Ireland’s Top 3 First Time Buyers Scheme
There is nothing more exciting than buying your own home, but with house prices continuing to soar across the country, many first time buyers are struggling to get their foot on the property ladder in Ireland.
Earlier this year, a report by Daft, one of Ireland’s leading property websites, revealed that house prices jumped by nearly 3% during the first three months of 2019. Prices are continuing to rise in Ireland’s main cities, with properties in Dublin City up by 4.1%, Cork City up by 8%, Galway City up by 9.9%, and Limerick City up by 11.4% compared to this time last year.
The national average house price in Ireland now stands at €261,000, an increase of 5.6% on this time last year, but the good news is, it’s not all bad news.
There has been a sharp increase in the number of properties available on the market this year, and as the Government continues to back schemes such as the First Time Buyers Relief, the Help to Buy (HTB) Incentive, and the Affordable Housing Scheme, there are more options available to first time buyers.
Here we take a look at the various Government-backed schemes, incentives, and grants for first-time buyers in Ireland, with details on eligibility and how to apply.
Help to Buy Scheme (HTB) Ireland
In July 2016, the Government launched the Help to Buy Incentive, also referred to as the Help to Buy Scheme, the First-Time Buyers Grant, and simply HTB, to help first-time buyers purchase a self-build or new residential property in Ireland.
- Qualification Criteria
To qualify, you must be a first-time buyer, you must live in the property you purchase as your main home for at least five years, and you must be tax compliant in the 4-years leading up to your claim. If you are buying a house with a friend or partner, they must also be first-time buyers and should meet all other eligibility criteria.
- Properties Covered Under the Scheme
To qualify for HTB, the property you intend to build or buy must be brand new and used as your primary residence. Non-residential properties converted to residential properties may qualify for HTB, but any property purchased as an investment, rather than a home, will not. If buying a home, you must purchase it from a Revenue-approved developer or contractor. If building a home, the construction must be subject to VAT in Ireland.
The total purchase value of your new home may not exceed €500,000, and you must take out a mortgage of at least 70% of the total purchase price.
- The Incentive for First-Time Buyers
If approved for Ireland’s First Time Buyers Scheme you can claim up to €20,000, depending on the amount of Income Tax and Deposit Interest Retention Tax (DIRT) you have paid in the previous four years. The maximum payment is €20,000 or 5 per cent of the property value – whichever is the lesser amount.
- Revenue Clawbacks
If you make a claim, and you do not live in the property for five years, or do not finish building your home, Revenue can claw back refunds, so it is essential that you keep your end of the deal under this first-time buyers grant.
The Help to Buy Scheme has helped over 22,000 first-time buyers get their foot on Ireland’s property ladder since its inception, but it is expected to expire on 31st December 2019. Plans for an extension are unconfirmed at this stage, but the Government is expected to extend the initiative to achieve its housing goals.
First-Time Buyers (FTB) Relief Scheme
The aptly named First-Time Buyers Relief Scheme is designed to help first-time buyers purchase their dream home by refunding a percentage of any DIRT (Deposit Interest Retention Tax) that they have paid on savings.
To qualify for the FTB incentive, you must be a first-time buyer in Ireland. Those who have previously purchased or built property in the country, jointly or individually, do not qualify. The property purchased must be your primary residence and not used for investment purposes.
- Refund Limitations
You can apply for a refund on DIRT paid on savings in the 48 months leading up the purchase of your home. The maximum refund amount is limited to 20 per cent of the purchase price of the house or 20 per cent of the completion value in the case of self-builds.
- Calculating your First-Time Buyers Relief
The amount of DIRT relief you can claim is calculated using the following formula: DIRT amount paid on interest / 12 (months) X (months applicable for that year). Speak to your mortgage broker for assistance in making your claim.
You cannot claim a refund from both the First-Time Buyers Scheme and the Help to Buy Incentive.
Rebuilding Ireland Home Loans (RIHL) Scheme
If you are not a first-time buyer building or buying a new home, you may be eligible for the Rebuilding Ireland Home Loans Scheme, a new Government-backed initiative released on 1st February 2018.
Designed to help homebuyers who are having difficulty securing finance from one of Ireland’s main lenders, the Rebuilding Ireland Home Loans Scheme offers low-cost mortgages for the purchase of new properties, old properties, and self-builds.
- What is the RIHL Scheme?
Under the Rebuilding Ireland Home Loans Scheme, first-time buyers can borrow up to 90% of the market value of the property they want to build or buy. The maximum market value is €320,000 in Dublin, Cork, Wicklow, Galway, Louth, Kildare, and Meath, and €250,000 across the rest of the country. Mortgages offered under the scheme come with exceptionally low-interest rates starting at just 2%, and there are both fixed and variable rate options available.
- Eligibility Criteria
The Rebuilding Ireland Home Loans Scheme is only available to first-time buyers aged between 18 and 70 years old. Primary applicants must be in permanent employment (2-years minimum), and they must have a gross annual salary of €50,000 or less. Checks will be made with the Irish Credit Bureau to ensure all applicants and have a satisfactory credit record.
Secondary applicants must be in continuous employment (1-year minimum), and joint applicants must have a combined gross income of €75,000 or less.
You need to provide proof that you have been declined a mortgage from at least two banks or building societies, and you’ll need a deposit of at least 10 per cent of the total purchase price.
Finally, you must occupy the property as your primary residence. This help-to-buy scheme is not available for investment purposes.
- Entitlement and Obligations
Rebuilding Ireland Home Loans are only available to Irish Citizens and people who have the right to live in the country. You will be required to sign up to the Mortgage Protection Insurance (MPI) Scheme when approved for a loan, and you will have to pay a monthly MPI fee in addition to your mortgage repayments.
- How to Apply
You can apply for the Rebuilding Ireland Home Loan Scheme in person at your local authority. In addition to your application form, you will need to submit supporting documents such as the two finance decline letters, photo ID, four recent payslips, and 12-months of original bank statements.
Unlike the Help to Buy Scheme, which only applies to new homes and new builds, the Rebuilding Ireland Home Loan Initiative applies to any home, and so it is ideal for those who want to buy a ‘second-hand’ property.
Much of the €200 million government funding set aside for the scheme has already been paid out, but according to TheJournal.ie, the Department of Housing has requested a further €600 million to keep the incentive going for another three years.
There are numerous First-Time Buyers Schemes available in Ireland, and with a little bit of help from the government, you may well be able to afford your first home. Speak to your mortgage broker for advice, and you’ll be taking your first step onto the property ladder in no time.