The First Home Scheme (FHS) is a government-backed initiative designed to help first-time buyers and other eligible homebuyers bridge the financial gap between their deposit and mortgage, and the price of their new home. Launched in July 2022 as part of Ireland’s “Housing for All Strategy,” this shared equity scheme allows buyers to apply for up to 30% of the cost of a new home, with the government and participating lenders taking an equity stake in the property.
Who is eligible for the scheme?
Applicants must be over 18 and either a first-time buyer or a homebuyer who fits the schemes other eligibility criteria (for example, a former married person whose relationship ended without retaining the benefit of home ownership). Applicants must have mortgage approval from a participating lender and must borrow the maximum available amount (up to 4 times their income). You will need at least 10% of the property purchase price or the build cost to be able to take advantage of this scheme. You will not be eligible if you are also taking advantage of a Macro Prudential Exception with your mortgage lender.
What is a Macro Prudential Exception?
A Macro Prudential Exception (MPE) allows financial institutions to offer mortgage loans that exceed the standard lending rules set by regulatory authorities. These exceptions permit borrowers to obtain mortgages with higher loan-to-income or loan-to-value ratios than typically allowed. MPEs are intended to provide flexibility in special circumstances, enabling more individuals to qualify for mortgages despite stricter general lending criteria.
What sort of properties are eligible?
The property must be a new build house or apartment, a self-build on a privately owned site, or a home being purchased after receiving a Notice of Termination from a landlord selling the property. It must be located in a private development or on a private site within the Republic of Ireland, used as the buyer’s principal private residence, and fall within local property price ceilings.
What are the property price ceilings?
They are ceilings set by the FHS that define the maximum allowable purchase or build cost for properties, varying by local authority area. These ceilings differ for houses, apartments, and self-builds. To qualify for the scheme, the property’s price must not exceed these limits. The ceilings are reviewed regularly and can change. For example, in Dublin, the ceiling is currently €475,000 for houses and €500,000 for apartments. The scheme ensures that only properties within these specified price limits are eligible for financial support. For the latest information on price ceilings by area, visit the official website here.
How much funding can the First Home Scheme provide?
The FHS can provide funding up to 30% of the property purchase price or build cost for new builds, reducing to 20% if availing of the Help to Buy Scheme (HTB). The minimum equity share is 2.5% or €10,000, whichever is higher. This funding is provided in return for an equity share in the property, meaning the FHS holds a percentage ownership until the equity is redeemed. The scheme aims to bridge the financial gap for first-time buyers and other eligible homebuyers between their deposit, mortgage, and the cost of the new home.
What fees and charges are there?
The FHS has no fees or charges for the first five years. Starting from year six, a service charge is applied, starting at 1.75% per annum and increasing over time. Additional costs include financial advice, legal fees, estate agent fees, and valuation fees required for property redemption. These charges cover services related to maintaining and servicing the equity facility.
Do I need financial and legal advisors to apply for the scheme?
Yes, the FHS itself strongly advises that you should engage both an independent financial advisor and a solicitor to assist you with your application for the scheme. A financial advisor will be able to guide you on the taxes due in relation to the scheme whilst a solicitor will assist you with all the legal aspects of purchasing and selling the property.
Can I buy back the First Home Scheme’s equity share in the property?
Yes, you can buy back their equity share in your property at any time through a process called redemption. Redemption can be partial or full and requires a property valuation to calculate the amount. A minimum of 5% of the original equity amount must be redeemed in partial redemptions, with a maximum of two redemptions allowed per year. Mandatory redemption is required if you switch to a non-participating lender, sell the property, or it ceases to be your principal residence.
Do I need a property valuation for redemptions?
Yes, a property valuation is necessary for all redemptions. You must obtain an up-to-date valuation from an independent, FHS-approved valuer to determine the current market value of your home. This valuation is required for both full and partial redemptions to calculate the amount needed to buy back the equity share. The valuation must be renewed if it has been more than six months since the initial drawdown or more than 24 months for self-builds.
Require further advice regarding this scheme?
If you’re considering purchasing a property with the assistance of the First Home Scheme, you are likely to have questions regarding the legal and financial implications of the purchase. At McCarthy + Co Solicitors LLP, our friendly conveyancing team has a long history in helping first time buyers navigate the complexities of home ownership. Arrange a consultation with one of our conveyancing solicitors today by completing our confidential property consultation request form.
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