Understanding the First Home Scheme in Ireland

Buying your first home is an exciting milestone, but let's be honest, it can also feel like standing at the foot of a financial mountain. Between saving for a deposit, securing a mortgage, and navigating soaring property prices, the road to homeownership can seem overwhelming.

That's where the First Home Scheme (FHS) in Ireland comes into play. This shared equity initiative gives first-time buyers a real chance at stepping onto the property ladder.

Launched in 2022, the scheme was created to help bridge the gap between your savings, your mortgage offer, and the cost of a brand-new home. In simple terms, it's a lifeline for those who've worked hard to save but find the ever-rising prices just slightly out of reach.

By providing a contribution towards the cost of your home in exchange for a share in its equity, the FHS makes buying a newly-built home both possible and financially sensible.

House prices continue to climb in many parts of Ireland, which makes affordability an ever-growing challenge for first-time buyers. The FHS is a direct response to this, aiming to support buyers while boosting the development of new homes across the country.

The result? It not only helps individuals achieve homeownership but also strengthens the housing market as a whole.

If you've ever felt like homeownership was slipping through your fingers, the First Home Scheme might just be the helping hand you've been waiting for.

Features of the First Home Scheme

The First Home Scheme (FHS) offers a practical way to make homeownership more achievable for first-time buyers. It's built around a shared equity model, which might sound complex at first but is actually straightforward. The scheme can provide up to 30% of the property's value through a combination of First Home Scheme funding and Help to Buy Scheme contribution if available. If you're also availing of the Help to Buy Scheme, the First Home Scheme portion reduces to 20%.

Think of it as a financial boost to bridge the gap between your deposit, mortgage approval, and the actual price of your dream home.

Using the FHS means the scheme holds a percentage stake in your property equal to the contribution provided. The benefit? You can start living in your own home while repaying this equity share at your pace. You can buy it back in chunks or fully, with a minimum repayment set at 5% of the original equity amount per transaction. While there’s a limit of two partial repayments per year, this flexibility allows you to manage repayments as your finances grow.

One of the standout features is the absence of service charges for the first five years. After this period, annual service charges kick in:

• Years 6 to 15: 1.75%
• Years 16 to 29: 2.15%
• Year 30 and beyond: 2.85%

These rates remain fixed, so there are no surprises down the line.

By closing the affordability gap, this scheme makes owning a new home less daunting and more realistic for first-time buyers.

It’s a step towards turning homeownership from a distant dream into a tangible reality.

Eligibility and Application Process

To qualify for the First Home Scheme in Ireland, you'll need to meet a few important criteria. First, you must be over 18 and either a first-time buyer or fall under the 'Fresh Start' principle. This includes individuals who've gone through separation, divorce, or insolvency, provided they no longer have an interest in a previous home.

You'll also need mortgage approval from a participating lender, ensuring you meet Central Bank lending criteria without using a Macro Prudential Exception. And here’s a key point: you’ll need at least a 10% deposit. If you’re self-building, the value of your site can count towards this.

The property itself matters, too. It must be a new build, either a house or apartment, in a private development, or a self-build on a privately owned site. Keep in mind, the property must be in the Republic of Ireland, serve as your primary residence, and fall within local authority price limits.

The application process is straightforward but detailed:

1. Eligibility Check: Start by checking your eligibility online using the scheme's calculator.
2. Mortgage Approval: Secure mortgage pre-approval, called Approval in Principle, from a participating lender.
3. Application Submission: Register on the First Home Scheme portal and complete the application, including uploading documents like your mortgage approval, ID, and proof of address. If you're self-building, you'll also need to provide estimated build costs.
4. Assessment: Once everything's submitted, your application will be reviewed.
5. Eligibility Certificate: If approved, you'll receive an eligibility certificate confirming the equity support you qualify for.
6. Final Steps: After securing your formal mortgage offer, upload it to the portal to receive your Customer Contract. Sign that with your solicitor, and the funds will be released to complete your purchase.

Mortgage pre-approval is a big deal here. It confirms how much you can borrow and represents a critical step to progress your application forward.

Without pre-approval, the process can’t move ahead, so it’s worth getting this sorted as early as possible. This step not only strengthens your application but gives you clarity on your borrowing capacity, helping you make informed decisions as you progress through the scheme.

Considerations and Benefits of Participation

If you're considering the First Home Scheme, here's the takeaway: it's a practical approach that makes homeownership more accessible for first-time buyers. By bridging the financial gap between your mortgage and the cost of a newly built home, the scheme removes one of the biggest barriers to buying your first property. It's especially helpful if rising house prices have made it feel impossible to get on the property ladder.

However, it's not without its fine print. The equity share means the scheme holds a stake in your home until it's repaid. This gives you flexibility, but keep in mind that property value changes could influence the cost of redeeming that equity.

If your home's value increases, so does the amount you'll need to repay. The equity share percentage remains fixed regardless of property value changes, so it's a factor worth considering based on your long-term plans.

While the scheme offers options to redeem the equity partially or fully, specific conditions and timing restrictions apply to the repayment process. And while there are no service charges for the first five years, these do kick in later, so planning your budget ahead of time is important.

Ultimately, the scheme is about opportunity. The First Home Scheme serves as a lifeline for many, opening the door to homeownership when it previously felt out of reach.

If you're still unsure, personalised advice can make all the difference. You've worked hard to save for this moment; understanding all your options is the best next step.