Get help as a first-time buyer with the First Homes scheme

Are you looking to buy your first home locally but the property prices in your area are just too high? Then the First Homes scheme may be able to help you. This government-backed scheme was launched in June 2021 and it offers a 30% discount on the prices of new-build properties. The scheme is designed to help first-time buyers get onto the property ladder. Such a big discount on the price may be the break you’ve been waiting for to afford your first home.

Who is the scheme for?

The scheme focuses on prospective homeowners hoping to buy their first homes locally. This means you don’t have to look further afield for a more affordable property. If you are a key worker, such as a police officer, an NHS worker or a teacher, you will be prioritised under this scheme. This is also the case if you are serving in the armed forces or are a recent veteran. Unlike other key workers, however, you don’t need to meet any local connection criteria set by your local council.

How does the First Homes scheme work?

This scheme, which is available in England, offers a discount of at least 30% to first-time buyers for newly built properties. Higher discounts of 40% or 50% may be offered by some local councils provided that the need for this has been agreed with the government. Property prices are capped under this scheme at £250,000 after the discount unless you wish to buy in London. In this case, the cap is set at £420,000 after the discount has been applied. Lower price caps can be set by local councils so check this first before you begin viewing properties.

To buy your first home via this scheme, you need to pay a 5% deposit and take out a mortgage for at least 50% of the discounted purchase price. As the deposit is based on the discounted price, this makes it much easier for you to save than if you choose to buy a property outside of the scheme. For example, you may have found a new-build home in Bexleyheath for £300,000. After the 30% discount is applied, the price is £210,000. A 5% deposit for this discounted price is £10,500. If you buy the same property outside of the scheme at the normal price of £300,000, however, your 5% deposit will be significantly higher at £15,000.

The smaller mortgage loan makes you more appealing to lenders. This is because you’re considered less of a risk than if you applied for a higher amount. It also means your monthly repayments will be lower.

Your eligibility for the scheme

To benefit from this scheme, you need to fulfil the following criteria:

• You must be a first-time buyer, as does anyone else you buy with.
• You need to buy a newly built property that’s registered under the scheme.
• The property must be used for your main residence.
• You must have a household income of £80,000 or less. If you live in London, it must be no more than £90,000.
• You need to pay a deposit of at least 5% of the discounted purchase price.
• You need to have a mortgage for at least 50% of the discounted purchase price.

How to apply for the First Homes scheme

There’s no set application process for this scheme. Instead, you need to check the new-build developments in your area and ask if any of the properties will be offered under the scheme. If they are and you’ve found one that you’d like to buy, you need to reserve it and make an application to the local authority via the builder. You need to pay a reservation fee before your application is submitted. This will be refunded if you’re later found not to meet the eligibility criteria.

Once your application has been reviewed by the local authority, you will be given an Eligibility Certificate and an Authority to Proceed (ATP). You need to give these to your mortgage broker in Kent or London as well as to your solicitor. The next step is to formally apply for your mortgage. It’s important to wait until you have received your ATP before you do this. If you do this the other way round and are declined for the scheme, you may be liable for fees incurred with your mortgage application. Your mortgage broker and solicitor will continue with the purchase process until you are ready to exchange, complete and collect the keys to your new home!

What happens when you sell your property?

The discount that is applied to your home when you buy it will always stay with the property. This helps first-time buyers in the local area benefit from the same discounted price every time the property is sold. This means if you buy your first home with a 30% discount and decide to sell it in the future, it has to be to another first-time buyer via the scheme. They will also reap the benefits of a 30% discount on the market value at that time.

Going back to the example we used earlier, you have found a new-build home in Bexleyheath with a market value of £300,000. You have benefitted from a 30% discount of £90,000, allowing you to buy the property for £210,000. In the future, the property’s market value has increased to £325,000. The new buyer also receives a 30% discount on this price, which is £97,500. This means they only pay £227,500 for their first home.

Alternative schemes to consider

As this scheme is so new, there are a limited number of properties currently available. If you can’t find a new-build development near you that has properties registered with the First Homes scheme, there are other government-backed schemes that you can take advantage of.

Before searching for Welling or Pimlico mortgages, speak with your mortgage broker about the Help to Buy shared ownership and equity loan schemes as well as the 95% mortgage guarantee scheme. There are pros and cons with each scheme and your broker will give you impartial advice on all of them. That way, you can make an informed decision as to whether you prefer to opt for an immediate solution with help from the government or whether you prefer to wait for a new-build to become available under the First Homes scheme in your local area.