You wrote some years ago about Help to Buy (HTB) for couples where one spouse does not qualify for HTB. Your article itself was self-explanatory, but I still want to clarify a doubt.
I am in a similar situation where my partner does not qualify for HTB, and we are considering applying for HTB and a mortgage under my name, with her assisting me in repayments. Would this be a problem?
Mr S.K.
Figures out last week show first-time buyers continue to drive the Irish mortgage market – accounting for just under two-thirds of the mortgages drawn down in the final quarter of the year.
For the year as a whole, data from Banking and Payments Federation Ireland says first-time buyers accounted for 58.7 per cent of all mortgage loans actually drawn down.
And a separate report last week from construction cost experts Mitchell McDermott said that Government incentives – including Help to Buy – are playing an “increasingly important role” in providing the finance to get houses and apartments built at all.
Demand for the scheme is certainly increasing. Back in 2018, there were 9,880 applications from first-time buyers looking for support under the scheme. That has jumped almost threefold to more than 28,000 in the first 11 months of last year, according to the most recent figures available.
And the amount people are claiming back from taxes already paid has also risen substantially. Back in 2016, the average amount of money reclaimed was €13,684. By 2022, Revenue numbers show the average claim was for €26,338.
From the outset, Revenue have been sticklers for making sure that only claims that met all the conditions would be entertained. And given that the scheme has now cost multiples of its original budget, you will not be surprised to hear that remains the case.
So who gets in and who does not?
The three key criteria include that you must be a first-time buyer (we will come back to that), the home you are buying must be newly built – either part of an estate development or a one-off property commissioned by you – for occupation by you as your family home for at least five years and, of course, you must have been paying tax over the previous few years to have a pool of income tax against which to make the refund claim.
That is not all. There is an upper limit on the value of the property you buy under the scheme – €500,000 – and you must be taking out a mortgage for not less than 70 per cent of the value of the property.
The maximum you can claim is €30,000 or 10 per cent of the property’s value, whichever is the lower – as long as you have enough tax paid over the last four years to cover that amount.
The only taxes you can reclaim under the scheme are income tax, as mentioned above, and deposit interest retention tax (Dirt), which is levied on interest paid on bank savings. That has been somewhat academic in recent years when banks have been paying no interest anyway on the vast bulk of deposits.
I am going to assume for the purposes of this answer that you meet all the other requirements and we will focus on the first-time buyer issue.
[ Renting ‘increasingly cheaper’ than buying a new home for first-time buyersOpens in new window ]
The critical thing here is that everyone involved in the purchase needs to be a first-time buyer.
In your case, your partner does not qualify. That means that you have to satisfy Revenue that the only first-time buyer in this deal – you – is the only person involved in the financing of this property. You also have to convince a mortgage lender to lend you 70 per cent of the value of the home knowing that, if anything goes wrong, they will only be able to chase you for the money, not your partner.
Most banks will not entertain that scenario. Unsurprisingly, they are looking for as much security as they can get when they are providing a long-term loan like a mortgage and will, as a rule, require the names of both people on the deed and the mortgage loan documents.
I understand at least one player in the market does entertain loans where only one member of a couple is borrowing the money but as a rule, anyone lending in those circumstances will be looking for reassurance that the person has sufficient earnings or assets to finance such a loan by themselves.
In your case, that will not be so. You are specifically looking for your partner to be giving financial support to meet your mortgage repayments.
More critically, whatever about the bank which might be happy to have such additional financial firepower, such an arrangement will certainly fall foul of the Revenue’s rules and it effectively means that the person who is not a first-time buyer is playing a part in the purchase of the property.
If you are looking to avail of Help to Buy you will need to satisfy the Revenue that you, and only you, will be the person “buying” the home. And, yes, that does mean you will have to be in a position to fully fund any mortgage payments. So you will not be eligible for Help to Buy in the circumstances that you outline.
[ Is it time to say goodbye to Help to Buy?Opens in new window ]
What you might be able to do is see whether you would qualify for some other State housing support – the Local Authority Affordable Purchase Scheme or the First Home scheme – alongside Help to Buy to allow you to bridge any gap in finance by yourself without financial recourse to your partner. All of these schemes have their own rules and you may or may not be eligible.
Ultimately, it is worth making sure you stick by the rules because Revenue can come looking for the money back if they find you were not entitled to it because you did not meet one or other of the requirements, or if you fail to live in the home for at least five years.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to dominic.coyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice
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