First Homes Scheme Explained for First Time Buyers
First Homes is a new government scheme launched in June 2021 that aims to support first time buyers and key workers looking to purchase a new property. The scheme offers first time home buyers discounts of 30-50% on properties and more affordable mortgages.
However, not everyone is eligible for the First Homes scheme and specific conditions do apply. Read on to learn more about the eligibility criteria and how you can qualify.
What you can find in this article:
- What Is the First Time Home Buyer Scheme?
- What Does the First Homes Scheme Work?
- First Homes Scheme Eligibility
- Pros and Cons of the First Homes Scheme
- First Homes Scheme Alternatives
Our team at REMAX Star Canning Town is always up to date on all the latest real estate market news, programmes, and regulations and ready to assist home buyers in making one of the most important decisions of their lives. To learn more about how we can help, do not hesitate to contact us at 0207 055 0441 or book an appointment to see us.
What Is the First Time Home Buyer Scheme?
First Homes is a government initiative that can help local first-time buyers access the property ladder. The buyers eligible for the scheme are key workers, Armed Forces veterans and serving members, and first-time buyers looking to become home owners in the areas where they live and work.
The properties first time buyers can access through the First Homes programme are new-build flats and houses across England. The allocated discount is no less than 30%, with local authorities having the power to allocate further discounts that can make properties more affordable by up to 50% compared to their market price.
The main features of the First Homes scheme are:
- Launched in June 2021
- An estimated 1,500 sites to enter the market in autumn 2021
- Over 10,000 homes/year will be delivered as of 2022
- Discounts of 30% with the possibility of going up to 50%
- Designed to give local buyers a chance to access the property ladder
- Allows easy access and priority to first-time home buyers, key workers like nurses and teachers, and active or retired members of the Armed Forces
- Discounts are passed on to future buyers of the property for continued support
How Does the First Homes Scheme Work?
If you are a first-time buyer wondering what this government programme can do for you, here’s a simple example:
A first-time buyer or key worker, let’s say a teacher, is looking for a property in any town in England, where they work or live. They are having trouble accessing the property ladder given the high costs of mortgages and high deposit requirements.
The said buyer can access the First Homes programme and buy a new-build flat or home with a price that is 30% below the market value. Specifically, if the property is valued at £250,000, the home buyer can purchase the property for £175,000.
When the buyer decides to sell the home, they will have to apply the 30% discount to the sale price, so that the new buyer (also a first-time buyer or key worker) can benefit from it. The discount applies to the value of the property at the time it is sold.
- local authorities can increase the value of the discount to 40-50%
- the discounted price of the property cannot exceed £420,000 for the Greater London area and £250,000 for other areas
- the new-builds that will be accessible based on the First Homes scheme must be no different from other properties comprised within the same development
First Homes Scheme Eligibility
First of all, in order to access the First Homes programme, you must be looking for a property in England. The scheme does not yet apply to other areas.
Second, you must be:
- A first-time buyer as per paragraph 6 of schedule 6ZA of the Finance Act 2003
- A key worker such as a health and social care worker, an education professional, a key public service worker, a public safety and national security worker
What Is the Definition of a First Time Buyer?
The first-time home buyer scheme does not apply to purchasers of second homes or buy-to-let properties even if someone else is buying in their name.
To be considered a first-time buyer, you must meet the following conditions:
- you intend to use the property as your main residence
- you have never owned a property in the UK or elsewhere
- you have never inherited or received a residential property as a gift
Property Price Limits
The home you purchase through this government scheme must have a discounted price below £420,000 if you’re buying a home in London or £250,000 for other areas in England.
Buyer Income Limits
As far as income is concerned, individuals, couples, or group buyers accessing the scheme must have a combined annual household income below £90,000 for Greater London and £80,000 for other areas (based on the previous year’s tax).
They will also need to be able to fund at least 50% of the discounted purchase plan through a mortgage or home purchase plan. If they already have the funds and do not need a mortgage, they won’t qualify.
Local Authority Criteria
Local authorities may have additional rules in place or additional discounts available. They can also influence how the programme is applied. They may, for example, decide to allow certain buyers to have priority in accessing the scheme as well as decide what key workers can access the programme.
Therefore, if you are a first-time buyer considering accessing the First Homes scheme, you should consult the specific conditions that apply to your area.
Pros and Cons of the First Homes Scheme
As with any government initiative, there are several pros and cons to this programme. The main ones first-time home buyers should consider are:
- It helps financially challenged buyers to access the property ladder in the areas where they live or work
- Applied discounts are a minimum of 30% and can go up to 50% if the local authorities decide to grant additional discounts
- Local authorities can decide to prioritize certain groups of workers or locals such as NHS workers, teaching staff, or army workers and veterans
- Stamp duty applies to the discounted property price, meaning that you may benefit from relief if buying a property outside of London
- You can only access properties in developments that are part of the First Homes scheme
- The high demand and number of applicants may make the programme difficult to access as only 10,000 homes are estimated to be delivered each year
- You will have to apply the same discount granted to you when you decide to sell the property and you will have to sell it to another First Homes scheme buyer
- You are not eligible for the scheme if you don’t need a mortgage to cover 50% of the property price
- You cannot benefit from the scheme if you want to buy a property outside of England
First Homes Scheme Alternatives
If you decide First Homes is not for you or you are not eligible, here are the alternatives you can consider:
- Right to Buy: If you live in and pay rent on a housing association or council property, you can apply for the Right to Buy programme. It allows you to switch from paying rent to paying a mortgage as well as purchase the same property at a discounted price.
- Shared Ownership: Shared ownership allows you to buy a share of a property owned by a housing association or a council and only pay a reduced rent on the remaining share. Over time, you can purchase additional shares in the property until you reach 100%.
- Help to Buy Equity Loan: If you already have a deposit of 5% of the property price and can get a mortgage for another 75%, the Government will loan you the 20% difference (or 40% for London). The Government will own an equity share of the property until you repay the equity loan.
All in all, the First Homes initiative promises to make home ownership easier for many groups of key workers and first-time buyers. And with interest and demand on the rise, property developers are likely to also increase their efforts to deliver new homes to those in need.
At Remax Star Canning Town, our experienced estate agents are always available to answer any questions you may have on home buying programmes and help guide you in your property search. If you are a first-time buyer, we can assist you in accessing First Homes properties and streamline your property purchase process. Do not hesitate to contact us 0207 055 0441 for more details.