Unlock the door to your first home

In January 2018, a new scheme was announced, designed to make it easier for low- or middle-income buyers to purchase their first home.

The scheme allows purchasers to borrow up to 90% of the value of a property, paying a fixed interest rate of 2 – 2.5% over 25 – 30 years. Fixing the low interest rate creates certainly, and makes a mortgage accessible to some mortgage applicants who may otherwise be refused. It is a lower interest rate than most of the banks, and could mean a significant saving over the course of a mortgage. There is also an option of a 2.3% variable rate over up to 30 years. With this option the rate may rise and fall, but it is possible to make lump sum repayments without penalty.

The following criteria apply to the scheme:

o Only first- time buyers, aged between 18 and 70 may apply. If a couple are buying a property together, both parties must be purchasing for the first time.

o The borrowers must not currently own any other property either in Ireland or outside of Ireland. It may be that applicants may have previously owned a property (e.g. by way of gift or inheritance), and have since disposed of it.

o Borrowers must provide a minimum of 10% of the purchase price, as a deposit. They may borrow up to 90% of the property value.

o Borrowers must have an indefinite right to remain in Ireland.

o Borrowers who are currently renting, must be able to show a rent book with a clear account for the previous six months. Borrowers who are local authority tenants must also show that their rent assessment is up to date.

o The property must be located in the Republic of Ireland, and the borrower must apply to the local authority where the property is situated.

o The property must have a value of a maximum of €320,000 in Dublin, Kildare, Louth, Meath, Wicklow, Cork and Galway, or €250,000 in the rest of the country.

o The value of the property is the market value, and not the purchase price (which may be lower than market value if one is purchasing from a family member at a discount).

o The maximum loan is €288,000 in Dublin, Kildare, Louth, Meath, Wicklow Cork and Galway, and €225,000 in the rest of the country.

o The property must have a maximum gross internal floor space of 175 square metres.

o The scheme is available on the purchase of new, second-hand and self-build homes.

o The scheme is available where insufficient loan offers have been received from two lending institutions.

o The scheme is available to individuals with a maximum salary of €50,000, or joint applicants with a combined salary of €75,000.

o The scheme will be subject to the same lending rules as ordinary lending institutions, and the repayments cannot exceed one third of the borrower’s disposable income.

o The primary applicant must be in continuous employment for a minimum of two years, and the second applicant for a minimum of one year. Self employed persons must be able to show two years of certified accounts.

o Borrowers must consent to a credit check. Applications will be refused if there is a poor credit history.

o Borrowers must obtain mortgage protection insurance at an extra cost, through the collective local authority scheme.

o It will be possible to combine this scheme with the Revenue’s Help to Buy Scheme, whereby it is possible for first time buyers to claim back Deposit Interest Retention Tax and Income Tax (up to €20,000) for the previous 4 years, to put towards the building or purchase of a newly built home.

o Borrowers must occupy the purchased property as their normal place of residence.

o Borrowers on the fixed interest rates will be subject to a penalty if they pay a lump sum repayment, or on switching to a variable interest rate.

o As with all mortgages, a borrower may lose their home if they do not keep up with payments, and arrears on a borrower’s account may impact access to future credit.

Applications will be accepted from the February 1st 2018, and the process is by way of an application form, which is to be returned to the local authority in which the desired property is situated. It is expected that the application will take up to six weeks.

The above is intended for information purposes only, and is not intended to be relied upon as legal advice. Please contact us on 01 – 676 3257 for advice specific to your needs. We can guide you through the entire process of purchasing your first home.

Lisa Quinn O’Flaherty