What is the first home scheme?
The First Home Scheme (FHS) is designed to support home ownership by bridging the gap between what an eligible first time buyer can secure as mortgage approval under Central Bank loan to income rules (4 times income) plus their deposit versus the purchase price of the new build property they are hoping to purchase or self build home.
The FHS provides a sum in exchange for an equity stake in the home to be purchased.
You can avail of the Help to Buy (HTB) scheme and also the FHS for purchase.
Under the FHS you can receive up to 30% of the purchase price of the property (subject to price ceilings) or 20% if you are availing of the HTB (which gives 10% of a purchase price capped at €30,000).
Examples of the First Home Scheme and how it can help bridge the gap
Worked example 1
- House price = €320,000
- Household Income = €60,000
- Maximum mortgage available loan to income rules = €240,000
- Client was eligible for help to buy €30,000 (capped at max €30k or 10% of purchase price)
- Client had €15,000 savings.
- Shortfall between purchase price and HTB/Savings = €35,000
- First Home Scheme will provide equity of €35,000 to bridge the gap and the equity held will be 11%
Worked example 2
- House price = €475,000
- Household Income = €85,000
- Maximum mortgage available loan to income rules = €340,000
- Help to Buy €30,000
- Client savings €10,000
- Shortfall between purchase price and HTB/Savings = €95,000
- Max amount from first home scheme 20% when combined with HTB so FHS can fund €95,000 shortfall.
- Note if no help to buy being availed of FHS can fund up to 30% of purchase price/value.
- The equity share provided by the First Home Scheme on day 1 will be a percentage of the property value so in the above scenario 20% stake at time of purchase.
Do I have to be approved for the First Home Scheme based on income like I would with a mortgage?
No the bar is very low for eligibility for scheme – you need to be a first time buyer*, purchasing a new build home and have approval with one of the banks who back the scheme.
First home scheme do not underwrite, all approval/mortgage details are checked by the bank who issue approval.
You need to have approval from one of the participating lenders in the scheme (at doddl we can help you get your approval in place – Start Here)
Once you apply for the first home scheme you will receive an eligibility cert from the FHS scheme.
Do I need to have Mortgage Approval in place before I apply for the First Home Scheme?
Yes you need to have approval in principle in place and it can only be for maximum 4 times your income, no exceptions to loan to income rules allowed when availing of the FHS.
Who is the amount I take under the first home scheme owed to?
The equity amount you take under the first home scheme is due back to The First Home Scheme Ireland Designated Activity Company (FHS).
The FHS is a collaborative initiative between the State (Department of Housing, Local Government and Heritage – DHLGH) and Participating Lenders who are currently Bank of Ireland (BOI), PTSB, and AIB Group (AIB, EBS, and Haven Mortgages).
The FHS is a €400m fund, who will provide equity finance to qualifying applicants.
When you take an amount under the FHS you will enter into a contract with the FHS and receive funds from the Scheme in return for the FHS taking a percentage ownership in the property. The percentage ownership that the FHS holds in your home is known as an equity share.
How long will the First Home Scheme be available?
Currently a €400m fund, it is expected the FHS will be available to new homebuyers until 2025. Per the FHS, this timeframe may be extended depending on the number of Participating Lenders and the number of applications received.
Will First Home Scheme price ceilings rise?
Price ceilings exist depend on local authority area and are reviewed twice annually. The reviews on pricing are based on customer feedback, CSO data, feedback from local authority areas.
Can I use the first home scheme to buy a second hand property?
No currently the first home scheme is for new build homes or self build homes only.
The one exception to this is if you are purchasing a home under the Tenant Home Purchase scheme. This product under the scheme is designed to help eligible tenants who have received a Notice of Termination and are looking to purchase the home they are currently renting anywhere in the Republic of Ireland.
Why can’t I buy a second hand home with the first home scheme?
The first home scheme does not currently fund second hand homes for purchase, Government policy to encourage first time buyers to buy new homes as new homes are greener so this contribute to the stated climate action policy of Government. Also the supply of second hand homes on the market is diminishing and policy is to keep the second hand market for those trading up and to encourage first time buyers to purchase new builds where infrastructure facilities are being factored in.
How to apply for the First Home Scheme?
- Steps involved to apply for the First Home Scheme (FHS) –
- get mortgage approval from one of the lenders who back the scheme -> our mortgage advisors at doddl can get your approval in place – lets get started – click here
- go to the FHS website and apply for an eligibility cert (you can register on the site pre-approval and you can check what you could be eligible for but cannot apply until you have approval)
- Go onto website to register but cannot apply for scheme until you have mortgage approval in place, all application process for FHS on their website and helpline and call centre.
- Upload approval then go through standard AML criteria upload, 40 mins to do application online, FHS review it and issue eligibility cert within 2-3 days max.
- Download eligibility cert and take it to estate agent when house hunting
- Eligibility cert will issue for particular development so you do need to include a development in the cert but not the house number.
- If you don’t secure a home in the development noted on the cert you can still use the cert for any other developments within the same local authority area.
- If you go to a different local authority you need to update eligibility cert as there are different price ceilings for local authorities.
Note the price ceiling is €475,k for house in all 4 local authorities in Dublin
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- Once you secure a property the eligibility cert should be updated to reflect development your new home is in
* Fresh start principle applies where you have been through a divorce or insolvency process and now no longer have an interest in family home or any other home can avail of FHS, Central Bank also recently changed rules on lending to such individuals.
When do I have the repay the equity amount given under the first home scheme?
You do not have to repay the equity amount unless you sell your home, on death, if the property is no longer your main home or you switch mortgage to a lender outside of the participating lenders in the scheme.
You can however choose to repay at any point in time, either lump sum or multiple payments. Once you own your home for 6 months or more you can choose to repay the equity stake. In order to do this you will need to get a valuation from an independent valuer and you can then make two payments within 12 month period, after the 12 months get another valuation.
The scheme is not designed for monthly repayment, as would be the case with a mortgage, but lump sum payments can be made anytime within life of the charge.
What happens if the value of my home goes up?
The equity stake is taken at time of purchase. So for example, purchase price €475,000 and equity stake taken 20% so €95,000.
At time of sale of your house –
- Home worth €550,000 at sale, then 20% €110,000 would be due back to clear equity stake
- Conversely house drops in value and is worth €400,000 then amount due back at 20% is €80,000
Is interest charged on the first home scheme?
- There will be no interest charged on the funds from shared equity scheme
- However, a service charge will apply to the equity stake from Year 6 onwards and will apply until the full equity is redeemed. You can choose to pay this or roll up as part of the equity.
- The following service charge rates will apply to the equity share:
- 0-5 years: 0%
- 6-15 years: 1.75%
- 16-29 years: 2.15%
- 30+ years: 2.85%
- The service charge is based on simple interest percentage of the initial capital deployed and reduces as capital is redeemed.
- The scheme is not regulated by the Central Bank as it is considered an equity product.
Important also –
- Help to buy scheme is a rebate of tax you have paid and is not refundable (provided home remains your principal private residence for 5 years)
- FHS equity stake has to be repaid at some point
Is the first home scheme like a mortgage?
The fund will take an equity stake in your property of up to 30% and it is very similar to a mortgage in terms of recourse, the bank will take first charge on your home and the FHS will take a second charge behind the bank. What this means is if you sold the house or on death (assuming valid life policy) the mortgage would be cleared firstly and then the first home scheme and whatever is left would go to you or your estate/family.
Once the equity from the first home scheme is redeemed the charge will drop away. Just like your mortgage you will receive an annual statement from the FHS.
While the charge on your home is similar to a mortgage the scheme is much more flexible than a mortgage as there is no payment in the first five years and thereafter a service charge is payable, you don’t have to pay the service charge if you do not have the means to do so, it can be rolled up, at simple interest. There is no term on repayment of the equity stake it must be repaid once you sell the home, if you rent it out, if you switch to a lender not within the scheme or on death. You can technically live in the house and never repay the amount, it can be repaid from your estate on death.
What is the average amount under the first home scheme?
The average equity sum the FHS to date is €70,000 reflecting the gap between purchase price and mortgage levels that mortgage hopefuls can achieve (when the scheme was launched it was expected that the average would be mid €50,k).
In summary
From a mortgage perspective, the help to buy, first home scheme and Green rate mortgages which are some of the lowest on market are a welcome boost for first time buyers trying to purchase a new build home. The obvious issue is the lack of supply versus demand for such homes.
Need Advise or want to get mortgage approval in place so that you can apply for the first home scheme then contact our team – We are here to help! Get Started
More details information on the first home scheme can be found on their website – First Home scheme
