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First Home Scheme [FHS]- Is it more of a hindrance than a help!

Jack Duhig from our Property Team outlines the rules of the FHS to include the process.

The First Home Scheme was launched in July 2022 and is available to first time home owners purchasing a new build or “fresh start” applicants purchasing a new build who have been adjudged bankrupt or who are divorced/ separated with no interest in the family home.

Not only does the purchaser have to qualify for the FHS, but the mortgage provider must be one that participates in the scheme and thirdly; the property itself must also qualify.

The rules vary for what properties qualify by purchase price according to County Council areas and in is recommend that you have a look at the FHS eligibility calculator on the FHS website to see what properties qualify in your area.

The FHS is different from the Help to Buy Scheme as the FHS is a shared-equity facility, whereby the State pays up to 30% of the purchase price of the property and takes a commensurate stake in the property. If a purchaser is also availing of the Help to Buy Scheme, the amount of equity that can be contributed by the FHS is reduced.

There are no charges for availing of the FHS for the fist five years, and thereafter there is a percentage charge applied each year called a service charge which gradually increases to a 2.85% charge in year 30. If after 30 years you have not bought back the equity, and you got a €30,000 facility from the scheme, you will have to pay a service charge of €855 per annum.

There are several scenarios which trigger the redemption of the equity, for example if the property is sold or if the home owner dies, where the equity share will have to be “bought back” in full. It is important to note that the FHS is entitled to a percentage share of the property’s value, so if they initially contributed €30,000 which was 10% of the property purchase price, and the value of the property subsequently doubled, the FHS is still entitled to 10% which is now €60,000, on an event which triggers redemption.

The FHS recipient does not have to wait until a redemption event to buy back the equity in the property and can do so at any point, or they can pay it back in installments of at least 5% of the original amount received. Practically speaking for the FHS applicant, your solicitor will receive the FHS legal pack around the same time that they receive the legal pack from the mortgage provider and will be able to advise on both at the same meeting. Once all documents are submitted to the FHS by the solicitor, the FHS will disburse funds directly to the solicitor’s client account in the same manner which happens with loan funds from your mortgage provider.

It is recommended by the FHS that you obtain independent financial advice as well as legal advice before availing of the scheme. The FHS has proved popular with over 800 applications so far and the initiative forms part of the Government’s “Housing for all” plan.

 *Please note that the content of this blog does not amount to professional advice. Legal advice should be sought in respect of specific queries. This update is provided on the basis of information available as at January 2023. For further information, please contact Jack Duhig/Lisa McKenna or any member of the McKenna & Co Property Team.

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