Did you know there is help out there for first-time buyers with the government’s First Homes Scheme?
It launched back in June 2021, and provides local homes for first-time buyers at discounted prices. We look at how the scheme works, who is eligible for it and how you can go about finding and applying for First Homes.
What is the First Homes Scheme?
The scheme has been designed to provide affordable housing to first-time buyers. It offers a minimum discount of 30% below market value on new-build houses and flats in England.
The idea behind the scheme is to help people, especially key workers, buy homes within the communities they live. Many people are unable to afford to buy in the area they live and grew up in, and are forced to move further afield. Of course, this means towns and cities potentially losing skilled staff if relocation makes commuting difficult.
With the First Homes Scheme, the discount applied to a home stays with that property forever. Every time the property is sold, the discount is passed on to the new buyer. This new, unique scheme goes some way to assist people to get a foot on the property ladder, and to buy their own new-build home.
How the First Homes Scheme works
The First Homes scheme differs significantly from other schemes we’ve seen in the past. Firstly, a discount is involved and for a property to qualify as a First Home, it must be sold for a minimum of 30% less than the current market value. Another part of the criteria is that, after the minimum 30% discount is applied, the maximum price of a First Home must not be more than £250,000 (£420,000 in London).
As we mentioned before, whatever the percentage reduction of the property is at the time of the first purchase, will remain throughout the property’s lifespan. So, if a buyer decides to sell up and move on, the discount they received will be applied to the next buyers, and so on. To ensure this, when a developer sells a First Home to a buyer, a restriction will be entered onto the title register to identify the property as a First Home.
Who is eligible for the First Homes Scheme?
The official national eligibility criteria is set out as follows.
- All individuals purchasing a First Home must be a first-time buyer, even if you buy with a partner.
- Your combined annual household income should not exceed £80,000 in England, for those in London it is £90,000.
- You will need at least a 5% deposit.
- You will need a mortgage for at least 50% of the property.
- The property being purchased must be your only home.
It is important to note that you may also need to meet further criteria set out by the council or local authority in the area you are buying. For example, there might be need to prove residency, family connections, or your employment status.
In areas where key workers provide essential services, in order to help them buy locally, authorities are encouraged to give them priority when it comes to buying First Homes.
Your First Home
For as long as you choose to live in it, your First Home will be yours. You can make improvements to it and decorate it, as long as you keep within the planning rules and terms of your mortgage or leasehold. You should also be aware that any changes you do make to the property will not affect the percentage discount. This will remain the same for the life of the property, regardless of time or changes.
How to apply for a First Home
First and foremost, you need to find a First Home. And this isn’t easy as there is still limited availability for new First Homes with them only being available on selected plots and developments. We recommend researching which builders and developments offer homes in the First Homes Scheme. Then, contact the housebuilders directly to enquire about them. At the same time, it is worth checking with them if you meet the national and local criteria of the scheme.
The next pertinent step is to try and obtain a mortgage. Ideally, you want a decision in principle so that you know how much you will be able to borrow. There are a few lenders who offer 95% mortgages for First Homes.
If you find a First Home you want to buy, the developer will be able to help you to complete the application. You will have to pay a fee for this, however if your unsuccessful with your application, you will get the fee back.
The First Homes Scheme is a great way to support families and young professionals with getting on the property ladder. While we don’t list First Homes exclusively on our website, we do have a comprehensive list of the housebuilders we work with. Click here for the list, to get started with your First Homes Scheme search.
