The Government has recently introduced a new shared Equity Scheme to allow potential home buyers to bridge the gap between the soaring cost of a First home and the maximum amount people are in a position to borrow under the Central Bank rules. It is called the First Home Scheme (FHS).
The First Home Scheme gives the borrower a percentage of the purchase price of the home and in exchange takes partial ownership in the Property equivalent to the percentage lent. The Scheme can fund up to a maximum of 30% of the market value of a new Property. The scheme is open to all First time Buyers of new homes who are borrowing the maximum mortgage amount available to them from their Bank, i.e. (4 times their income). They must also have a minimum 10% deposit of the purchase price. This is made easier by the existing Help to Buy Scheme which can be used in addition to this scheme. However, if you avail of both schemes the maximum available First Home Scheme is reduced to 20%.
The FHS is not a loan and doesn’t have to be repaid unless you are selling the property, the property is no longer your Principle Private Residence or you die. However, service charges will start to apply after six years based on a percentage of the amount borrowed. This rate rises incrementally every ten years from an initial rate of 1.75% to a maximum rate of 2.85% after 30 years. You can redeem the scheme’s equity share in your Property by paying a percentage sum equivalent to the value of the Property at the time of redemption. i.e. If the value of the Property has increased since purchase, the cost of redeeming the scheme’s percentage will have increased pro-rata.
You do have to get an Auctioneer to value the property for the purposes of redeeming the Equity. You are not obliged to redeem the whole amount at once, if you don’t wish to do and can make a partial redemption of the scheme’s percentage. If during the operation of the scheme, you decide to make improvements or material alterations to the property which increase its value. These will not be taken into account for the purposes of valuing the Scheme’s percentage in your home.
Click HERE for more information on the scheme.