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Mortgage Incentives: Help To Buy Scheme vs First Home Scheme
Many first-time buyers across Ireland, who are attempting to overcome the hurdle of soaring house prices, are debating the same topic: the merits of two schemes – Help to Buy Scheme vs First Home Scheme. With the ascending cost of property making it increasingly difficult for many to afford homes, both of these schemes provide much-needed financial assistance to those in a position to avail of them.
Offering first-time buyers a financial incentive of up to €30,000, the Help to Buy scheme can dramatically improve the affordability of a new home or self-build. The First Home Scheme is also well worth considering, knocking a potential 30% off of the cost of a property for both first-time and qualifying previous homeowners.
Understanding these schemes is vital for aspiring homeowners seeking available support, particularly given that eligibility for both schemes depends on individual circumstances and property criteria. What’s also important for this cohort to realise, is that in certain circumstances, a homebuyer may qualify for both schemes, further increasing the potential savings on such a mammoth purchase.
In this article, we discuss the intricacies of each scheme in detail, helping buyers make the right move when the time comes.
The Help To Buy Scheme
The Help to Buy (HTB) scheme was first established in 2016 as a government initiative aimed at assisting first-time buyers with raising funds for a house deposit. Its core objective is to alleviate the financial burden on prospective homeowners by providing a tax rebate of up to €30,000 or 10% of the property value (whichever is the lesser), helping them to secure their initial deposit.
The recent extension of the Help to Buy scheme until 31st December 2025, announced in October as part of Budget 2024, ensures an additional window of opportunity for aspiring buyers to benefit from the financial assistance offered by the scheme.
The Help To Buy Scheme: aspects to be aware of
- Tax Rebates: The Help to Buy Scheme offers a significant benefit for first-time buyers, providing a refund of Income Tax and Deposit Interest Retention Tax (DIRT) paid within Ireland over the previous four years. This refund, subject to legislative limits, is a crucial aspect for applicants to consider, as it directly impacts their financial planning and potential savings when purchasing or self-building a qualifying home.
- Mortgage Eligibility Criteria: A critical eligibility requirement for the HTB scheme is that the mortgage availed must constitute at least 70% of the purchase price or the approved valuation in the case of a self-build. This requirement ensures that applicants have a substantial stake in the property, aligning with the scheme’s goal of aiding genuine first-time buyers in securing their homes.
The Help To Buy Scheme: who is eligible?
To be eligible for the scheme, applicants:
- Must be first-time buyers purchasing or self-building a new residential property
- Must be tax-compliant
- Must live in the property for at least five years after its purchase or build
- Must not have availed of any house purchase grants or incentives previously
- Must utilise a qualifying mortgage lender and use a Revenue-approved developer or contractor
The First Home Scheme
Introduced in 2022, the First Home Scheme emerged in response to the country’s growing housing affordability crisis. Launched to support both first-time homebuyers and those re-entering the property market, the scheme sees the government and participating banks pay 30% of the selling price in exchange for a stake in the property.
The First Home Scheme: aspects to be aware of
- It is important to note that the First Home Scheme operates under the basis of ‘shared equity’. This refers to the FHS providing funds to homebuyers, in exchange for a percentage ownership (equity share) in the property. The FHS can fund up to 20% or 30% of the property’s purchase price, depending on whether the Help to Buy Scheme is used, and homeowners can buy out this equity share at any time, although there is no obligation to do so.
- From the sixth year of ownership, if the equity share has not been fully redeemed, a service charge begins to accrue on the homeowner’s account, with rates fixed at 1.75% for years 6 to 15, 2.15% for years 16 to 29, and 2.85% for the 30th year onwards.
- Homeowners have the option to redeem or buy back the equity share held by the Scheme in their property at any time. This buy-back can be partial or full, giving homeowners flexibility in managing their equity stake. However, it’s important to note that certain events, such as selling the home or refinancing, may necessitate the full repayment of the equity share.
The First Home Scheme: who is eligible?
In terms of eligibility, the First Home Scheme is designed to accommodate a broader spectrum of potential homeowners, but there are still certain criteria to be met.
- Applicants can be both first-time buyers and those who previously owned a property but no longer have a financial interest in it due to personal circumstances such as divorce or bankruptcy
- Applicants must be over 18 and should intend to occupy the property as their primary residence for at least five years after purchase
- The scheme does not apply to second-hand homes, except in cases where a landlord is selling the property the applicant is renting
- The purchased property should also meet specific value thresholds, with regional variations accounted for in these limits
- Applicants must be in a position to cover at least 10% of a deposit and draw down a mortgage with a participating lender
- Applicants must borrow the maximum amount available from their mortgage lender
Help To Buy Scheme vs First Home Scheme
While both the Help to Buy scheme and the First Home Scheme in Ireland aim to make homeownership more attainable for prospective buyers, they differ in what they offer and their eligibility criteria. This is why both must be studied in advance to assess which is the right fit – or perhaps to determine if a buyer is eligible for both at the same time, which can happen with certain new builds.
HTB primarily supports first-time buyers and aids with deposit affordability. Its focus is on newly built properties, offering financial assistance exclusively for this category. On the other hand, the First Home Scheme extends support to both first-time buyers and a specific group of property purchasers re-entering the housing market. While new builds are the primary focus, second-hand homes will be considered in certain circumstances, as outlined above.
Both schemes have their limitations. The HTB scheme caps the property value at €500,000, limiting the potential support, while the First Home Scheme stipulates property value thresholds based on the purchase area.
Choosing the right scheme
Choosing the right scheme depends on the individual’s circumstances. For first-time buyers eyeing newly built homes, HTB might be more fitting. Those re-entering the market or considering a wider range of property types might find the First Home Scheme more suitable. Understanding the nuances of these schemes is crucial, as depending on their circumstances, a homebuyer can qualify for both, potentially maximising their financial support.
Weigh up your mortgage options with help from Symmetry Financial Management
When it comes to purchasing a home, seeking expert advice helps house hunters understand the available options in terms of interest rates, loan terms, and incentives like the schemes explored in this article. By collaborating with Symmetry Financial Management, you can access guidance from our team of seasoned professionals who customise mortgage options to match your unique circumstances.
We offer expert mortgage advice at every stage of the journey, ensuring clients are equipped with the right knowledge to make sound financial decisions. Contact us today to discuss your options and take the first steps towards securing your dream home.
Don’t forget to also check out our blog and resources for further insights into mortgages.
If you’d like a free, no-obligation consultation for your mortgage, pension or financial needs, get in touch here, call us on 01 6831673 or email us directly on info@symmetryfinancial.ie.
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