What is the First Home Scheme?
Buying a property for the first time can be daunting and stressful. From saving a deposit to passing a lender’s affordability calculation, you may feel overwhelmed.
The good news is the government have a variety of schemes designed to help first-time buyers get onto the property ladder. Among those schemes is the First Home Scheme, which can prove beneficial if you are eligible for it.
Let’s explore the First Home Scheme and see if it is suitable for you.
Introduction to the First Home Scheme
The First Home Scheme allows you to buy your first property at a discounted price. Properties eligible for the scheme are discounted between 30% and 50% of their market value. For a property to be eligible in the First Home Scheme it must be a new build or be purchased from someone who previously used the scheme themselves.
The First Home Scheme operates nationwide however you may find local restrictions. This is because the government allows local authorities to manage the scheme oversight. Some local authorities have a priority checklist to qualify for the scheme. For example, it is typical for local authorities to require you to be one or more of the following:
- Be an Essential Worker (NHS/Emergency Services)
- Already live in the area
- Have a low income
The only time these requirements are waived is if:
- You are a member of the armed forces
- You are divorced or separated from a member of the armed forces
- You are a widow of an armed forces member
Veterans are also exempt from local authority requirements providing they have served in the last 5 years.
How Does the First Home Scheme Work?
When an eligible property is sold on the First Home Scheme it will be marketed as a First Home Scheme property. This means when you conduct property searches you will need to specifically filter your results to include First Home property.
Some new build properties are not yet marketed openly and you may need to visit the developers sales office to enquire if any properties they are building will be available on the scheme.
There is a price cap on the property value which is £250,000 outside of London and £420,000 in the capital. Fortunately, this value is calculated after the discount has been applied, meaning you could potentially buy a £500,000 property with a 50% discount on the first home scheme.
Restrictions of the First Home Scheme
Buying a property on the First Home Scheme means you will be subject to the scheme’s restrictions.
These restrictions are designed to help people buy and own their home with a view to reside in the property for the foreseeable future. If you are looking to get onto the property ladder and then sell the property to upsize later on, the First Home Scheme is probably unsuitable.
This is because you can only sell the property to other people using the First Home Scheme and you won’t ever realise the true property value at sale.
To summarise, if you buy a property with a 30% discount, you will need to sell the property with a 30% discount. Even if the property increases over the course of owning it, you should expect the same value you bought at back. This is because 30% of the higher value will be factored in at sale and any profit from the First Home Scheme will be negligible.
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What are the Eligibility Criteria for the First Home Scheme?
Aside from the above mentioned local authority requirements, the government imposes several base requirements on the First Home Scheme. These are:
- You must be over 18,
- You must be a first-time buyer,
- You must be able to obtain a mortgage that covers at least 50% of the property value.
Finally, there is also a basic income requirement for the First Home Scheme. You must not have a household income of more than £80,000 (maximum £90,000 in London).
How to Apply for the First Home Scheme
Applying for the First Home Scheme can be complicated. Your first port of call will be the property developer or estate agent (if buying from an existing scheme seller).
They will go through your details and help you complete the application if they believe you are eligible. Once the application has been completed it will be sent to the local authority who will assess your eligibility.
Normally, there are fees for applying for the scheme but the amount is different between developers. Unfortunately, these fees are not regulated and you should enquire exactly how much it will cost before applying.
You will also need to have a Decision in Principle (sometimes called an Agreement in Principle) for your application to progress. You should approach a whole of market mortgage broker, like Boon Brokers, to acquire an Agreement in Principle. Once assessed, the local authority will provide the outcome to you, your developer, and mortgage broker/lender.
If your application is successful, the traditional house buying process will begin. If you are unsuccessful in your application, you will have the fee refunded and will need to seek property in another way.
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Other Government Schemes Available
There are other property buying schemes available such as Right to Buy if you live in a council property or Right to Acquire if you live in a housing association property.
For first-time buyers there are very few other schemes available. The Help to Buy Equity Loan Scheme has now closed for applications.
Speak to a Specialist
Government Schemes can be complex both in how they work and applying for them. Governments also update, review or introduce new schemes which can make it difficult to understand what options are available.
A mortgage broker will keep abreast of the various government schemes and help you find a scheme that fits your circumstances
Boon Brokers is a Whole of Market Mortgage, Insurance, and Equity Release Brokerage, providing fee free no obligation advice.
Contact Boon Brokers to book your First Home Scheme consultation and discuss the options available to you today.