Making sense of ‘help to buy’

Yesterday Revenue announced the details of the new ‘help to buy’ scheme. It is designed to make buying a home more realistic for first time buyers and to increase the supply of new homes. Whether it’s a good or bad idea is beside the point, what most people want to know is how it works so here’s the breakdown.

It’s a scheme to allow first time buyers buying a new home to get a rebate of up to 5% of the purchase price or contract price (whichever is the lower) from income tax and DIRT tax paid in the past four tax years to a maximum of €20,000. The property must cost less than €500,000 or 600k for retrospective applications, the size of the loan versus the value of the property must also be 70% or more.

So, for every €100,000 of value you must be borrowing at least €70,000 the idea being that very cash rich buyers don’t need this help. It started on the 19th of July 2016 and goes until the 31 Dec 2019.

Now that it’s open for applications, there are 3 groups covered. First are the retrospective applicants, this is for people from last July up to now who either signed contracts for a new home after July 19th 2016 or for self-build they drew the first part of their loan after July 19th 2016.

The new applicants are the further two sections that apply from this week, the first time buyer who is buying a new build and the first time buyer who is a self-builder.

So, what is a first-time buyer? It’s a person or couple where they have never bought or owned a home before in any country. So if you bought in Canada in the past and came home having never bought here you are not a first time buyer in the eyes of the Irish tax authority. You also must occupy the property yourself for at least 5 years, it cannot be a rental home.

It’s done in two distinct stages and must be used on a property built by a ‘Qualifying Contractor’. This is a designation gained from Revenue by the contractor, the contractor applies for this designation and must be tax compliant and submit information to Revenue for ‘qualifying residences’ which are the properties that this scheme can be used on.

The first stage is the application stage. You must register on ‘MyAccount’ if you are a PAYE worker or Revenue Online Service for the self-employed. You then fill in a form 11 or a form 12 (revenue forms) for the tax years that apply. Hopefully you are up to date because any outstanding taxes have to be paid before you can use the scheme.
You then go through the application stage, give your property purchase and bank details, and info that helps to determine the refund. After that you’ll find out what amount of refund you may be due, and using that information you go and sign a contract for the home and get a mortgage approval, after this you move towards the ‘claim’.

The second part is the ‘claim’ stage. Having given all of the information, you confirm that it is still all correct, things like purchase price/property/mortgage amount/and your PPS number.  This is verified by the developer or solicitor for a self-build. Ultimately payment is ultimately made directly to the qualifying contractor for the rebate amount and you complete the purchase.

 

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