their mortgage.
Scenario 5
- If the market value of the home decreases to a level in line with the affordable price and a discount is no longer available then a clawback would not apply. Your local authority will advise you about this.