Brand new €400 million First Home scheme to make home ownership a reality for first-time buyers
- Foilsithe: 7 Iúil 2022
- An t-eolas is déanaí: 8 Iúil 2022
- Government-backed shared equity scheme will provide part of the purchase price to buyers to add to their mortgage and deposit
- applications will be taken from today
- scheme available initially to mortgage customers of AIB, Bank of Ireland and Permanent TSB
- eligibility extended beyond First-Time Buyers to include certain people affected by relationship breakdown and/or insolvency
First Home, a new scheme set up to make it easier for First-Time Buyers to afford a new build home as part of the government’s Housing for All strategy, has opened for business today.
The €400 million affordable purchase scheme, designed in conjunction with mortgage providers and Banking and Payments Federation Ireland (BPFI), aims to bridge an existing affordability gap by providing buyers with part of the purchase price for their home, in return for the scheme taking a minority equity stake.
The maximum stake that the scheme will take is 20pc, if the buyer is also availing of the government’s separate Help to Buy scheme, and 30pc if Help to Buy is not used.
Applications can be made today online at www.firsthomescheme.ie. The First Home scheme application process runs in parallel with the mortgage application process (that is, mortgage applications should continue to be made separately through participating lenders).
The scheme is available initially to first-time buyers and other qualifying homebuyers who are taking out mortgages from AIB (including its EBS and Haven Mortgages businesses), Bank of Ireland or Permanent TSB. Other mortgage providers may join the scheme in the coming months.
It is open to buyers of newly-built houses and apartments in private developments.
Darragh O’Brien, the Minister for Housing, Local Government and Heritage, said:
“This brand new scheme will literally open the door for many First-Time Buyers. Affordability and the chance to buy a home is very much at the centre of this government’s housing policy. In Housing for All, our new housing plan for Ireland, we committed to establishing a scheme, in partnership with participating mortgage lenders, which would make home ownership easier for those who were finding that aspiration just out of reach.
"This scheme we are launching today will support First-Time Buyers and those seeking a fresh start by helping to bridge the gap between what they can afford and the price of the home they wish to purchase.
"It will make new homes more affordable and easier to access for First-Time Buyers, helping them get their foot on that crucial first rung of the property ladder. It will encourage the increased development of new build homes.
"This government is working to give young and not so young people a real chance to buy their own home. Today’s announcement is another step in that direction."
Michael Broderick, interim CEO of the First Home scheme, said:
“This is an exciting scheme to help First-Time Buyers realise their ambition of buying a home. It will help close the affordability gap while ensuring people borrow at a level that reflects their individual financial circumstances.
"Our job is to make it as easy as possible for First-Time buyers to benefit from this support and help them get keys in their hands as quickly as possible.
"We are committed to providing easy access and a high-quality service.
"The scheme is just one of a wide range of government measures aimed at making it easier to buy a home. Similar schemes have worked effectively in other countries and we plan to make a real and positive difference for the people who use it.”
Brian Hayes, CEO of Banking and Payments Federation Ireland, said:
“We are delighted to support this ground-breaking partnership between the State and the participating lenders to make it easier for First-Time Buyers to own their own home.
"The First Home scheme is the product of strong and constructive collaboration between all of its stakeholders, all with the shared aim of helping people get on the property ladder.
"We think this scheme is capable of making a real difference for the people who can benefit from it and we look forward to seeing it achieve its aims in the months and years ahead."
How the First Home scheme works
The scheme will provide financial support to borrowers and facilitate them in purchasing a new home that they could not otherwise do after combining their available mortgage and deposit.
By bridging the gap between the available mortgage, deposit and the price of the new home, the scheme will make the prospect of home ownership possible for many for the first time.
The scheme is making €400 million available, to facilitate the purchase of up to 8,000 homes over a 5-year period, subject to demand.
Example
First-Time Buyers’ income: €70,000
Maximum borrowing (3.5x income): €245,000
Property purchase price: €350,000
Deposit: €35,000 (10pc of purchase price – Help to Buy can be used)
Maximum that First-Time Buyers can pay without support: €280,000 (€245,000 plus €35,000)
Affordability gap: €70,000 (€350,000 minus €280,000)
Outcome: First Home scheme can provide €70,000 in return for a 20pc equity stake in the property.
Eligibility extended beyond First-Time Buyers to include certain people affected by relationship breakdown and/or insolvency
To be eligible for the scheme an applicant must be a First-Time Buyer, who is defined as a person who:
- has not previously purchased or built a dwelling in Ireland for his/her/their occupation, and
- does not own or is not beneficially entitled to an estate, or has interest in any dwelling in Ireland or elsewhere and
- has a right to reside in Ireland, and
- is aged over 18
A number of exemptions have been introduced which mean applicants may also be eligible despite previously purchasing or building a property in Ireland if:
- they did so with a spouse, civil partner, or partner, and that relationship has ended. The applicant must not retain a beneficial interest in the previous property, or
- they have sold (or divested of) that property as part of a personal insolvency or bankruptcy arrangement, or other legal process as a consequence of insolvency
Applicants must also:
- have Mortgage Approval with a participating lender
- borrow the maximum mortgage amount available from one of the participating lenders (up to 3.5 times income)
- not be availing of a Macro Prudential Exception (MPE) with a participating lender
- have a minimum deposit of 10% of the property purchase price
Measures to prevent distortions in the housing market
The scheme has been designed to avoid causing distortions in the housing market and ensuring that it remains targeted at starter homes for First-Time Buyers.
The principal measure to prevent market distortion is a price ceiling that will apply to the scheme in each local authority area.
This price ceiling will vary in each local authority area to reflect local market conditions, demand for housing, and incomes in each area.
These ceilings will be reviewed within 6 months, and at regular intervals after that, to ensure that they get the balance right between preventing market distortion and ensuring that the scheme is effective in helping First-Time Buyers who need it.
Price ceilings for each local authority area will be available on the First Home scheme website.
Sale of houses bought using the First Home scheme/service charges
When a First-Time Buyer, who has bought a home using the scheme, subsequently decides to sell it, he or she will be required to use the sale proceeds to redeem the outstanding mortgage and pay to the scheme the portion of the sale proceeds that corresponds to the scheme’s equity stake.
Example
Scheme users will have the option, but not the obligation, to buy out some or all of the First Home scheme equity stake at any time, if they wish and have the resources to do so. A maximum of 2 partial buyouts are allowed per year. Partial or full buyouts are based on the market value of the property at the time the buyout takes place.
No other payments are due to the First Home scheme if the equity stake is bought out in the first 5 years of ownership.
From year 6 onwards, scheme participants will be liable for a service charge starting at 1.75pc of the euro value of the original equity provided by the First Home scheme (that is, simple interest of 1.75pc of the portion of the purchase price that was provided by First Home, not 1.75pc of the total purchase price).
This service charge will increase to 2.15pc from year 16 and to 2.85pc from year 30 (if applicable).
Homeowners will have the option of paying this charge each year or deferring the payment until the property is sold.
Additional terms and conditions
Some additional terms and conditions apply. Details will be available from the First Home scheme website.