The new Help to Buy scheme explained in simple English,
17th February 2017
Anyone saving for their first home knows that every euro counts. Abundant sacrifices have to be made: abandoning your daily coffee; tucking into your boring cheese sandwich for the fifth day in a row; and skipping nights out with friends. All so you can save for a deposit.
At the start of 2017, the government’s Help to Buy scheme came into effect. Essentially, it allows any first-time buyer (or first-time self-builder) to claim income tax back for the previous four years before buying their house (or building it).
But it’s hard work to make sense of it, which is why we’re here to help you out. So here are the answers to the main questions you might have about the scheme.
How much can I get back?
The maximum rebate is €20,000. You have to be a first-time buyer buying a house with at least a 70% mortgage to be eligible for the scheme.
However, not every first-time buyer will receive the full €20,000. If your new home is valued at less than €400,000, you will receive 5% of the property’s worth. So let’s imagine you are buying a house that costs €350,000. Then the maximum rebate you could claim is €17,500.
You can buy a house valued at up to €500,000 – but the maximum rebate is still €20,000. There’s a wrinkle here too. When the scheme was first announced in mid-2016, the upper limit was €600,000. But after political protests, the limit was changed to €500,000.
However, a further change was still to come, as it was decided that it wouldn’t be fair to the buyers who purchased a new property after the scheme was announced but before it was amended. In a nutshell: if you bought a house valued at up to €600,000 between 19th July and 31st December 2016, you are entitled to the rebate – though it’s still capped at €20,000.
How do I apply for the rebate?
First of all, you have to register for Revenue’s online service, MyAccount. In order to get your claim up and running you will need to provide a copy of the contract of purchase for your new home as well as the completion date for the purchase.
You will need to provide details of the mortgage lender as well as the loan to value ratio. You will also need details of the developer or builder selling you your new home. However not all builders and developers are registered with Revenue as yet so you need to clarify the status of your builder with Revenue. At present only 31 firms have signed up, however Revenue has confirmed that they expect the number of approved contractors to increase over the coming weeks.
Once all the documentation is in place, Revenue will correspond with the developer to make sure they are tax compliant. Once that is completed, the developer will receive your rebate – which will form a part of your deposit.
What else do I need to know?
There are a few more niggly bits and pieces when it comes to the rebate. Your new home must be a new build and it must come from an approved developer or contractor – unfortunately the scheme does not apply to properties that are already built.
The rebate goes directly to the approved developer or contractor and forms part of your deposit. (The rebate goes directly into your bank account if you bought between mid-July and 31st December 2016.)
You need to have paid tax in Ireland for the last four years to claim the rebate. People who have only paid tax for a proportion of the four year period would need to contact Revenue to discuss their particular circumstances.
The scheme is available only to owner-occupiers, not to the investment or buy-to-let market, and applicants will need to live in the property for five years or face a potential clawback of the rebate granted.
Terms and conditions aside, the rebate offers a breather for cash-strapped first-time buyers who were previously struggling to afford the deposit on a new property under the Central Bank rules.
Under the scheme, you can now get your new property with as little as a 5% deposit. There are some hoops to jump through and it doesn’t apply to houses that are already built so your options are more limited – but it’s definitely a worthwhile scheme and a step forward for the market.
Making the first move?
If you are thinking about buying a new home, why not get in touch with our experts who can offer you the best advice on property in Ireland. And remember to follow us on Facebook, Twitter or LinkedIn for all the latest news.