Auto Enrolment Enquiry
Speak To Us Today
To speak with one of our team about auto enrolment, please fill in your details below and pick a time that suits.
What Are The Costs Of The First Home Scheme?
If you’re an aspiring homeowner researching the government initiatives available to you, chances are you’ve been wondering about the costs of the First Home Scheme (FHS).
Much like the Help to Buy Scheme, this incentive was designed to bridge the funding gap for first-time buyers, self-builders and fresh applicants, offering them a helping hand onto the property ladder. While there is no doubt that such initiatives provide significant support at the outset, it is crucial to understand what the financial implications will be for homeowners down the line – particularly in the case of the First Home Scheme.
In this article, we examine this shared equity incentive and discuss its associated costs, so that you can make an informed decision as you embark on your property-buying journey.
What is the First Home Scheme?
Described as an affordable housing scheme, the FHS is designed to support prospective homeowners to buy a new home or build their first home.
It involves the government and participating financial institutions paying for up to 30% of the value of an eligible first-time buyer’s home, in exchange for an equivalent equity share in the property. This means that if you receive 20% of the purchase price through the FHS, the government and associated lenders will hold a 20% stake in your home.
If you are also availing of the Help to Buy Scheme, you will only be eligible to receive up to 20% of your property’s purchase price through the FHS.
How does the First Home Scheme benefit homebuyers?
If a prospective homebuyer is declared eligible for the FHS, there are several upfront and obvious benefits to avail of.
Firstly, applicants availing of the full 30% equity share will enjoy smaller monthly mortgage repayments – at least for the first five years. Secondly, this initiative gives those struggling to hop onto the property ladder (in the face of an average 9% increase in house prices in 2024) a rare opportunity to get their very own home.
Arguably one of the biggest benefits of the scheme is the immediate saving opportunity it presents to buyers, enabling them to focus their funds on some of the most hefty costs associated with the purchasing process. These include a deposit, solicitor’s fees, stamp duty, valuation fee and a surveyor’s report.
However, these benefits aside, there are also specific considerations linked to the scheme that first-time buyers or builders should be acutely aware of before signing on the dotted line.
What are the costs of the First Home Scheme?
One crucial aspect of the FHS is that those availing of it must forfeit a share of their home until such a time that they are in a position to pay back the equity. However, there is a silver lining.
Homeowners who bought through the FHS have the option to repurchase the government’s equity share in the property at any time. It’s also possible to make partial repayments, with a minimum of 5% of the original equity amount per transaction, and up to two partial repayments allowed per year.
This is where another major consideration must be taken into account.
The cost of repayment may exceed the price of the original share, as it will be based on the current market value of the property. For instance, if the government holds a 10% stake and your property’s value increases from €350,000 to €400,000, you would need to pay €40,000 to redeem the equity share.
Therefore, it is vital to keep in mind that as property values appreciate, the cost to buy back the equity share will correspondingly increase.
Service charges under the FHS are also something to be aware of. One of the primary costs associated with the First Home Scheme is the service charge applied to the government’s equity share.
Notably, there is no service charge for the first five years of ownership. However, from year six onwards, the following annual service charges apply:
- Years 6 to 15 – 1.75% of the initial equity amount
- Years 16 to 29 – 2.15% of the initial equity amount
- Year 30 onwards – 2.85% of the initial equity amount
These rates are fixed for the duration of the equity facility.
Additional considerations when weighing up the costs of the First Home Scheme
Aside from the core costs discussed above, there are additional outgoings and considerations which eligible applicants should evaluate carefully. These include:
Property valuation
When opting to buy back the equity share, you’ll need to obtain a valuation from an FHS-approved valuer, which incurs a fee.
Mandatory redemption scenarios
Certain situations require you to repay the equity share, such as selling the property, renting it out, switching mortgage providers to a non-participating lender, or upon the death of the homeowner.
Seek expert mortgage advice when weighing up the costs of the First Home Scheme
While the First Home Scheme offers valuable assistance to first-time buyers aiming to purchase or build a new home in Ireland, it is essential to be aware of the associated costs. With plenty of food for thought, from evolving service charges to the implications of the government’s equity stake, seeking expert financial advice can provide prospective homeowners with the clarity they need to make an informed decision.
Understand the costs of the First Home Scheme with the help of Symmetry Financial Management
At Symmetry Financial Management, we specialise in guiding first-time buyers through the mortgage process, including providing an in-depth look at available government incentives such as the First Home Scheme.
Our straight-talking team is on hand to provide expert mortgage advice to first-time buyers, ensuring you have a clear understanding of the costs associated with every part of the journey.
Contact us today to learn more about how we can assist you in achieving your homeownership goals.
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.
Free Webinar:
The Mortgage Process Explained