Ireland's First Home Scheme: What is it and How does it work?
The First Home Scheme is a type of shared equity scheme and affordable housing scheme. It was introduced by the Irish government to support first time buyers buy or build their first home in a private development anywhere in the Republic of Ireland.
We have compiled these resources without taking into account your personal objectives, circumstances, financial situation or needs. All information about First Home Scheme has been collected independently by Coins to Asset. Therefore, before acting on any information contained on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs, and seek professional advice where appropriate. You can read the full Terms of Use.
by Lynda K Unogu | March 18, 2024
The First Home Scheme offers first time buyers in Ireland the chance to get up to 30% of the cost of their new home from government and participating lenders in return for an equity stake in their home. The minimum equity share is 2.5% of the property purchase price, or €10,000, whichever is higher. You have the right to redeem or buy back the shares on your home but don’t have to. This scheme helps mortgages affordable to first time buyers because they are able to buy their property with less deposit saved. Ultimately the government wants to use this scheme to bridge the gap for eligible homebuyers between their deposit and mortgage.
Key Takeaway
- First Home Scheme is not a loan
- First Home Scheme is a share equity scheme
- The minimum equity share is 2.5% of the property purchase price, or €10,000, whichever is higher.
- Get up to 30% of the property purchase price or build cost (for self-builds)
- Price limits apply depending on your local area
- First Home Scheme is available for qualifying properties
- Incur no service charge in the first 5 years
How First Home Scheme in Ireland works?
See how the First Home Scheme can help you with up to 30% of the market value of your property:
Example:
Property Price: €400,000
Salary: €80,000
Maximum Mortgage Loan (4 x salary): €320,000
Deposit (10% of property price): €40,000
Mortgage + Deposit: €320,000 + €40,000 = €360,000
There is a shortfall of €40,000 that First Home Scheme can cover
Front Home Scheme (FHS) investment of €40,000 in your property = 10% equity share of your property taken by the government.
In the future, should you decide to redeem or buy out the FHS equity share.
Property Valuation at the time of redemption: €500,000
FHS 10% equity share remains unchanged
Redemption cost to you: €50,000 plus accrued service charge payable.
Who is eligible for First Home Scheme?
You will need to meet to below criteria to be eligible for First Home Scheme:
First time buyer: You must not have previously bought or built a property to live in and you do not own or have an interest in any property in the Republic of Ireland or abroad.
Eligible home buyer: You have previously owned a home, but you no longer have a financial interest in it because, you are now divorced, separated or your relationship has ended and you have gone through personal insolvency or bankruptcy.
Age and Residency: You must be aged over 18 and have a right to live in Ireland
Minimum Deposit: You must have a minimum deposit of at least 10% of the property purchase price or build cost (for self-builds, equity in your site can contribute to your deposit.)
Household Income: There are no specific household income limits required to participate in the FHS but you can borrow the maximum amount available to you from one of the Participating Lenders (up to 4 times your income*)
Mortgage Approval in Principle: You must have a mortgage approval with a participating lender and not be availing of a Macro Prudential Exception (MPE) with a Participating Lender
>>Read more: Best first time buyer mortgage rates
What types of properties are eligible for the First Home Scheme?
- House or Apartment must be in a private development in Ireland
- Self build must be on a privately owned site in your name in the Republic or Ireland
- House or apartment you are currently renting and residing in and now, looking to purchase having received a Notice of Termination from your landlord, as the landlord is putting the property on the market. – Tenant Home Purchase Scheme
- Property must be your principal private residence
- Property must be within the local authority price ceiling for the property type.
>> Read more: Best mortgage rates
Are there price limits on the First Home Scheme?
| Local Authority Area | Price Limits |
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Cork City, Dublin City, Dún Laoghaire-Rathdown, Fingal, South Dublin |
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Limerick City and County |
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Waterford City and County |
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County Wicklow |
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Galway City |
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County Cork, County Kildare, County Meath |
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County Galway |
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Kilkenny County, Laois County, Louth County, Westmeath County |
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County Clare |
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County Carlow, County Cavan, County Donegal, County Kerry, County Leitrim, County Longford, County Mayo, County Monaghan, County Offaly, County Roscommon, County Sligo, County Tipperary, County Wexford |
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How much does First Home Scheme cost?
The First Home Scheme FHS comes at a cost to you but unlike a mortgage or personal loan, there will be no fees or charges applied to your equity facility for the first five years. At the start of your sixth year of ownership, if you have not fully redeemed
the equity share, a service charge will begin to accrue against your account. You are charged a service charge rate, which is fixed for the life of the equity facility. The service charge rate begins at 1.75% from year 6 – 15. 2.15% from year 16-29 and 2.85% from 30+. Service charges accrue daily and are applied to your account monthly in arrears.
Who are the participating lenders to the First Home Scheme?
Participating lenders are
- Bank of Ireland
- AIB
- EBS
- Haven
- PTSB
How to apply for First Home Scheme?
- Obtain a Mortgage Approval in Principle from a participating lender and provide a copy to FHS
- Photo ID for all homebuyers, valid for at least another six months
- Current address verification (dated in the last six months) for all homebuyers
- Submit the above documents and receive an eligibility certificate to your participating lender. Eligibility certificate is not an offer but states the minimum and maximum of equity qualified for.
- Provide a copy of the eligibility certificate to your participating lender to process your mortgage application and if successful you get a mortgage letter of offer.
- The Mortgage Letter of Offer should be uploaded to your customer portal, as well as any other required documents outlined in your Eligibility Certificate for assessment by the FHS.
- If your FHS application is approved, you’ll receive a copy of your Customer Contract for the equity facility. The Customer Contract is the formal legal contract between you and the FHS. The Customer Contract and supporting documents will also be sent to your solicitor and must be signed by you and witnessed by your solicitor
- The signed Customer Contract, and all declarations and forms should be returned to the FHS by your solicitor to complete the application. The FHS will then release funds to your solicitor’s account, and your solicitor can finalise the property purchase on your behalf in parallel with the mortgage process. Your FHS equity facility is now set up and we will issue you with a welcome letter.
Pros and Cons of First Home Scheme?
Pros:
- Ease of getting on the property ladder: The First Home scheme could provide a shortfall required to help you buy your preferred first home.
- Larger deposit: If you have a deposit saved, you have also get a help to buy scheme and still avail of the First Home Scheme. The FHS can fund up to 30% of the purchase price of your new property. This amount is reduced to 20% if you are availing of the Help to Buy Scheme (HTB).
- Tenant home purchase scheme: The First Home Scheme is also open to those currently renting and residing in and now, looking to purchase having received a Notice of Termination from your landlord, as the landlord is putting the property on the market.
- Local area: The First Home scheme is aimed to help people find properties in their local areas of choice, it could be where they already live or work in rather than looking further afield.
- Redemption of equity share: You can buy out all or part of the equity share at any time and there’s no obligation to do so unless a mandatory redemption event occurs. .
Cons
- Not a Regulated Product: The First Home Scheme is not regulated by the Central Bank of Ireland and the equity product is not governed by the Central Bank and its statutory codes of conduct and/or other regulations to include the Consumer Protection Code.
- New-builds: The FHS is available for newly built houses and apartments in a private development in the Republic of Ireland or the property has been completed and made habitable within the last 3 years but never previously lived in
- Price Ceiling: The FHS is subject to property purchase price ceilings based on the local authority area in which the property is located
- Switching Mortgage Lenders: If you have an FHS equity facility you can switch between mortgage providers. You can switch your mortgage to another Participating Lender without having to redeem your FHS equity facility but If you switch your mortgage to a non-Participating Lender, you must redeem the equity share in full including any accrued service charges
- Selling Your property: The equity share and all outstanding service charges must be repaid in full on the sale of the property.
Latest News on First Home Scheme
3,200 Buyers Approved Under First Home Scheme
Some 3,200 buyers have been approved under the €400m First Home Scheme since its launch 18 months ago. In its 2023 year end update, First Home said 1,255 homes had already been purchased under the scheme, of which 1,118 were bought in 2023.
The number of homes purchased under the scheme in the second half of 2023 (799) was more than five times the number purchased in the second half of 2022 (137) immediately after it was opened.
First Home Scheme FAQ's
Can I switch my mortgage if I take up this scheme?
Yes you can switch your mortgage between lenders. There is a caveat, you can switch your mortgage to another Participating Lender without having to redeem your FHS equity facility but If you switch your mortgage to a non-Participating Lender, you must redeem the equity share in full including any accrued service charges
is mortgage top-up allowed on a First Home Scheme?
Mortgage top up is considered but you will need to make a formal application and must notify the FHS of your intention to top up your mortgage with a Participating Lender, and the FHS must confirm that it does not object to the mortgage top up as a part of the mortgage top up application process.
Can I rent out or sell my home?
Yes you can sell or rent out your home. In both scenarios, you must inform the FHS. Note that If you are considering selling or renting your property, the equity share and all outstanding service charges must be repaid in full on the sale of the property. However if you are planning on renting a part of your house but it still remains your principal private residence then you are permitted to do so.
Can I use the First Home Scheme in conjuction with the Help to Buy scheme?
Yes you can avail of the help to buy scheme to make up your deposit but the First Home Scheme will only fund up to 20% of the property purchase price instead of 20%
Lynda Unogu MBA IMC (CFA UK) PMP
Lynda holds an MBA from University College Dublin and worked previously in product roles within financial services and technology firms like Mastercard, Citi Bank and JP Morgan. She constantly seeks to apply her expertise in financial services to the field of personal finance with the goal of helping people navigate the complexities of the finance.
