Help to Buy Scheme for First Time Buyers

Help to Buy Scheme for First Time Buyers

Since January 2017  –
first-time buyers in Ireland have been able to claim a tax rebate equal to 5% of the value of the new home they are buying.  The Help to Buy Scheme or “HTB” Scheme is also being called the “First Time Buyers Grant”.

It is only available on the purchase of a new home – which is defined as “a new building which was not previously used, or suitable for use, as a dwelling.”  Second-hand homes are not eligible.

This HTB scheme was due to end at the end of 2019 but in Budget 2020 it was extended to the end of 2021

As at  December 2019 ,  34,760 HTB claims hafe been made, of which  26,052 were approved. The estimated total value of approved HTB claims to date is in the order of €236 million.

The Help to Buy tax rebate of up to €20,000  is available only to first-time buyers to help them purchase a new home in Ireland.  The home must be purchased from a “qualifying contractor” . It is aimed at people who might not be able to afford to put down a 10% deposit in line with Central Bank Mortgage Rules.

The HTB tax rebate can be claimed on new homes that were bought since July 19th 2016 .  But – if you signed a contract to buy a property (or drew down the first tranche of the mortgage for a self-build) before 19th July 2016  you will not be eligible for the Help to Buy Scheme
The Help to Buy scheme is due to finish at the end of 2021

Since February 1st 2018 – First Time Buyers in Ireland can also apply for low-interest rate mortgages from local authorities – read more here about this Rebuilding Ireland Home Loan. 

It looks like it is possible to use both the Help to Buy Scheme and the Rebuilding Ireland Loan – we have not seen anything to say otherwise.

Bonus : If first-time buyers also manage to take out one of the bank mortgages that offer cashback – such as with Bank of Ireland , they could get as much as 8% total cashback.

See the Lowest Mortgage Rates Here

See How MuchYou Can Borrow

HTB Details:

The government’s  Help to Buy Scheme  (HTB)  enables eligible first-time buyers to get up to 5% of the purchase price of a new house or apartment back in the form of a tax rebate.  This can then be used towards the deposit on the purchase.

The total tax rebate under Help to Buy is limited to the total income tax and DIRT paid over the previous four tax years and will be capped at €20k. If you have paid less than €20k income tax / DIRT  in the past 4 years – the maximum rebate possible will be the total amount of tax you paid.

Purchases Before Jan 1st 2017
The rules are different for houses bought or built between July 19th 2016 and Dec 31st 2016. These properties will  be eligible for tax rebates on purchases up to €600,000 – but the rebate will still be limited to  €20,000.

Purchases from Jan 1st 2017 – The 5% tax rebate will only apply to houses  priced up to €500,000. Still  with a €20k cap.

Examples of Rebate Amounts

Purchase Price              Max Tax Rebate on Purchases
After Dec 31 2016

200,000                           10,000
250,000                           12.500
300,000                           15,000
400,000                           20,000
499,000                           20,000
501,000                            Nil

Applications for Help to Buy

There are 2 stages to the  HTB Application :
Stage 1 is to work out the maximum relief available to you under the scheme based on tax payments you made in the relevant years.  You can apply before you choose a house or apply for a mortgage. Once you know the maximum rebate possible –  you can then  arrange a mortgage and/or sign a contract with a prospective Qualifying Contractor.

When mortgages and contracts are signed you will need to  complete Stage 2 of the Help to Buy Claim  where the exact rebate will be worked out based on purchase price.

Payments of the rebate will be made directly to the builder/developer as part of  the deposit.  The builder/developer must have registered with Revenue as a registered contractor under the Help to Buy Scheme . Only properties built by a registered contractor will be eligible.
In the case of a self build – the payment wil be made direct to the bank providing the mortgage.

Before making an application for the Help to Buy Scheme , you will  first need to complete Online Forms 12 (if a PAYE taxpayer) OR Forms 11 (if self-assessed), in respect of each of the  four tax years and you must pay any outstanding taxes due.

Online applications for the Help to Buy scheme have been accepted by Revenue since Jan 3rd 2017.
PAYE employees can apply on Revenue’s MyAccount .
Self Assessed taxpayers can apply through ROS

Applicants will also need to register to use the Revenue’s MyEnquiries service.

Mortgage Rules

In order to qualify, applicants must take out a mortgage of at least 70% of the purchase price, or in the case of a self -build, at least 70% of the valuation approved by the mortgage provider.  

First Time Buyer – definition . Revenue say that…. “The first-time buyer must not have either individually or jointly with any other person (directly or indirectly), previously purchased, or built a property.”

So – owning an inherited property will not exclude people from this scheme.

Clawback: The property must be occupied by the first-time buyer, or at least one of the first-time buyers in the case of multiple first-time buyers , for a period of five years from the date the property is habitable — otherwise some or all of the rebate will have to be repaid. See Below …
Leave or sell within 1 year – 100% of rebate to be repaid.
Leave or sell within 2 years – 80% of rebate to be repaid.
Leave or sell within 3 years – 60% of rebate to be repaid.
Leave or sell within 4 years  – 40% of rebate to be repaid.
Leave or sell within 5 years – 20% of rebate to be repaid.

First Time Buyers Grant

There was a First Time Buyers Grant in operation from 1977 to 2002. When it was abolished it was worth €3,610 .The Housing Minister at the time said the  grant “returned little benefit to consumers” and had “simply been absorbed in the increased profits of builders“.

We wonder if the same thing will happen this time around?  Will the HTB scheme  just result in a rise in house prices ?