Tea and Mortgage episode #30 – All about Ireland’s First Home Scheme

Podcast Transcript

All about Ireland’s First Home Scheme

0:04  – 0.12 Norm Schriever

Hey, everyone, how you doing? Tea and Mortgage with John Coleman and today we have a super special episode number 30.

00:13 – 00.31 John Coleman
Oh, my God. So if I was honest with you, if I was only 30 years of age, I’d feel a lot better about myself. But still, in terms of 30 episodes, you bullied me into this Norm.

But here we are. And I have to say, I look forward to it now. So you have changed me.

00:32 – 00.48 Norm Schriever
Yeah, and hopefully a little bit for the better.  And most importantly, we have an awesome group of people who listen and watch and subscribe and share. And just trying to give great information and insight to people looking to buy homes and get a mortgage.

00:49 – 00.52 John Coleman
Well, that’s what we’re here for now and have a bit of fun along the way as well.

00:53 – 01.05 Norm Schriever
Yeah, that doesn’t hurt. That doesn’t hurt.

Well, in episode number 30, we have something that’s really good that a lot of people are searching for. A lot of people want information. And that is Ireland’s First Home Scheme.

So we’re going to talk all about that today.

01:06 – 01.26 John Coleman
Excellent stuff. I’m going to give you sort of a warts and all view of it from the good and the bad. And then whether I would use it myself.

And there’s a lot of good information out of it. And it’s something that there’s a few nuances that people don’t always pick up on that I think is very important. It will be very important to highlight as well.

01:27 – 01.38 Norm Schriever
Yeah, like anything, this is great to have information. But by no means is this a complete guide. And they should contact you or another mortgage professional to look into their personal situation.

01:39 – 01.43 John Coleman
Absolutely. It doesn’t have to be me, by the way.  There are other very good brokers out there as well.

01:44 – 01.54 Norm Schriever
It doesn’t hurt to give you a call. It doesn’t hurt. You do a good job.

So if it’s okay with you, John, I have about eight questions here. We could do these rapid fire. And you could just give us your notes and feedback.

01:55 – 01.56 John Coleman
Yeah, perfect.

01:57 – 02.03 Norm Schriever
All right. So we’ll start with the easy one.

The very basic. What is the first home scheme?

What is the first home scheme?

02:04 – 04.35  John Coleman
Okay, well, let me kind of backtrack a little bit in terms of where it came out. It’s either about two years at this point. And it was one of the government’s efforts to help people who basically because the banks are limited with central bank rules as to the amount of money they will lend. And a lot of people were unable to get the mortgage they needed to buy a home. So basically, this was a government scheme added to help people make up the difference between what the bank will lend them and the actual cost of the property. Okay, so that’s where it came from.

It’s actually for new properties only, except if the house you’re currently living in is being sold. So 99 times out of 100 is going to be just for a new property. And then it’s based on an equity share. So the government can take anywhere between zero and 30 percent of the actual cost of the property.  If you happen to be using 20% of the help to buy scheme, and we’ll touch on that a little bit more later. The maximum you can get from the government for the scheme is basically 20% percent equity share.

Now, basically, this comes in many different ways.  It basically will come location based. So depending on where the property you’re looking to buy is, there’s a ceiling on the price that you can use. So in Dublin, if the maximum price for a house is €475,000.  For some reason, I still haven’t got a proper answer for an apartment. If it’s new, it’s €500,000.

In the main €475,000 is your upper limit. Outside of Dublin, it can go as far as €425,000, €350,000. So you really need to look at where you’re looking to buy. And then just basically you’ll see the limits as to the cost price. Because a lot of, say, new properties in Dublin might cost €500,000. Well, they wouldn’t qualify because €475,000, as things stand, is the maximum price.

04:36 – 04.42 Norm Schriever
Okay, got it. So it gets a little bit complex.  There’s a couple of moving parts people need to understand.

04:43 – 05.16 John Coleman
Oh, absolutely. If I was to give a quick summary of those moving parts is one, it only makes up the difference. So if the bank will lend you the money, you won’t be using the first home scheme.

Two, it’s for new properties only. So it takes two for that one exception. And three, then there’s a ceiling of a price.

For Dublin, €475,000. But for other areas, it can go down to €425,000, €375,000. So you basically just, wherever you’re looking to buy, you would just check out what the ceiling of the price is. And that’s where you would stand accordingly.

05:17 – 05.24 Norm Schriever
Great. Great. All right. And now the next question is a big one. How to apply for the first home scheme? Where do people go?

How to apply for the first home scheme?

05:25 – 06.21 John Coleman
Well, it’s actually quite simple. Well, it is and it isn’t. The first thing you need to do is basically have an approval from the bank. So if you’re talking to me, we would get you an approval with the bank. And then you would approach, just go direct to the first home scheme. It’s quite quick, actually. And they will confirm how much they’d be prepared to give you. It’s not a qualifying thing. Once you’ve been approved by the bank, they will give you the money.

They will approve you for the extra. And it’s just a document that the bank would then need when you’re actually coming to find a house. The one caveat, again, is that the banks that work with this scheme are obliged to give you the maximum that you qualify for. OK, so you can’t just, you can’t say, well, I will only take €300,000 from the bank and I’ll take the rest of the first home scheme. Where if the bank were actually happy to lend you €350,000, you’re obliged to take the full €350,000. Got it.

How does the first home scheme work?

06:22 – 06.34 Norm Schriever
Interesting. And so you covered this a little bit, but the next one is how does first home scheme work? And you covered that pretty well. But if there’s any other notes or things you think.

06:35 – 07.49 John Coleman
I’m going to talk about how the first home scheme works. I’m going to hit people with what I would consider the one area we might even be a question you have for later is a lot of people want to use the first home scheme in conjunction with the help to buy scheme. And this is where there is a really, really important nuance and that people don’t always take into account because they kind of go, well, I get my €30,000 in theory from the help to buy and I’ll use the first home scheme. But with the help to buy scheme, you need to be borrowing 70 percent of the cost price to actually qualify to use it. So hypothetically, right.

I’ll just give you an example where people sometimes do not get this. So say the price of the property they’re looking to buy is the maximum €475,000. Okay. And they want to use the first home scheme and the help to buy scheme. But say the banks would only lend them 300,000. Then they can’t use both because at €475,000, €332,000 is the magic figure.

07:50 Norm Schriever
Okay.

07:50 – 09.19 John Coleman
Okay. At 70% of the €475,000, that would allow you to use the help to buy. Now, in that instance, you can still purchase the home by taking more of the first home scheme. Okay. You can use up to 30% of the first home scheme.  In that instance, you just are forgoing the help to buy scheme. Okay. And in terms of how it works, this is the important piece. Basically you only have to always ask this and probably doesn’t get as much attention as it should.

Well, how do you pay it back? Right. It’s not free money.

It’s not like the help to buy is just a refund of your tax contributions. This is another party taking a 30% stake in your new home, basically. Right. You don’t, you’ll only start paying it back after five years. It’s at a lower rate than the rates that are out there. And you can overpay and buy it back pretty quickly. But if, for example, you’re buying a house today, that’s just for the sake of making this math easy for €400,000. Okay. And in five years time, the value of your house is €440,000. Well, you now owe 30% or 20% depending on what you took of the €440,000, not of the actual. So the government are having an equity share in your property. The value of that going up obviously goes up accordingly as well.

09:20 – 09.30 Norm Schriever
Yeah. A lot of people don’t know that. I think that’s great information. And then how people can actually find first home scheme houses or properties when they’re out looking.

How to find first home scheme houses

09:31 – 09.52 John Coleman

It’s difficult. The first question you see if you’re coming across a new development, you just have to ask the agent, do they qualify for the first home scheme? The biggest clue is going to be in the price. Okay. If the price is over €475,000, it won’t qualify for unless it’s an apartment.

09:53 Norm Schriever
Okay.

09:54 – 10.11 John Coleman
So that’s the first clue. So if the price is priced at€475,000, it’s a very strong indicator that it qualifies for it. But the quickest and easiest way is if you’re looking at a development, just ask the agent, do these houses qualify for the first home scheme?

How long does it take for the first home scheme approval?

10:12 – 10.18 Norm Schriever
Okay, great. And how long does it take for the first home scheme approval?

10:19 – 10.53 John Coleman
Currently, two to three days. It’s very quick as things stand now. Obviously, you never know where that might be in the future. But right now, that doesn’t take much time because there’s no it’s not it’s not assessed on any income. It’s not assessed on any bank. It’s not assessed how long you’ve been in the country. You’re buying a new property. You qualify as long as you the bank aren’t lending you more than what it’s like. It’s only to make up the shortfall. So if the bank are lending you too much, you don’t qualify for it. So it is a very, very quick process.

10:54 – 11.00 Norm Schriever
Well, that’s good because you don’t hear much about quick and easy processes with anything in mortgage in Ireland.

11:01 – 11.09 John Coleman
No, you really don’t. It is very quick and it’s not a case of you won’t. No one has ever said to me, oh, they said no.

11:10 Norm Schriever
Yeah.

11:11 John Coleman
It doesn’t happen.

11:12 – 11.22 Norm Schriever
Wonderful. And you’ve definitely covered this a little bit. Let’s see if you have any more notes. How does the first home scheme differ from the help to buy scheme? And if you did cover this, you know.

How does the first home scheme differ from the help to buy scheme?

11:23 – 12.56 John Coleman
No, no. I think it’s worthy of repeating this. So there’s no harm. The first home scheme is a, it’s an equity share. OK, you have to pay the money back, which starts after five years. And it only makes up the difference between what the bank will lend you and the actual cost price. OK, it can be anywhere between 20% of the cost price and 30% of the cost price. It can be 30% if you’re not using the help to buy scheme, 20% if you are. OK, the help to buy scheme is a non-refundable refund of the tax that you paid in the last five years. OK, so up to a maximum of €30,000 or 10% of the cost price. Now, in most cases, it has new parts that are over 300. But if it was outside of Dublin and happened to you, you’d only get 10%.

OK, it is non-refundable. It’s only on new properties. There’s a slight difference in terms of the value. And I don’t know what you’re thinking was here. €500,000 is the maximum price on new properties, whether it be in the house or an apartment. It makes no difference. There was you’ll still get up to €30,000. But one thing I would say with the help to buy. I mean, we do have a separate conversation on this one is that people always think, oh, yeah, I’ve been paid. I paid lots of tax. I’ll get to full €30,000. Check with revenue. Don’t be making any false assumptions on that.

Which banks work with the first home scheme?

12:57 – 13.03 Norm Schriever
All right, John, and awesome information you’re giving about the first home scheme here. One more.

13:04 – 13.09 John Coleman
Yeah, there probably is one more question about which banks. I’m sure you’re going to ask me about which banks, because not all the banks do this.

13:10 – 13.12 Norm Schriever
Yeah, exactly.

13:13 – 14.24 John Coleman
Yeah.  Well, let me talk you through that. And this is really, really important as well. Right. Some banks who might lend you. 30, 40, €50,000 more to get you over that €330,000. Do not, as things stand, work with the first home scheme. So at the moment, it’s really the main banks that work with me when the main banks are looking at Bank of Ireland, Permanent TSB, AIB. They’re the three main banks that actually work with the first home scheme. OK, so. You’re at the mercy of those banks in relation if you want to use this scheme. So that’s a really, really important piece, because on one hand, I could be telling you the bank will lend you €350,000. Right. But there might be a bank that might lend you, but that might work with the first home scheme. And the bank that you do work with might only lend you €320,000. So, again, these are the little nuances that you need to know. It’s so easy to make false assumptions around what you can do if you’re not getting good advice here, because you could be told you’re qualified for X.  And then you want to use the first home scheme and then suddenly you’re disappointed.

14:25- 14.35 Norm Schriever
Yeah. Wow. OK. So even more important, why they should talk to you or a great professional mortgage person before doing anything, before making any big moves.

14:36 – 14.44 John Coleman
Goes back to what I always talk about the road map, knowing where you’re standing, educate yourself with good information before you set off on the journey of trying to find a home for yourself.

14:45 – 14.57 Norm Schriever
Well, wonderful.  Yeah. And any other experiences or stories or case studies, any clients you remember with the first home scheme along the way?

14:58 – 16.19 John Coleman
Initially, some of the banks were having difficulties understanding it. That makes sense. They didn’t really understand the rules. They were kind of going, oh, well, we can only lend them X because of this.  And they were always wrong. Right. But it did cause some stressful moments for people when the banks were sort of challenging what they could do. And you kind of didn’t understand the rules themselves, basically. Thankfully, that has gone away and there’s a much clearer understanding from everyone as to the process because the banks do factor in.

So say, in theory, the bank will lend you €330,000 hypothetically. Right. But that’s just on a normal buying a house. The bank do have to take some cognizance of the fact that in five years time, you’re going to have a commitment to start paying back the first home scheme. So that can actually reduce the amount of money that they will lend to you. OK, so again, remember and keeping in mind that to use both the first home scheme and the help to buy, you need to be borrowing 70 percent. So these are things that you just need to make sure don’t catch you at the point when you’re looking for a home.

16:20 – 16.37 Norm Schriever
Wonderful. Yeah, I think this is really helpful for people to get these, the basics and then also what’s behind the curtain a little bit when it comes to the subtleties or the nuances of these schemes. So great information, John. And hey, let’s let’s go celebrate now. Tea and Mortgage episode number 30.

16:38 – 17.02 John Coleman

Whoa. Thank you for pushing me through this. It’s funny. I have one of my colleagues who would have the same stage fright as me. And she helped us. You know, she looks after all the Brazilians. And I pushed her to do things that were outside her comfort zone. And now she’s doing a webinar once a month with all the Brazilian community here in Ireland.

17:03 – 17.05 Norm Schriever
And she loves to push me.

17:06 – 17.30 John Coleman
And if I hadn’t kind of begrudgingly done this. I wouldn’t have been able to sort of say to her, you should be doing this because you have to come. You have to practice what you preach, you know, and you know, I don’t want to do it. I don’t like it. I kind of go. I didn’t like it either. But it does become easier, you know, so. And when you’re actually. Thank you for being there. I’m trying to find the nice words to describe you here.

17:31 – 17.33 Norm Schriever
The electric cattle prod.

17:34 – 17.35 John Coleman
We’ll go with that. OK.

17:36 – 17.55 Norm Schriever
But it’s nice. I was just going to say it’s when you see that it’s not about you, but it’s about the community and about people who really have questions and they need good advice without, you know, just sales, without fluff, without an agenda. And you see that, that’s well responded to. Then it gets easier. Right.

17:56 – 18.32 John Coleman

Yeah. Well, I think you deserve a bit of credit here, my friend. You’ve always made this feel like it’s ever since we first started collaborating, got over five years ago now. You’ve always made me feel as if you and I are just having a conversation between two guys sitting in a bar, just having a normal chit chat. I kind of tend to forget that this is for a larger audience, even though I know that the concept of this is all about educating other people and bringing good information to people. It still feels like just you and I having a chat that there might be people listening in. Yeah, absolutely.

18:33 – 18.50 Norm Schriever
Well, that’s the best way to do it. And we definitely keep in mind all of the people who are listening and supporting and subscribing. And thank you all so much. And you could all contact John. We’ll have apply links or contact links.  And if you want your personalized roadmap, John’s the man to reach out to.

18:51 – 18.55 John Coleman
Well, thanks, Norm. And looking forward to episode number 31.

18:56 – 18.58 Norm Schriever
31 next month. All right. Take care, everyone.

18:59 John Coleman
Thank you.