Understanding the First Home Scheme in Ireland

The First Home Scheme (FHS) is a State-backed shared equity scheme for first-time buyers of new homes. It pays up to 30% of the purchase price in return for an equity share of the same percentage, which you buy back when you can, or when you sell.

It exists to close the gap between the mortgage you can get and the price of a new home. It launched in July 2022, is funded by the State together with the participating lenders, and is often used alongside the Help to Buy Scheme.

This guide covers how the equity share works, what it costs over time, who qualifies and how to apply.

Features of the First Home Scheme

The scheme contributes towards the price of your home and takes a matching share of the equity. The maximum is 30% of the price. If you also use Help to Buy, the maximum FHS share is 20%, so the two together still cover up to 30%.

The share is a percentage, not a fixed sum. If the home is worth more when you buy it back, you pay more; if it is worth less, you pay less.

You can buy back the share in stages or in one go:

• Each partial redemption must be at least 5% of the original equity amount.
• You can make up to two partial redemptions in any twelve-month period.
• Each redemption is priced at the home's value at the time, confirmed by an independent valuation.

There is no charge for the first five years. From year six an annual service charge applies, calculated on the original amount the scheme provided:

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

The rates are fixed for the life of the facility. On an equity contribution of €74,000, the year-six charge is about €1,295 a year.

Since April 2023 the scheme has also covered tenants whose landlord is selling the home they rent, under the Tenant Home Purchase strand. That is the one route by which the FHS can be used on a second-hand home.

Eligibility and Application Process

To qualify you must:

• Be over 18 and a first-time buyer, or a Fresh Start applicant: someone who owned a home before but no longer has a financial interest in it following separation, divorce, insolvency or bankruptcy. On a joint application, both of you must qualify.
• Have mortgage approval from a participating lender, for the maximum that lender will give you. If the lender has used a Central Bank exemption to lend above the standard limits, the FHS is not available.
• Have a deposit of at least 10%. Help to Buy can form part of it. On a self-build, equity in your site counts.
• Buy a new house or apartment in a private development, or self-build on a site you own, in the Republic of Ireland, to live in as your main home.
• Stay within the price ceiling for the local authority area, which runs from €375,000 in some counties to €500,000 in Dublin, Wicklow and Cork city.

The application runs through the First Home Scheme portal:

1. Check eligibility. The scheme's online calculator gives an indicative figure in a few minutes.
2. Get Approval in Principle. You need Approval in Principle from a participating lender before you can apply. This is the step to do first.
3. Apply. Register on the portal and upload your Approval in Principle, ID and proof of address. Self-builders also provide estimated build costs.
4. Eligibility certificate. If approved, the scheme issues a certificate confirming the equity support you qualify for.
5. Customer contract. Once you have your formal loan offer, upload it to receive the FHS customer contract. You sign it with your solicitor as part of conveyancing, and the funds are released at closing.

Considerations and Benefits of Participation

The First Home Scheme gets buyers into a new home they could not otherwise afford on their mortgage and deposit alone. For many of our clients it is the difference between buying now and renting for several more years.

Three things to weigh before you commit:

• The share tracks the value of your home. If prices rise, the cost of buying back the share rises with them. The percentage never changes; the euro figure does.
• The service charge starts in year six. It is modest at first but it is an ongoing cost until the share is redeemed, and it rises in years 16 and 30. Build it into your long-term budget.
• Redemption has rules. Partial buy-backs are limited in size and frequency, and each one needs a valuation. Plan redemptions around your finances rather than assuming you can clear it at any moment.

Whether the scheme suits you depends on the property, your borrowing capacity and how long you expect to stay. We work it through with first-time buyers every week; get in touch and we will run the numbers for your situation.