Trying to get your foot on the property ladder can be a challenge. But fear not – there’s help out there!
Saving for your first deposit can be a difficult: student debt, entry-level incomes and ever rising house prices can make it feel almost impossible. However, in order to help more people buy their first home, the Government has a number of different Help to Buy schemes, including the First Homes Scheme, that was introduced in 2021.
What is the First Homes Scheme?
The First Homes Scheme helps local first-time buyers and keyworkers buy a home by offering a discount of at least 30% off the market price. You’ll need a minimum of 5% of the discounted price as a deposit. The discounts will apply to the homes forever, meaning that generations of new buyers and the local community will continue to benefit every time the property is sold.
Who is eligible for the First Homes Scheme?
There are certain criteria that need to be met in order to qualify for the First Homes Scheme:
- You must be 18 years old or over.
- You must be first-time buyers and must have a household income not exceeding £80,000 and £90,000 in London (or lower if set by the local authority).
- Post-discount price caps on first sale of the property of £250,000 across England and £420,000 in London (or lower if set by the local authority).
- A First Home should be your only home and you will need to use a mortgage or home purchase plan for at least 50% of the purchase price of the home.
- Local connections and/or key worker status as determined by the relevant local authority, where local key workers are prioritised.
There is an exemption to making the local connection criteria: members of the Armed Forces and recent veterans do not need to meet any local connection or key worker requirements set by local authorities.
Are there any restrictions to the First Homes Scheme?
There are some limitations to the scheme that makes it stand out from previous help to buy schemes
- It’s only available in England.
- The house you buy can only be a new home built by a developer, or a home you buy from someone else who originally bought it as part of the scheme.
- There are only a few locations across the country that offer the First Homes Scheme currently. A programme of 1,500 First Homes is being rolled out over the next 2 years in over 100 locations across England. First Homes should also start becoming available on new construction sites across England as developers and local authorities begin to incorporate new planning policies. (Check with your local authority to see if they are offering the First Homes Scheme)
- You can usually only apply if you are a local resident or a local keyworker.
What are the benefits of the First Homes Scheme?
The biggest advantage of the First Homes Scheme is that unlike shared ownership schemes, you have full ownership of your home. If this is a house, it means you’ll own the freehold. If it’s a flat, it means you’ll own a leasehold on the property. It also offers you a significant discount on the market value of the home.
Are there any drawbacks of the First Homes Scheme?
Be careful you aren’t paying too much. Newly built homes are likely to come at a premium and you may find something older and cheaper on the open market in the same area. In areas with higher prices, such as commuter towns and cities, this scheme could make a big difference to the lucky few who are eligible and act quickly.
Also, as the scheme is very new, there is limited availability at the moment, so competition will be high.
Can you use your Help to Buy Equity Loan Scheme alongside the First Homes Scheme?
The Help to Buy Equity Loan Scheme was closed to new applicants on the 31st October 2022. Before this, you were unable to use them schemes in conjunction, as they provide alternative government help to assist first time buyers.
What happens when I come to sell a home purchased through the First Homes Scheme?
The First Homes discount is applied to the property on its first purchase, and then the discount stays with the property every time it is resold. This is so that it can help generations of new buyers and the local community can continue to benefit every time the property is sold.
The same buying criteria will always apply, so you will need to sell your home to another first-time buyer who fits the scheme’s criteria, with the same discount you bought it with.
How do you apply for the First Homes Scheme?
The first step is to research which builders and developments are offering First Homes (local authority websites should also be able to offer some information). If the homes are available, you will need to contact the builder directly to check whether you meet the criteria of the scheme. If you’re eligible, the builder will help you make your application to the local authority.
You will need to act fast. As this scheme is only applicable to a limited number of houses across England, there will be big competition to secure a home at the discounted rate.
What other schemes are available?
If there aren’t any First Homes near you, or you aren’t eligible to a apply for one, there are other government schemes available to help you buy a house. These include Shared Ownership, Deposit Unlock, Lifetime ISAs and 5% deposits.
Disclaimer: The article above is only a rough guide to give you an idea of the of what is involved with the First Homes Scheme. We advise that you speak to a financial advisor for any mortgage or financial advice.