EXPLAINER: How to make home ownership possible - A guide to the available supports

Buying a home can feel daunting, especially when you are trying to figure out what financial supports are available.

The good news? A number of schemes now exist to help first-time buyers overcome the affordability hurdle.

Here is a quick look at the supports available and how they could help you take the next step toward owning your first home.

Help to Buy Scheme - What is it?

The Help to Buy Scheme supports first-time buyers who are purchasing a newly-built house or apartment, or building their own home.

The scheme works by allowing you to reclaim a portion of the Income Tax and Deposit Interest Retention Tax (DIRT) you have paid in Ireland over the four years leading up to your application.

How much could you get?

If you sign a contract for a new-build home or draw down a self-build mortgage between 23 July 2020 and 31 December 2029, you could claim relief on the lowest of the following:

• 10% of the purchase price;
• 10% of the approved valuation for a self-build;
• €30,000; or
• The total Income Tax and DIRT you paid in Ireland over the four years before applying.

The maximum payment per property is capped at €30,000, even if multiple people are involved in the purchase.

Do I qualify for the Scheme?

To be eligible for the scheme, you must meet several conditions:

• First-Time Buyer: You must be a first-time buyer purchasing or building a new residential property between 1 January 2017 and 31 December 2029. If you are buying or building with someone else, they must also be a first-time buyer.
• No Property Ownership: You must not own, or have ever owned, any property in Ireland or abroad, alone or jointly. This rule applies even if you are now separated or divorced and have relinquished your interest in a previous property. If you have inherited or have been gifted a property, you may still qualify for the Scheme, provided you meet all other conditions.
• Property Value: The property must cost €500,000 or less. If you are self-building, the approved valuation from your mortgage provider, including the cost of the site, must not exceed €500,000.
• New Residential Property: The property must be newly built and never previously used as, or suitable for use as, a residential property. Properties converted from non-residential use may qualify.
• Occupancy: You must live in the property as your main residence for at least five years after purchase or completion. If this condition is not met, the Help to Buy payment must be repaid, depending on how long you have lived in the property.
• Mortgage: You must have a mortgage covering at least 70% of the property’s purchase price, for a newly built home, or the mortgage provider’s approved valuation for a self-build. If you are using the First Home Scheme, any equity received under that scheme is not included when calculating the 70% loan-to-value requirement. Only the mortgage amount counts.
• Tax Compliance: You must be fully tax compliant for the four years immediately before your claim. This includes submitting Form 12 (PAYE) or Form 11 (self-assessed) for each year and paying any outstanding taxes. You must also be registered for Revenue’s online myAccount (PAYE) or ROS (self-assessed).
• Approved Contractor: If you are purchasing a new home, the contractor or developer must be registered with and approved by Revenue.

Can I Use This Scheme Alongside Other Supports?

Yes! You can combine the Help to Buy Scheme with the First Home Scheme, giving first-time buyers extra support to get on the property ladder.

First Home Scheme - What is it?

With the First Home Scheme (FHS), the government and participating banks can contribute up to 30% of your new home’s cost. If you are also using the Help to Buy Scheme, this contribution is reduced to 20%.

The minimum support is the higher of 2.5% of the property price or €10,000. It is a shared equity scheme, which means they get a stake in your home, but you can buy it back anytime if you want.

Are there any charges?

The First Home Scheme is free for the first five years you own your home. After that, if you have not bought back the equity share, a service charge applies.

This charge, which covers the maintenance of the scheme, is calculated as a percentage of the amount the FHS contributed when you bought your home.

The rates increase the longer you remain in the scheme: 1.75% for years 6–15, 2.15% for years 16–29, and 2.85% for year 30 and beyond. These rates are fixed for the life of the equity facility.

You can pay the service charge annually or in monthly instalments. If it is difficult to afford, you can pay a reduced amount, pause payments for a set time, or defer them. Deferring will not incur extra fees, but the charge will eventually need to be paid.

Do I qualify for the Scheme?

There are several conditions to be met to qualify for the Scheme:

• Age and Residency: You must be over 18 and have the right to live in Ireland.
• First-Time Buyer or ‘Fresh Start’ Applicant: You must be buying or building your first home. This means you will not qualify as a first-time buyer if you have previously owned a home in Ireland or abroad, or if you inherited one. ‘Fresh start’ applicants are those who previously owned a home but no longer have a financial interest due to divorce, separation, personal insolvency, or bankruptcy. If you are purchasing or building with someone else, they must also meet the same criteria.
• Primary Residence: The property must be your principal residence. For buyers, it must be a newly-built home in a private development. For self-builds, the property must be on a site you own or are buying, be a detached or semi-detached house, and the build must be managed by you or a contractor.
• Property Price Limits: Your home must be within the price limits set for your local authority area, which vary depending on location and whether it’s a house or apartment. Examples include:
• Cork City, Dublin City, Dún Laoghaire-Rathdown, Fingal, South Dublin, Wicklow – €500,000
• Galway City, Kildare, Meath – €475,000
• Co Cork, Co Galway – €450,000
• Limerick City and County – €425,000 for houses, €450,000 for apartments, €425,000 for self-builds
• Co Louth - €425,000
• Co Kerry, Kilkenny, Laois, Mayo, Westmeath, Wexford – €400,000c
• Waterford City and County - €400,000 for houses, €450,000 for apartments, and €400,000 for self-builds
• Co Carlow, Co Cavan, Co Clare, Co Donegal, Co Leitrim, Co
• Longford, Co Monaghan, Co Offaly, Co Roscommon, Co Sligo, Co Tipperary - €375,000
• Mortgage and Deposit Requirements: You must borrow from a participating lender, which includes Bank of Ireland, Permanent TSB, Allied Irish Bank, including AIB, Haven Mortgages, and EBS. The mortgage must comply with Central Bank limits, being up to 4 times your gross annual income for first-time buyers, and 3.5 times for others. You also need a deposit of at least 10% of the property price or build cost, which can include the Help to Buy contribution or equity in your site if building.

How do I buy back the equity share?

You can buy back the equity in your home at any time, but it is optional. You can pay it all at once or in partial payments. The minimum partial payment is 5% of the original equity, with a maximum of two partial payments per year.

The repayment is based on your home’s current market value, so it may increase if the property prices rise; however, any improvements that increase your home’s value are not included in the calculation.

When is buying out the equity share compulsory?

It is compulsory to repay the FHS equity if your home is no longer your main residence. This includes:

• Selling or renting: You must pay off the equity and any service charges if you sell or rent your home. Renting out a single room while living there is fine.
• Changing mortgage provider: You can move your mortgage to another participating lender without paying off the equity. However, if your new lender is not in the scheme, the equity and charges must be repaid.
• Death: For single or joint applicants, the equity must be repaid when the last applicant passes away.

Tenant Home Purchase Scheme

The Tenant Home Purchase Scheme lets tenants buy their rental home if their landlord decides to sell. Unlike the regular FHS, it applies to second-hand properties, so you will not be eligible for the Help to Buy Scheme if you avail of this support.

To apply, you will need a valid notice of termination from your landlord and a mortgage approval in principle. Otherwise, all FHS rules and requirements still apply.

Both schemes combined open up opportunities for first-time buyers. Knowing the rules and how the schemes can work together can make buying your first home more affordable and achievable.

For further advice or if you wish to discuss any other legal area please contact reception@lynchsolicitors.ie or telephone 052-
6124344.

The material contained in this blog is provided for general information purposes only and does not amount to legal or other professional advice. While every care has been taken in the preparation of the information, we advise you to seek specific advice from us about any legal decision or course of action.

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