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The First Home Scheme: Break Out Of The Rental Cycle
For many people in Ireland, breaking out of the rental cycle seems like an impossible dream — however, there are schemes available that can help make it a reality. The Help to Buy Scheme is a popular option, but in this article, we will be focusing on the First Home Scheme (FHS), exploring the benefits it offers, along with eligibility criteria and how to apply for it.
“Pay more, get less”: the reality of the rental cycle
Rental prices in Ireland are still at an all-time high, while the supply of rental properties has plummeted to a historical low. This has resulted in many people becoming trapped in a seemingly endless cycle of “paying more, getting less”.
According to the latest report from Daft, market rents have jumped by 14.1% in the third quarter of 2022, compared with the same period last year. This represents the highest year-on-year price hike since Daft began its reports back in 2006.
This is bleak news for would-be homeowners since trying to save enough for a deposit on a home is virtually impossible when you have a huge rent bill to pay every month. That’s why it is important to be aware of the schemes that are available and how you can avail of them.
What is the First Home Scheme?
First introduced in July 2022, the FHS is an initiative that aims to make homeownership more achievable for people in Ireland. It is designed to bridge the gap between your deposit and mortgage by providing up to 30% of the cost of your home in return for a stake in it.
This is known as a “shared equity scheme”, and it is available to first-time buyers and other eligible homebuyers, including divorced or previously insolvent individuals.
How do I qualify for the First Home Scheme?
To be eligible for the FHS, you must:
- Be over 18 years of age
- Be a first-time buyer or eligible homebuyer
- Get mortgage approval from a participating lender (Bank of Ireland, Permanent TSB or Allied Irish Bank which includes AIB, Haven Mortgages and EBS)
- Borrow the maximum amount available to you
- Have a minimum deposit of 10% of the property purchase price
- Not be availing of a Macro-Prudential Exception (MPE) with a participating lender
In addition, the property you are purchasing must be a newly-built house or apartment that you intend to live in as your ‘principal private residence’. It must also be within the local authority property price ceiling for the property type.
If you are not a first-time buyer, you can still qualify for the FHS if you are a ‘fresh start applicant’. This means that you previously owned a home but no longer have a financial interest in it due to being divorced/separated or declared bankrupt. If you are buying the property with someone else, they must also be a first-time buyer or fresh start applicant.
Unlike the Help to Buy Scheme, you cannot avail of the FHS if you are planning to self-build.
How much funding can I get and are there any costs?
The FHS can fund up to 30% of the market value of your new property. If you are also availing of the Help to Buy Scheme then this amount is reduced to 20%. The minimum amount you can get is 2.5% of the property purchase price or €10,000, whichever is higher.
There are no costs for the first five years. However, if you have not bought out the FHS equity share in your home by the start of the sixth year, then service charges will be applied to your account. These charges are paid to the FHS for “services related to the provision, maintenance, and servicing of the equity facility”, and they increase the longer you remain in the scheme.
The FHS service charge rates are fixed as follows:
| Year | Service charges |
| 0-5 | 0.00% |
| 6-15 | 1.75% |
| 16-29 | 2.15% |
| 30+ | 2.85% |
What is the process for buying back the equity share?
You can buy back the full equity share in one payment or pay it back in partial instalments, depending on your financial situation. However, bear in mind that the minimum amount you can pay back is 5% of the original equity amount. In addition, you are only allowed to make two partial payments a year.
The process of buying back some or all of the equity shares is as follows:
Step 1: Get your home valued by an FHS Approved Valuer. The valuation is valid for 12 months and you must pay for this out of your pocket.
Step 2: Send the valuation report to the FHS along with supporting documents and ask them for a “redemption quote”. This will tell you how much it will cost to pay off some or all of the FHS equity in your home.
How do I apply for the First Home Scheme?
You must complete an online application for the FHS here. There are several steps involved in the application process, including getting mortgage approval in principal and getting an eligibility certificate from the FHS. It’s a good idea to seek advice from an experienced financial advisor who can help you to navigate each step of the process smoothly.
Break out of the rental cycle with help from Symmetry Financial Management
Buying your first home is a momentous, life-changing experience, but the process can often be anything but smooth sailing. Here at Symmetry Financial Management, we want to help you feel clear and confident about your options — that’s why we always strive to be your impartial and authoritative source for reliable mortgage advice.
To find out if the First Home Scheme will work for you, why not book a no-fee consultation with our dedicated team today? With our unbiased advice and expert guidance, you can overcome any challenges that stand in the way of buying your dream home!
We remain at the forefront of the latest developments in mortgages, pensions and savings, so be sure to also check our blog and resources for more.
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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