Making Cents: Unpacking the First Home Scheme for Kildare buyers

IS IT possible to earn an annual income of €52,500 and buy a property for €300,000, and have no savings and have monthly repayments of c. €1,060 per month?

The answer is yes.

And the reasons how this could be, are primarily down to two state backed initiatives which help facilitate first time buyers buy a newly built home.

They are the Help to Buy Scheme (HBS) and the First Home Scheme (FHS).

The significance of both mean a first-time buyer, assuming they are earning enough, could buy a new property costing up to €300,000 without needing to have any savings at all.

Typically a first-time buyer would need to have a 10% deposit towards the purchase of a property and that can be a big ask particularly if someone was renting and they didn’t have much of their monthly income leftover that could go towards savings, and what amount they could save would take them years before the reach the 10% they need.

But the HBS and FHS schemes allow first time buyers to bypass that 10% requirement somewhat and accelerate the home buying process for those who would find it difficult to save a deposit that could be €20,000 or €30,000 or €40,000 or even €50,000.

I’ve written a number of times in the recent past about the HBS scheme so in this article I’m going to concentrate on the FHS, but I’ll quickly refresh you on the HBS scheme because it’s somewhat linked to the FHS scheme.

Okay, the HBS scheme allows eligible first-time buyers to get up to 10% of the purchase price of a new house or apartment back in the form of a tax rebate. This amount can then be used towards the minimum deposit required for the purchase.

The total tax rebate is limited to the total income tax and DIRT paid over the previous four tax years and is capped at €30,000. If you have paid less than €30,000 income tax/ DIRT in the past four years, the maximum rebate possible will be the total amount of tax you paid.

And because the amount is capped at €30,000 it means that anything above €300,000 would require savings from the borrower.

So, the help to buy scheme is really good for those struggling to save and who don’t want to have to wait years before they can become a homeowner.

Anyway, I want to tell you about another initiative called the First Home Scheme (FHS) which was launched back in July 2022.

The scheme is available to all first-time buyers of newly built properties. It is also available to people who previously purchased a property with a partner but that relationship has ended and they have no beneficial interest retained in the property. And it’s also available to those who have sold or divested a previously owned property as part of a bankruptcy/personal insolvency arrangement.

And essentially, it’s a shared equity scheme whose function is to bridge the gap between your deposit and mortgage, and the price of your new home. It works whereby the state and participating banks take a share in your home in return for providing you with up to 30% of the property price.

So, you own 70% of the property and the state and participating mortgage lenders will own the remaining 30%.
And whatever % the FHS puts up is equal to the % they own, so if you take 15% from the HFS scheme, you own 85% of the property and the state/lenders own 15%.

The FHS is effectively lending you money and they won’t charge you anything for the first five years and from year six onwards an annual fee will apply.

From years six to 15, a service charge of 1.75% will apply, and from years 16 to 29 a service charge rate of 2.15% will apply and from year 30 onwards, the rate moves to 2.85%. But unlike a typical mortgage these repayments are interest only i.e. no capital repayments are required by the HFS. And these rates are fixed for the life of the equity facility.

The First Home Schemes’ connectivity with the Help to Buy Scheme (HBS) is that if you avail of the HBS scheme the amount you can get from the FHS is reduced to 20%.

Let me give you some more examples of how this scheme works in practice.

Example 1
Single/couple earning €50,000 and they want to buy a property costing €333,333 and have €33,333 savings in place.
It can be financed by:
- 10% deposit (savings) €33,333
- 30% (first home scheme) €100,000
- Mortgage approval €200,000

Example 2
Single/couple earning €50,000 and they want to buy a property costing €285,715 and have no savings in place.
It can be financed by:
- 10% deposit (help to buy scheme) €28,571
- 20% (first home scheme) €57,144
- Mortgage approval €200,000

Example 3
Single/couple earning €80,000 and they want to buy a property costing €457,100 and they have €15,700 in savings.
It can be financed by:
- 10% deposit (savings - €15.7k and help to buy scheme - €30k) €45,700
-20% (first home scheme) €91,400
-Mortgage approval €320,000

It’s worth noting that if your mortgage approval, when added to your deposit, are sufficient to purchase a property you are interested in purchasing, you cannot avail of the FHS scheme. Again, to remind you, the purpose of the FHS scheme is to make up a funding shortfall when the deposit plus mortgage approval is less than the purchase price of the property.

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And if you sell a property the FHS is entitled to their percentage of the sales price, so if the value of the property has gone up, the FHS will share in the capital appreciation of the property i.e. you will pay them back more than the initial loan, and equally if the value of the property goes down, the FHS will share in that loss.

The FHS doesn’t apply to second hand properties, it only applies to newly built properties.

And there are many criteria that must be met before you can apply and qualify for the FHS scheme and an example of some of them are:
- You must have a minimum deposit of 10% of the purchase price.
- You must be over 18 years of age.
- The property must be intended to be your primary residence.
- You must have mortgage approval from a lender that is participating in the First Home scheme (AIB and its subsidiaries EBS and Haven, Bank of Ireland, and Permanent TSB).
- You must borrow the maximum amount a lender is willing to give you.
- There are limits on the price of the property you can buy which will vary by each local authority area e.g. in Cork and Dublin city the ceiling is €475,000 for a house and €500,000 for an apartment. In Galway city it’s €425,000 for an apartment and €450,000 for an apartment and in Limerick city it’s €375,000 and €450,000.
- Joint applications are possible but both applicants have to be first time buyers.

There’s a great website which explains the FHS in great detail and it has lots of FAQs from eligibility, fees and charges, the role of your solicitor, selling the property, renting out a room, moving lenders, fees and charges, the application process, the limits on the price of properties in every area in Ireland and so on.

And that website is www.firsthomescheme.ie and I’d encourage any first-time buyer to take a look inside it.

Liam Croke is MD of Harmonics Financial Ltd, based in Plassey. He can be contacted at liam@harmonics.ie or www.harmonics.ie