While everyone dreams of owning a home, buying a home are never easy, especially for first-time homeowners. To make this dream a reality, the government of Ireland introduced a €400 million First Home Scheme for its citizens.
This scheme is meant to bridge the gap between the deposit, mortgage, and the price of a new home. This is mainly the amount you can borrow from your bank and the amount you need to buy your new home.
Though the First Home Scheme Ireland is a sign of relief for first-time homeowners, not everyone can qualify for it. Read on to learn more about this scheme, the eligibility criteria, and how you can apply for it.
What is the First Home Scheme?
The First Home Scheme (FHS) is an affordable, government-funded scheme to support people buying their first homes. FSH is a shared equity scheme that allows the government of Ireland and participating banks to pay at least 30% of the cost of a new home in return for a stake in the home.
For example, if you earn an annual income of €50,000, your dream home costs €250,000, and the minimum home deposit is €25,000. Since the Central Bank can only allow you to borrow 4 times your gross income, which in this case is €200,000 you will have a short of €25,000.
However, with FSH, the government can give you at least €50,000 in return for a stake in your home. This means you will be able to afford the home plus the mortgage. Note that you can buy out or repay the government if you wish and retain full ownership of your home.
Suppose you sell your home after a few years at a higher value, and the government will take back their share at the new market price.
For example, if the home’s value has risen to €300,000 and the government had a 20% share, it will take €60,000 instead of the initial €50,000. On the other hand, if the home’s value has fallen, the government’s share will also fall.
First Time Home Scheme Eligibility
FSH is open to any first-time home buyer in Ireland. The scheme also includes people who previously owned a home but lost it through a divorce or bankruptcy.
To qualify for FSH after a divorce or bankruptcy, you must prove that you no longer have any shares or interest in your former home. FSH is also open to joint applicants who have never owned a home.
Apart from being a first-time homeowner, you have to meet the following criteria to qualify for the scheme:
- Be at least 18 years
- Be a resident of Ireland
- Qualify for a mortgage that is a maximum of 4 times your annual salary
- Have a minimum of 10% deposit of the buying price
- Be able to borrow the maximum amount your lender approves
If you meet the criteria, the next step is to go through the application process. Under the new FSH, you can buy a new apartment in a private development or a newly built house. Unlike the Help-to-Buy scheme, FSH doesn’t apply to self-builds or second-hand homes.
The home you choose will depend on price limits, your preference, and your ability to repay the mortgage. Check the price ceilings in your local area and buy a property you can afford
How to Apply for the First Home Scheme
The FSH allows an online application process. To apply, you will visit the First Home Scheme website and submit your application. The documents you have to upload during the application process include:
- Your photo ID, such as a valid driver’s license or passport
- A copy of the Mortgage Approval in Principle (AIP)
- Current address verification
The AIP must be valid for at least eight weeks from the submission date. You can use a bank statement, a recent utility bill such as gas, electricity, or a landline telephone bill to verify your address.
Once you submit the application, it will go through an approval process, and you will receive an Eligibility Certificate.
This certificate outlines also outlines how much financial support you qualify for. To proceed with the process, you must get a Mortgage Letter of Offer from your lender. To ensure you apply for the right loan, talk to a mortgage advisor and learn your options.
You need to upload the Mortgage Letter of Offer to your customer portal. If the application is approved, you will receive a copy of the contract. This is a formal legal contract between the home buyer and FSH. The contract has to be signed by the customer and solicitor.
If you understand the terms and conditions of the equity, FSH will complete the final process and release the money to your solicitor’s account. The solicitor and your mortgage lender will buy the property on your behalf.
Application and Service Charges
FSH does not charge any application fees. Additionally, homeowners under this scheme do not pay any service during the first five years of ownership. If the equity is still in place after five years, you will have to pay a service charge.
The service charge you pay will depend on the initial funding from the government minus any repayments you have made. You can choose to pay the service charge monthly or yearly.
Remember, this service charge is an addition to the money you owe the government. It does not reduce or increase the government’s stake in your home.
If you cannot pay the service charge, you can defer the payment to a later day, with no interests or penalties. However, the charges will continue accumulating, and you will have to pay them in full.
Become a Homeowner with the First Home Scheme
Find and buy your dream with the help of the First Home Scheme from the government of Ireland. Our Mortgage Advisors at Pangea Mortgages will help you get the right mortgage and help make the process of owning a home as smooth as possible.
Contact our Mortgage Advisors today to get help buying your first new home.