Help to Buy Scheme 2020: Important Changes
Category : Mortgage News
Important changes were made to the Help to Buy scheme that are now in effect since July 23rd and valid until the end of 2020. These changes aim to stimulate house purchases and the construction of new homes or self builds in Ireland while helping first time buyers afford these properties. The Help to Buy Scheme is a government initiative allowing prospective homebuyers to claim a refund of income tax (but not USC or PRSI) and deposit interest retention tax (DIRT) paid in Ireland over the previous four years. The expanded scheme will only apply to December 31st 2020, which is a very short window especially with the limited number of new build properties available in 2020.
What has changed?
Maximum claim amount increases from €20,000 to €30,000
First-time buyers who purchase a newly built home or plan on building one themselves can now claim back up to €30,000 in income tax and DIRT on bank deposit interest paid over the last four years. As before, you cannot claim back either universal social charge or PRSI paid over that period. This is a substantial increase compared to the old rule that previously allowed first time buyers to claim back a maximum of €20,000.
Claim up to 10% of house price up to €300,000
Significantly, the Government has also doubled the amount of the purchase price that the scheme can cover. Until now, the maximum you could claim was 5 per cent of the purchase price and if that were less than €20,000, so be it. Aspiring homeowners can now claim up to 10 per cent of the house price up to €300,000 and up to €30,000 on more expensive properties with a maximum value of €500,000.
Full deposit via the scheme
First time buyers can now potentially get their full 10% deposit via the scheme and not have to provide any funds themselves. This is subject to the purchase price of the new property being a maximum of €300,000 and the required 10% deposit of €30,000 claimable through sufficient tax paid over the last four years. The potential for First Time Buyers to have their full deposit covered will allow those who previously were not mortgage ready to now qualify for a mortgage. However, lenders will require mortgage applicants to provide proof of repayment capacity and will be subject to other lending criteria before approval.
What are the conditions of the Help to Buy Scheme?
- Only newly built or a self-build properties will qualify.
- The scheme is for owner occupiers only, investors or landlords cannot apply.
- You must live in the property for a minimum of five years after you buy or build it, or you will risk Revenue clawing back your tax rebate.
- Only properties built by a registered contractor will be eligible for the scheme.
- You can claim a maximum of 10% of the purchase price of a new home up to €300,000.
- The maximum relief claimable is up to €30,000.
- The relief claimable is dependent on the amount of income tax (but not USC or PRSI) and DIRT paid in Ireland over the previous four years. If you wish to apply for €20,000 under the scheme you must have paid at least this much to revenue in the last four years.
- There is a cap on the eligible purchase price of a property of up to €500,000
- You must take out a mortgage of at least 70% of the purchase price or the final value of the property once built. You must not hold more than 30% equity in the property once built to qualify.
When does the Help to Buy Scheme end?
The expanded Help to Buy scheme is scheduled to run until 31 December 2020, however, this date may be extended to further stimulate the ever-present need for the construction of new properties.
The previous Help-to-Buy scheme with a maximum relief of €20,000 is still scheduled to run until 31 December 2021 and will be reverted to once the extended Help to Buy scheme ends later this year unless an extension is made.
How can I apply?
To apply for the scheme employed people need to apply through revenue via My Account and self-employed people through Revenue Online System (ROS). For more details on the Help to Buy Scheme visit Revenue.ie.