Dáil Éireann Debate, Tuesday - 30 April 2024
234. Deputy Mattie McGrath asked the Minister for Finance if he plans to review the eligibility requirement for the help-to-buy scheme whereby the mortgage for the applicants must be 70% or more of the value of the self-build, but due to the increasing cost of building, the mortgage is no longer more than 70% of the total value and the applicants have to save a bigger deposit, and are therefore not eligible for the help-to-buy scheme. [19058/24]
View answerThe Help to Buy (“HTB”) incentive, is a scheme to assist first-time purchasers with the deposit they need to buy or build a new house or apartment. The incentive gives a refund of Income Tax and Deposit Interest Retention Tax (“DIRT”) paid in Ireland over the previous four years, subject to limits outlined in the legislation. Section 477C of the Taxes Consolidation Act outlines the definitions and conditions that apply to the HTB scheme and provides that the amount of relief available shall be the lesser of:
• €30,000,
• 10 per cent of the purchase value of a new home/self-build property; or,
• the amount of Income Tax and DIRT paid in the four years before application for the relief.
One condition of the scheme is that a qualifying first-time purchaser or self-builder must take out a loan in an amount equal to at least 70% of the purchase value of the property.
The HTB scheme, was initially intended to be limited to persons who had mortgages with a minimum LTV of 80%. However, Central Bank data indicated that a sizeable number of first-time buyers or builders take out a mortgage with a LTV of less than 80%. As such, it was decided to amend the scheme in the subsequent Finance Bill to set the minimum LTV at 70% so as to ensure that first-time buyers or builders did not feel compelled to borrow larger amounts than they would have otherwise in order to qualify for the scheme.
Individuals who are in the position of being able to avail of a mortgage at a lower loan-to-value ratio than 70% are considered to have sufficient resources to meet the deposit requirements of the macro-prudential rules and thus less in need of assistance from the Exchequer. Lowering the LTV ceiling would therefore only increase dead-weight in the scheme.
In the case of a self-build property, the purchase value is the approved valuation of the self-build property, as approved by the lender in accordance with the Central Bank’s macro-prudential rules. These rules stipulate the valuation should include the site value. According to Revenue statistics, from the inception of the scheme to end-March 2024 self-builds have represented 25.05% of approved claims. The nature of self-builds is such that an applicant may already own the land on which the house is built which means that they may only need to borrow only in relation to construction costs.
It would not be equitable to allow for different eligibility criteria with regard to LTV ratios in respect of self-build properties vis-á-vis that which applies to all other new build homes; the policy position remains that purchasers taking out a mortgage of less than a 70% LTV will not be able to qualify under the HTB incentive.
