Buying a home is never easy and with the ongoing cost-of-living crisis, as well as many other obstacles in most people's ways, it can take years for young people to get on the property ladder. Any support available is worth pursuing.
Darragh O'Brien Minister for Housing announced the First Home Scheme on 1 July 2022 to help the squeezed middle - those potential home-buyers whose annual incomes exceed the parameters for social housing yet are still inadequate to buy in the current challenging home market. Sky-high rents have made it increasingly difficult to save toward a home deposit.
This new scheme is part of the government’s Housing for All strategy that will have no income limits for those applying. John Lowe of MoneyDoctors.ie explains.
The government received clearance for the new scheme from the European Union, the European Central Bank and the Central Bank of Ireland with Minister O’Brien stating, "I think this scheme has the potential to be a real game-changer for that group of people who can’t buy because of the gap between the finance they have and the finance they need. It will make a difference quickly".
The minister was hoping over the following four years to house 8,000 new home owners under this initiative and has funded it with an initial €400 million to start the project with promises of further funding pending its success. The three main lenders signed up to the agreement – AIB Bank, Bank of Ireland and PTSB.
Here's how the scheme works:
- The government will pay up to 30% of the cost of a new build property for those squeezed middle, buying equity in your home until such time as you can pay back that equity. This also applies to people building a new home, and people who want to buy the home they're renting because the landlord is selling it.
- If the applicants buying a new property also qualify for the 10% or €30,000 Help to Buy Scheme (HTBS) – whichever is the lesser – the maximum government equity contribution is 20%, totalling 30% of the purchase price.
- Initially no interest is charged on the government equity "loan" for the first five years.
Let’s look at an example:
You buy a new property for €320,000.
A 90% loan to value would be €288,000. Ordinarily you would need a joint annual income of €82,300 per annum to justify such a loan with any lender – this based on 3.5 times your joint annual incomes.
The new government scheme will allow you to:
- Take 30% of the purchase price interest free for five years
- Can include the HTBS grant (10% + 20% from the First Home Scheme)
- You will need mortgage approval for the 70% (€224,000)
- To justify the €224,000 mortgage, the applicants would only need to have a joint annual income of €64,000, or €32,000 per applicant for two people
- The government is essentially giving you €96,000 (30%) on this purchase (€30,000 from the Help to Buy Scheme and €66,000 from the First Home Scheme).
The First Home Scheme will apply to first-time buyers, but also to divorced people and those who have been made bankrupt.
For more information click on John Lowe's profile above or on his website.
The views expressed here are those of the author and do not represent or reflect the views of RTÉ.
