Can first-time buyers use land as deposit on home to meet 70% rule?
Dominic Coyle answers readers’ questions
Self-building: nothing in the Finance Act 2016 – which contains the rules governing the Help-to-Buy scheme – expressly lays down how a deposit should be paid in relation to self-builds. Library photograph: iStock
We are first-time buyers, within the 70 per cent rule, and are self-building. Will we be eligible if our deposit was our land rather than a cash deposit? Surely this is still counted as a deposit with monetary value and we have paid our taxes, and so on, so should be eligible.
Ms SM, email
The rules on the Help-to-Buy scheme are fairly tightly written. Critically, all parties to the deal must be first-time buyers. And they must be borrowing at least 70 per cent of the value of the property – whether that is self-build or a newly built home that has not been previously occupied.
The scheme was designed to ease the burden on aspiring young homeowners hamstrung by what were considered to be onerous deposit requirements. The income tax rebate of up to 5 per cent of the value of the project – up to a maximum of €20,000 – was structured so that it could reduce the scale of deposit required.
Of course, the Central Bank in its review of mortgage rules that was ongoing at the time the measure was introduced, separately decided to loosen its requirements so that first-time buyers need find a deposit of only 10 per cent of the price of the home. With the Help-to-Buy scheme, for those who qualify, this is essentially cut to 5 per cent.
Dysfunctional housing policy
Allied to the ongoing shortage of first-time homes, the fear is that the whole incentive will inevitably go to pad developers’ pockets as prices rise to take account of it. That remains to be seen but, given the generally dysfunctional nature of Irish housing policy, it doesn’t seem a big reach.
For you, though, the issue is whether your arrangement meets the term of the incentive scheme. I see no reason why not.
The deposit issue is a matter for the Central Bank rules. I see nothing in the Finance Act 2016 – which contains the rules governing the Help-to-Buy scheme – that expressly lays down how a deposit should be paid in relation to self-builds. In fact, I see no reference in the act even on whether details of the deposit on self-builds needs to be disclosed at all as part of the application process for the rebate, although these details are expressly required for people buying newly built homes.
Your lender is supervised fairly closely by the Central Bank on these things and if it sees fit to consider the land, which you already own and on which you plan to build your home, as your deposit, that’s fair enough – and it’s not a matter for the Help-to-Buy incentive application process at all as far as I can see.
Once you draw down the first tranche of your loan, you should be eligible to apply for the rebate on income tax and Dirt paid by both of you.
Send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by email to email@example.com. This column is a reader service and not intended to replace professional advice.