The Pros & Cons Of The First Home Scheme In Ireland

by | May 24, 2024 | Mortgages | 0 comments

The First Home Scheme in Ireland is an initiative aimed at helping first-time buyers to gain a foothold on the property ladder. It also provides financial support to applicants in other categories who may find themselves restarting their journey towards homeownership.

This government-backed scheme is designed to alleviate some of the financial burdens associated with purchasing a new home through a shared equity scheme.

 

What is the First Home Scheme?

The First Home Scheme (FHS) is a shared equity scheme that helps bridge the gap between a potential homebuyer’s savings and the total cost needed to secure a property. It targets first-time buyers and ‘fresh start’ applicants, offering a practical stepping stone to homeownership, by providing up to 30% of a property’s purchase price in exchange for an equivalent equity stake. This stake is provided and owned by the government and participating banks.

 

Eligibility criteria

Eligibility for the First Home Scheme extends to:

  • Adults over 18
  • First-time buyers or individuals needing a fresh start post-bankruptcy or divorce
  • Individuals with a readily available deposit and mortgage approval from one of the participating major banks
  • Individuals purchasing newly built homes within certain price ceilings set by local authorities
  • Individuals hoping to purchase the home they are renting

 

Advantages of the First Home Scheme in Ireland

The most attractive advantages of the First Home Scheme include:

 

Equity support of up to 30%

This substantial level of financial assistance can dramatically reduce the size of a mortgage needed, making monthly repayments more manageable. Note: If availing of the Help to Buy Scheme, equity support is up to 20% plus up to 10% from Help to Buy.

 

Broad eligibility, including ‘fresh start’ applicants

The scheme recognises the challenges faced not only by first-time buyers but also by individuals re-entering the housing market, providing them with a viable pathway to start afresh on their homeownership journey.

 

Partnership with major banks

The FHS is supported by the pillar banks in Ireland (Bank of Ireland, AIB, PTSB) ensuring reliability and sustained backing for applicants.

 

Considerations and potential drawbacks

While the benefits of the First Home Scheme are certainly worth considering, certain potential drawbacks should be explored before an application is made. These include:

 

Equity share repayment (including interest) after 5 years

The FHS is designed to aid initial affordability, making it possible for hopeful property seekers to hop on the property ladder. However, the equity stake must eventually be repurchased – potentially with interest – which can increase the total cost over time.

 

Property price limits based on location

Eligibility for the scheme is restricted to properties within specific price ranges, which may limit choices, depending on geographical area.

 

Restricted to new builds and certain lenders

Applicants are confined to newly built properties and must secure financing from designated lenders, which may not always offer the best mortgage rates available.

 

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Financial implications associated with the First Home Scheme

Aside from the drawbacks, applicants to the FHS should also be aware of the potential financial implications of availing of this incentive, namely:

 

The service charges from year 6

If the equity share is not bought out within five years, homeowners face annual service charges, which increase over time.

 

The impact on future property equity and mortgage switching

Retaining a share of equity means less profit from future property sales and can complicate switching to more favourable mortgage terms with different lenders.

 

Applying for the First Home Scheme in Ireland

If an applicant decides to proceed once all considerations are weighed up, it’s important to get all relevant paperwork to ensure a smooth and efficient application process.

 

Required information and documentation

  • Proof of identity and residency
  • Evidence of mortgage approval and financial stability
  • An Approval in Principle from a participating lender
  • Details about the property
  • Solicitor’s details

Any applicant looking for some advice on preparing for the application process should seek guidance from a mortgage broker.

 

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The benefits of seeking advice from mortgage brokers

Trawling through mortgage applications and wrapping your head around the nuances of government schemes like the FHS can be daunting. This is where professional mortgage brokers come in, providing clarity and ensuring that applicants make informed decisions tailored to their financial circumstances.

 

Explore the First Home Scheme in Ireland our expert advice

Before deciding whether or not to apply for the First Home Scheme, it’s crucial to weigh this initiative against other available financial supports, such as the Help to Buy Scheme. Consulting with our team at Symmetry Financial Management – trusted advisors in financial and mortgage services – can assist with this process, as we provide bespoke mortgage advice tailored to individual needs and circumstances.

Our expertise ensures that every client’s path to homeownership is as clear and beneficial as possible.

To approach the opportunities presented by the First Home Scheme with a full understanding of both its benefits and its limitations, it’s important to get input from the experts. Contact us today and make a well-informed step towards securing a new home.

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.