One of the major fall-outs of the economic collapse in Ireland was the impact on our banks, who barely survived (or not) under the strain of their bad debts. As a result, there was a significant tightening in their approach to lending, making it extremely difficult for borrowers to meet their lending criteria when looking to buy a house. One group that was particularly badly affected were First Time Buyers, who now needed to raise significant deposits to buy a house. This can be very difficult, as they have no existing house to sell and many are paying very high rents.
So when announcing Budget 2017, the government introduced a “Help to Buy” grant, to assist first time buyers get on to the property ladder.
Who is the scheme for?
The scheme is for first time buyers only. They are purchasers who neither individually or jointly with any other person (directly or indirectly), previously purchased, or built a property. So you can own a property (maybe by an inheritance) and qualify for the scheme – you just can’t have bought one previously.
The grant only applies to a home that the purchaser will live in, and not to investment properties. Since 1st January 2017, the Help to Buy scheme also only applies to properties that cost €500,000 or less and only only to newly built homes and once-off self-built homes. It doesn’t apply to the purchase of a second-hand home.
The purchaser must also be taking out a mortgage for at least 70% of the purchase price, so it doesn’t apply to cash buyers.
What’s the benefit of the scheme?
The benefit of the scheme is that first time buyers can claim back a refund of income tax and Deposit Interest Retention Tax (DIRT) that they have paid over the past 4 years of up to 5% of the purchase price of the property. This amount can then be used as part of the deposit needed towards the house. There is also an overall cap on the rebate that can be gained of €20,000.
How do you apply?
There’s an online application process that you use to apply for the rebate, which is then paid directly to the builder or developer as part of your deposit. So the builder of your house must be registered under the scheme. However we suggest that you first of all talk to us before you go down the mortgage road at all. We can help you to find the best mortgage for you and also guide you through this Help to Buy process.
Are there any catches?
No, there are no catches as such. But you should make yourself aware of all of the rules. For example, the first time buyer must live in the house for at least 5 years once it is built and habitable. Otherwise there will be a claw back of a proportion of the rebate, depending on the amount of time that has elapsed. Also, you must be tax compliant in each of the four qualifying years in which you are claiming a rebate. There are a number of other rules that you should familiarise yourself with, before applying under the scheme.
Is the scheme working?
Yes it is. So far, the scheme has been really well received. The government allocated €50 million to the scheme when they announced it. However by early March ‘17 and based on application to date, the scheme is forecasted to already cost the state €56 million. By the end of this year, the €50 million estimate is likely to be far exceeded.
The scheme is due to run until 31st December 2019. Could the runaway success of the scheme result in it being changed? Now just might be the time to make that big step into the housing market. We would be delighted to guide you along the way, helping you to get your mortgage in place and to hopefully avail of this valuable grant.