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First-time buyers may get top-up loans in Budget (Irish Independent)

04 November 2011

The Government is considering a "top-up mortgages" plan to help thousands of first-time buyers get on to the property ladder.

The proposal would be in addition to an expansion of the so-called county council mortgages for low-income buyers.

Officials are looking at an equity loan scheme, where the Government would top up small mortgages -- allowing more buyers to finance the purchase of a home.

The Government would own part of the house until the top-up loan was paid back.

The plan would help low- to middle-income earners who want to buy a home but have difficulty obtaining credit.

It would be a different take on the existing shared ownership schemes, where at least 40pc of the property is bought by the local authority.

A rough example of the new scheme could see a €250,000 house bought with a mortgage from a bank of €175,000, and a government loan of €75,000.

As a result of putting up 30pc of the equity, the State would own 30pc of the house, until the loan was paid back.

A similar system has operated in Britiain and Northern Ireland in recent years.

Lenders' reluctance to finance high-percentage mortgages -- in contrast to two years ago, when banks were offering 100pc loans -- has left many first-time housebuyers with too big a gap to bridge to buy a house.

Government sources say the details of any top-up scheme have yet to be finalised.

If the Government does decide to proceed with the scheme, the loans would be announced as part of the Budget.

"It's another leg of the plans. It's a possibility at the moment. It's still got to be fleshed out," a source said.

Tomorrow, the Government will approve the extension of the local authority loan scheme.

Mr Cowen said the Cabinet would consider a proposal from Environment Minister John Gormley, which would see the income threshold and price limits raised, meaning buyers earning more money would be able to get loans, and properties with a higher value financed.

Government sources believe extending the scheme will not interfere with the market.