Are you a prospective first-time buyer, but struggling with the financial outlay for your new home? Help is on hand in the form of shared equity and the government’s First Home Scheme, writes Conor Power.
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THE First Home Scheme came into being on July 7th, 2022, as the country was still coming to terms with what normal life looked like after two years of Covid-enforced restrictions on living and on building.
It was one of a raft of measures that the current administration (itself, something of a shared equity) put into place to try to tackle the continuing housing crisis. The idea was to give first-time buyers a little extra zero-to-low-interest loan so that they would have some additional capital when going to buy their house.
What it is, in essence, is the government stepping in to give a first-time buyer an additional leg-up in the manner of a generous relative; like a more well-off uncle who says, ‘Here’s an extra bit to allow you buy that three-bedroom semi … pay me back when you can.’
The conditions to fulfil in order to avail of the First Home Scheme include:
Being a first-time buyer
Having mortgage approval with a participating lender (i.e. one of the main lending institutions)
Borrowing the maximum amount available to you (i.e. 4 times your gross annual salary)
Having a minimum deposit of 10% of the purchase price (or equivalent equity in your site in the case of self-build homes)
The scheme will forward you up to 30% of the purchase price of the new home. The minimum equity share of the government is 2.5% or €10,000 – whichever is the higher amount.
For the first five years of the scheme, there is no charge. If the scheme continues thereafter (i.e. if you haven’t paid it off), the charge is a fixed one of 1.75% from Year Six to Year 15, 2.15% from Year 16 to Year 29 and 2.85% thereafter.
The full details are laid out in the website firsthomescheme.ie
It isn’t a new idea, of course. Back in the 1980s when Ireland was among the poorer countries of the EU, a similar scheme existed that was administered by the county councils. That was when the State took its role of ensuring that its citizens had roofs over their heads seriously.
All assistance is welcome, however, and the current government can’t be accused of not trying at this point.
Today’s first-time buyer in Ireland can avail of a number of supports to help them get their foot onto the property ladder.
These include the Help-to-Buy scheme and the combination of both of these (if using the HTB and FHS together, the maximum the FHS will advance will be 20% instead of 30%) can mean that the first-time buyer is effectively looking for a mortgage of around 70% of the purchase price – which is a very different prospect to that of looking for a loan of 85% or 90% of the purchase price.
One thing that has been a little curious about the First Home Scheme is that its take-up has been quite slow – particularly for a scheme that’s been in place for the best part of two years.
In terms of the pick-up of usage in West Cork, there has been precious little by way of new developments on which to base any meaningful statistics.
Anecdotally, Mark Kelly of Hodnett Forde Property Services in Clonakilty says that only one of his first-time buyers has availed of it so far to his knowledge, whereas most such customers are using the Help-to-Buy scheme.
Further afield, Paul Hannon – Director of Sherry Fitzgerald New Homes in Cork city – says that approximately 25% of his first-time buyer customers are using the First Home Scheme.
John Fahy runs the Dublin-based mortgage brokerage Pangea Financial Services, and he deals with various lending institutions and home-buyers from all over the country.
In his experience, the First Home Scheme has been very slow to begin with but has taken off exponentially in recent months.
‘What’s difficult about the First Home Scheme in terms of official figures is how long it will take for somebody to complete on it. That’s why official figures are very low, because we’ve seen a massive uptake in the last three or four months. There’s a huge number of people who are now asking for it; who are going out of their way to use it in their application.’
As to why people haven’t been taking it up so much before now, John suggests that it’s a simple case of lack of knowledge about the scheme:
‘I think that a lot of people just didn’t know about it – that was definitely one of the reasons. It wasn’t well understood and it’s taken a good bit of time for it to become better understood by both agents and home buyers … it took a few early adaptors to get it up and running but it’s well up and running now.’
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