What is the first home scheme and can I use it with the help to buy scheme?
67% of people who avail of the first home scheme also use the help to buy scheme so how do they both work together?
The HTB and FHS’s can be used together to help fund different parts of a home purchase –
Help to Buy (HTB) helps with your deposit. It is a refund of Income Tax and DIRT paid over the previous four tax years up to a maximum of 10% of the purchase price capped at €30,000. The property must be a qualifying new build/self-build valued at €500,000 or less.
First Home Scheme (FHS) helps to bridge the affordability gap between mortgage amount, deposit, help to buy and the purchase price of a new build home. It takes an equity share in the property in return for providing the additional funding.
If you are using HTB, the maximum FHS equity contribution is 20% of the purchase price/build cost, rather than 30% where HTB isn’t being used.
A simple example of how the help to buy and first home schemes work together:
Take a first-time buyer purchasing a €400,000 new build:
Total Income: €80,000 (joint or single)
Mortgage: €320,000
Help to Buy: €30,000
Deposit cash: €10,000
Total available: €360,000
Gap: €40,000 to be funded by First Home Scheme
The equity stake the first home scheme would take in your home is therefore 10% (€40,000/€400,000).
So the buyer gets the property with:
€320k mortgage + €30k HTB + €10k savings + €40k FHS = €400k.
The FHS then holds a 10% equity share in the home. It’s not a €40,000 conventional loan: because it’s an equity stake, what it costs to redeem is linked to the property’s value when you buy the share back. You pay nothing in years 1-5 and from year 6 you pay a service charge of 1.75% in years 6-15 and then it rises further if the equity stake remains outstanding thereafter.
One important point – you don’t automatically take the full 20% FHS just because you’re using HTB. You have to take the maximum mortgage level you can achieve under Central Bank rules. The FHS is designed to bridge the actual funding gap.
Reasons why people might not use the help to buy with the first home scheme – they are buying under the tenant purchase scheme (not a new build hence HTB does not apply), they have not paid tax in Ireland in the last four years so are ineligible, they want to avail of max 30% under first home scheme, they are for some other reason ineligible.
So the two schemes can be used together but do differ – the HTB is helping solve the deposit challenge while FHS is helping solve the affordability/mortgage capacity gap.
See some examples of how the scheme can help – All you need to know about the first home scheme Ireland – Read Here!
If you need help understanding how the schemes could apply to you contact our team – start here!
