There has been a recent increase in the number of first time buyers using the First Home Scheme (FHS) to get onto the property ladder. Launched in July 2022, the FHS has become a valuable option for those looking to bridge the gap between their mortgage, deposit, and the price of a new home.

Recent statistics reveal a significant surge in the FHS’s popularity, with 3,200 buyers obtaining approval and receiving FHS eligibility certificates since it was introduced. To date, 1,255 homes have already been bought using the scheme – showing just how effective this Government Support has been in facilitating homeownership for many. Notably, drawdowns from the FHS are now around five times higher than they were in the second half of 2022.

First Home Scheme Developments

The FHS is a joint venture between the Government and participating lenders (i.e. AIB – including EBS and Haven, Bank of Ireland and PTSB), and has €400 million in funding. The Scheme was originally designed for individuals purchasing newly built houses or apartments and has since evolved to include tenants whose landlords are seeking to sell their rental property. In September 2023, the scope of the FHS was further expanded to include self-builders who are building their first home.

First Home Scheme Funding and Costs

Under the FHS, the Government and participating lenders pay up to 30% of the cost of your new home in return for an equity share in your home equal to the percentage of the funding provided. The purpose of the Scheme is to provide financial support for first time buyers, helping them bridge the affordability gap between their deposit and mortgage, and the price of their home. The minimum amount you can get from the FHS is 2.5% of the property purchase price, or €10,000, whichever is greater.

There is no charge for the FHS for the first five years that you own your home, and if you buy back the equity stake during that period, you will not be required to make any payments. From the sixth year of ownership with the FHS, a service charge, starting at 1.75% of the original equity value becomes applicable, which is significantly lower than current mortgage rates.

How the First Home Scheme Works

Applicants of the First Home Scheme are not subject to income limits, and this has transformed the accessibility of homeownership for those with modest incomes. Say, for example, you and your partner earn a joint annual income of €64,000 and wish to buy a home with a purchase price of €425,000. You have the required 10% deposit of €42,500 and the mortgage amount you can secure, i.e. 4 times your annual income, is €256,000. This means that when your deposit and mortgage are combined, there is still a shortfall of €126,500. This shortfall can be covered by FHS funding.

The FHS can also be used alongside the Help to Buy (HTB) Scheme. The HTB offers a tax refund of up to 10% of the purchase price of a new home, up to a maximum amount of €30,000. This assists first time buyers in accumulating their deposit for their home, and it proves particularly beneficial, especially for those who rent and do not have sufficient disposable income to allocate towards deposit savings. Where you rely on both the FHS and the HTB, the maximum funding you will be eligible to receive from the FHS is 20%.

The First Home Scheme’s financial support empowers first time buyers, especially those earning a conservative income, to overcome funding gaps and accelerate their climb onto the property ladder.

For more information about the FHS or for assistance with your mortgage journey, contact our team today – we’d be delighted to help.