Buying your first home can be challenging. With the ongoing cost-of-living crisis, as well as other challenges first time buyers may face, it could take many years before many young people can get onto the property ladder. Any available supports, like the First Home Scheme, are worth pursuing to help you achieve your homeownership aims.

The First Home Scheme (FHS) was introduced to help those first time buyers whose annual incomes exceed the limits for social housing yet are still inadequate to secure a mortgage to buy a house in the current housing market. The Scheme is said to potentially be a game-changer for that cohort of people who cannot buy a home because of the gap between the finance they have and the finance they need.

First Home Scheme Funding

The Government in partnership with three participating lenders - Allied Irish Bank (which includes AIB, EBS and Haven Mortgages), Bank of Ireland and PTSB - fund and support the First Home Scheme. They will pay up to 30% of the cost of a new build property, buying equity in your home until such time as you can pay back that equity. This also applies to those building a new home as well as those who wish to buy the home they are renting because their landlord is selling it.

There is no interest charged on the funds you receive from the shared equity scheme. A service charge will apply to the equity stake from the 6th year onwards and this charge will apply until the full equity is redeemed. The service charges start from 1.75%, which is significantly lower than current mortgage rates.

Combining the First Home Scheme and Help to Buy Scheme

FHS applicants can also rely on the Help to Buy (HTB) Scheme refund. The HTB offers a tax refund of up to 10% of the purchase price of a new home, up to a maximum of €30,000. The HTB is designed to assist first time buyers in accumulating their deposit for their home.

Where you rely on the FHS and HTB, the maximum equity contribution you will be eligible to receive from the FHS is 20%.

A Practical Example

A couple with a joint annual income of €70,000 want to buy a home with a purchase price of €400,000. The maximum mortgage available to the couple, in term of the Central Bank's loan to income limits, is €280,000. They have managed to save €10,000 towards their deposit and they are eligible for the HTB rebate of €30,000. The shortfall between the purchase price, their available mortgage, and savings (including HTB) is €80,000. The FHS will provide 20% of the purchase price, which will cover the €80,000 shortfall.

First time buyers on conservative incomes who cannot secure mortgage amounts that will enable them to buy a home and who do not have enough disposable income to allocate towards deposit savings can leverage both the FHS and HTB to overcome these funding constraints.

For more information and a better understanding of how these government schemes can help you get onto the property ladder, contact our team today.