Buying your first home is one of, if not the biggest, financial commitments you will ever make in your lifetime. Take it slow and choose wisely as you will most likely be living in the property for 15+ years and property prices in today’s climate are extremely competitive. Typically speaking, you can borrow up to 3.5x household income; however, mortgage lenders can approve loan to income (LTI) mortgage exceptions of >3.5x household income for 20% of their lending to first-time buyers. All mortgage seekers, not just first-time buyers, are faced with the hurdle of having the adequate mortgage deposit. First-time buyers require a mortgage deposit of 10% of the property valuation and subsequent buyers, not including investment properties, require a 20% deposit. Saving a mortgage deposit can be very difficult as the cost of living in Ireland is challenging with high rents, fuel costs and overall living costs increasing with the ever-present inflationary impacts.
Most people are aware that there is assistance for first time buyers in respect of generating a mortgage deposit. This is known as the Help to Buy (HTB) scheme; however, many are confused as to the mechanics surrounding same. The scheme is to assist first-time buyers only and is due to expire on 31st December 2022. This may be extended further but we will not be made aware until the Government announce budget 2023 in late 2022. Unfortunately, it does not apply to second time/subsequent buyers. If you have inherited property in past, you will still qualify as a first-time buyer and can also qualify for the HTB scheme. The property must be a (1) new development or (2) self-build. Second-hand properties do not qualify for the HTB scheme regardless of the applicants being a first-time buyer or not. The property valuation/completion value (self-build) cannot exceed €500,000 and the mortgage amount must be equivalent to 70% or more. The HTB scheme is a tax rebate of the taxes you have paid over the previous 4 calendar tax years, i.e., applying for HTB in 2022 – the years that count are 2021, 2020, 2019 & 2018. The maximum you can receive is 10% of the property value subject to €30,000 or the maximum amount of tax paid by you over the previous 4 calendar tax years. For couples, the total combined tax is counted.
In the below examples, you will note that you technically do not require your own cash deposit if the property value does not exceed €300,000; however, it is vital that you are evidencing the affordability each month at the required level to become mortgage approved. Evidence of affordability must be shown for at least 6 months prior to the mortgage application and to be continued until mortgage drawdown. Evidence of affordability refers to savings, rent and any loan(s) repayments on the basis that they will be cleared off prior to mortgage drawdown.
|HELP TO BUY (HTB) GUIDE|
|Mortgage amount required||€225,000||€270,000||€315,000||€360,000||€405,000||€450,000|
|Monthly mortgage repayments*||€804.36||€965.24||€1,126.11||€1,286.98||€1,447.86||€1,608.73|
|Household salary required**||€64,286||€77,143||€90,000||€102,857||€115,714||€128,571|
|Evidence of affordability required per month for mortgage underwriting purposes||€1,064.83||€1,277.79||€1,490.76||€1,703.72||€1,916.69||€2,129.66|
|HELP TO BUY & SAVINGS REQUIRED|
|Less: HTB assistance||€25,000||€30,000||€30,000||€30,000||€30,000||€30,000|
|Net savings required||€0||€0||€5,000||€10,000||€15,000||€20,000|
|*35-year mortgage at 2.5%.|
|**90% LTV of purchase price / 3.5x household incomes (t&cs apply).
***Help to Buy – Up to 10% of property valuation subject to a maximum of €30,000 or the maximum amount of tax paid by you over the past 4 calendar tax years. Property valuation cannot exceed €500,000 and you must borrow at least 70% of the property valuation.