Q Hi Philip, can you tell me about the new scheme available that may help myself and my partner buy our first home? We earn €70,000 between us and we are first time buyers currently trying to secure a mortgage. We are frustrated because we cannot qualify for a mortgage that would allow us to purchase a property near where we live and work. We have €5,000 in savings, and we qualify for €30,000 through the Help to Buy grant (HTB), but struggle to get additional funds together because we pay rent.
A: I get this type of query frequently in my business. It is no wonder people like you are finding it difficult to get a deposit together, never mind any additional shortfall between purchase price and maximum loan available.
The First Home Scheme, announced by the Minister for Housing Darragh Breen on the 7th July 2022, aims to bridge the gap between your mortgage, deposit and the purchase price of a new home by providing the funding shortfall, in return, it has a share in your home.
It is best explained using your own example:
- The house you want to purchase costs €350,000
- Your combined salary is €70,000, you will qualify for a mortgage four times this, i.e. €280,000
- You have a deposit of 10% of the purchase price i.e. €35,000 (this is your €5,000 savings and €30,000 HTB grant).
So, €280,000 (Mortgage) + €35,000 (Deposit) = €315,000
– But, the actual purchase price is €350,000. This means there is a €35,000 shortfall.
Normally this would mean back to the drawing board, but the new First Home Scheme can provide the €35,000 shortfall to bridge the gap. In return, to owns an equity share of your home, in your case 10% of cost price (€35,000).
Sometimes these schemes can feel complicated so below I have listed some of our most common queries.
1.What is the interest rate on the scheme?
There are none because the First Home Scheme is not a loan and principal repayments are not required. However, there is a service charge after five years as per table below.
Year 0 – 5 = 0%,
Year 6 – 15 = 1.75%
Year 16 – 19 = 2.15%
Year 30+ = 2.85%
2.Do I have to be a First Time Buyer to avail of this scheme?
The scheme is available to eligible first time buyers. There will be a limited number of exceptions for non-first time buyers, in accordance with the ‘Fresh Start’ principle announced in ‘Housing for All’.
3.How do I apply?
The application process is actually fairly straight forward:
– Contact myself of a member of my team to start your Mortgage Application
– Visit www.firsthomescheme.ie
– Make your application. You’ll need you Mortgage Approval in Principal (AIP)
– Receive your Eligibility Cert.
– Upload your Mortgage Letter of Offer (LOO) to the system.
– Your solicitor uploads signed contracts etc. to the system to draw down funds in parallel with you mortgage.
This article aims to give information, not advice. Always do your own research and/or seek out advice from a Financial Broker before acting on anything contained in this article.