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If you’re a key worker or a first-time buyer hoping to purchase a newly built property in your local area, you’re going to want to hear about the new First Homes programme.
Our guide explains what the scheme is, how it works and what to consider.
What is the First Homes scheme?
The First Homes scheme is a UK government initiative aimed at helping first-time buyers purchase homes at a discount of at least 30%-50% of the market price. The properties are newly built and located in their local area.
The scheme is designed to make homes more affordable for key workers and local residents in areas where they may have been priced out of the market.
Who is eligible for this first-time buyer scheme?
- First-time buyers
- You must be over 18 years of age
- Have the ability to get a mortgage for at least half the property’s value.
- Households with income not exceeding £80,000 (£90,000 in London)
Some local authorities will prioritise first-time buyers who are key workers.
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How will it work?
The First Homes programme is designed to help first-time buyers and key workers such as NHS nurses to purchase a property at an affordable price. Properties available under this scheme are sold with a minimum discount of 30% below the market value, making them more accessible to those who may not otherwise be able to afford to buy a home.
For instance, if a First Homes property were to be valued at £300,000, a key worker such as an NHS nurse could receive a 30% discount of £90,000, purchasing the property at £210,000. This discount provides significant savings for the buyer, which can make the difference between being able to purchase a home or not.
One important aspect of the scheme is that when the owner of the property decides to sell, the 30% discount they received must be passed on to the next buyer, who must also be a key worker or local first-time buyer. This ensures that the affordability benefit of the scheme is preserved and that the property remains accessible to those who need it.
To illustrate, if the same property were to increase in value by 10% to £330,000 over a period of 10 years, the new seller would receive £231,000 from the sale.
This represents a 30% discount from the current market value and allows the next buyer to purchase the property at an affordable price, continuing the cycle of accessibility for first-time buyers and key workers.
Key workers included for the first home scheme
How much deposit would I need for a First Homes programme house?
The amount of deposit you need for the UK First Homes Scheme will depend on several factors, such as the purchase price of the property and the mortgage lender’s requirements.
Typically, mortgage lenders require a deposit of at least 5% of the property’s purchase price, although some may require a higher deposit amount. For example, if you are buying a First Homes property valued at £200,000, you may need to have a deposit of at least £10,000.
It is worth noting that the First Homes Scheme’s discounted price may also affect the deposit amount required. For instance, if the First Homes property is being sold with a 30% discount, the deposit amount required would be based on the discounted price, not the full market value.
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What’s the maximum discount available via the First Homes Scheme?
The maximum discount available under the First Homes scheme in the UK is 50% off the market value of the property.
Buying a First Homes programme property – are there other costs to consider?
In addition to the deposit, you will also need to consider other costs associated with buying a property, such as legal fees, valuation fees, and stamp duty (if applicable). You may also want to factor in ongoing costs such as mortgage payments, utility bills, and maintenance costs.
- Solicitor’s fees
- Removal costs
- Valuation fees
- Surveyor’s fees
- Insurance
How can I apply for the First Homes scheme?
Applying for the First Homes scheme in the UK involves several steps. Initially, you must get in touch with the developer of the new-build property or an estate agent if you plan on purchasing it from a previous First Homes buyer.
To secure the property, you may be required to pay a reservation fee. Once you’ve expressed your interest, the developer or estate agent will provide guidance to complete the application process.
You’ll need to submit the application to your local council for review. If your application is accepted, you’ll receive an Authority to Proceed and an Eligibility Certificate. It’s crucial to obtain these documents because you’ll have to furnish them to your mortgage provider or broker, as well as your conveyancer, to move forward with the buying process.
Before submitting an application, it’s important to verify that you’re eligible for the First Homes scheme. You can do this by reaching out to your local authority or consulting the official government website.
At the time of writing, there is no national application portal for the First Homes Scheme. You will have to find out which developers are participating in the scheme and if they have developments in your area.
What happens if my First Home application is approved?
If your application for the First Homes scheme in the UK is approved, you will need to proceed with the purchase process.
Here are the steps you will need to take:
- Instruct a solicitor: You will need to appoint a solicitor who will handle the legal aspects of the purchase. Your solicitor will review the contract, carry out property searches, and ensure that the property meets all the necessary requirements.
- Secure a mortgage: You will need to secure a mortgage for the remaining value of the property after deducting the discount provided by the First Homes scheme. You will need to provide the Authority to Proceed and the Eligibility Certificate to your mortgage provider or broker to initiate the mortgage process.
- Pay the deposit: You will need to pay the deposit for the property. The amount of the deposit will depend on the terms and conditions set by the developer of the First Homes property you are interested in.
- Complete the purchase: Once you have secured the mortgage and paid the deposit, you can proceed with the purchase. Your solicitor will handle the legal aspects of the purchase, including the exchange of contracts and the transfer of ownership.
Is the First Homes Scheme only for first-time buyers?
The First Homes scheme in the UK is exclusively designed for first-time buyers. However, if you’re not a first-time buyer and still struggling to get onto the property ladder, there are other government schemes available to assist you, such as shared ownership.
Shared ownership allows you to purchase a share of a property (usually between 25% and 75%) and pay rent on the remaining share.
You can gradually increase your share of the property over time, a process known as staircasing. This scheme can be an affordable way for people who cannot afford to purchase a property outright to get onto the property ladder.
Are there any drawbacks to the First Homes Scheme?
One potential drawback of the First Homes scheme in the UK is that the discount you receive when purchasing a property is tied to that property.
This means that if you purchase a property with a 30% discount, for example, you will be required to sell it at a 30% discount in the future.
While this feature of the scheme ensures that the benefits of the discount are passed on to the next eligible buyer, it can also mean that potential increases in property value may be reduced.
If property values in the area rise significantly, you may find that you are unable to sell your property at market value without first repaying the discount you received.
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Is the First Homes Scheme worthwhile?
The First Homes Scheme introduced in 2021 is a government initiative that aims to support first-time buyers in the UK by offering them the opportunity to purchase new-build properties at a discounted price. This can provide a significant boost to their purchasing power, allowing them to get onto the property ladder and start building equity.
However, one of the current challenges facing the First Homes Scheme is the limited availability of properties that are eligible for the scheme. The government has stated that they aim to make at least 25% of new-build homes available under the scheme, but this target has yet to be met in many areas of the country.
This lack of availability can make it difficult for first-time buyers to take advantage of the scheme and can lead to increased competition for the limited number of properties that are available.
How can Strive Mortgages help you with a First Homes mortgage?
At Strive Mortgages, we specialise in helping first-time buyers secure mortgages, including those under the First Homes Scheme. We offer personalised mortgage advice and guidance to clients to you navigate the complexities of the mortgage process, from initial eligibility checks to submitting applications and securing financing.
We work with a wide range of mortgage lenders, including those who offer First Homes Scheme mortgages, to help you find the best possible mortgage deal for your needs and budget. Get in touch with us today.
For more info on first-time buyer mortgages, please contact a member of the Strive team, by emailing [email protected] or call us on 01273 002697.
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