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First Homes scheme: what is it and how does it work?

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First Homes scheme: what is it and how does it work?
First-time buyers have a difficult time getting on the property ladder after decades of rising house prices. The UK government has a number of schemes to offer vital assistance, including the First Homes schemewhich may offer a discount on new builds.  
This article will reveal everything you need to know about the First Homes scheme.

What is the First Homes scheme?

The First Homes scheme offers discounted homes to first-time buyers in England who otherwise wouldn’t be able to afford one.
First-time buyers can buy a new-build home in their local area at a discount of 30% on the market price via this scheme, which for an average new-build property, could lead to a saving of up to £100,000.

First Homes scheme: how does it work?

The First Homes scheme involves the building of new homes specifically to be sold at a discount, which are of a similar specification to full-price homes.
These will then be put on the market at a discount of at least 30%, but this can be increased by local councils to up to 50%, including in areas where property prices are very high.
However, these properties must be purchased by first-time buyers. If you’re buying as a couple, neither can have previously owned a home.
Otherwise, the properties are bought and sold as normal.
If a first-time buyer decides to sell the property, it will be independently valued - and the scheme discount will be re-applied to this new value for the next owner.
So, this will ensure homes are sold below market price and continue to benefit future first-time buyers.

First Homes scheme: who is eligible?

You need to be a first-time buyer to qualify for the First Homes scheme and buy in your local area with the intention of living in the property, so it cannot be a holiday home or buy-to-let.
While the scheme is open to people in every profession, certain professions may have priority such as serving members and veterans of the armed forces, as well as nurses, police, firefighters and teachers.
To ensure the scheme helps those most in need, the government has included some price caps, which are outlined below:
  • Property price caps: Properties are subject to a £250,000 price cap across England after the discount, although a higher cap of £420,000 applies in London.
  • Household income caps: Buyers’ combined income is capped at £80,000 across England and at £90,000 in London, but local planning authorities can set lower caps for the first three months of sale.  

Does the First Homes scheme make it easier to get a first-time buyer mortgage?

The scheme requires first-time buyers to buy a property with a mortgage or home purchase plan, which covers at least half the purchase value. With a discount in place, the mortgage requirement will be lower., which covers at least half the purchase value. With a discount in place, the mortgage requirement will be lower.
However, the market for lending on discount market homes is small, partly due to the limited number of homes available.

First Homes scheme: how do I apply?

Below is a brief overview of the steps you need to take to apply for the First Homes scheme.
  • Contact the developer: Let the developer know you're interested in buying a First Home, or you can ask an estate agent if you're buying from a previous First Homes buyer.  
  • Apply through the developer: They will take you through the steps to submit your application or do it on your behalf, including proving you are a first-time buyer, which a solicitor can do through Land Registry searches. You need to pay a fee if the First Home you want to buy is a new build. If your application is not successful, it will be refunded.  
  • Get the authority to proceed: If your application is approved, your local council will send you an authority to proceed and an eligibility certificate. You’ll need to give these to your conveyancer and mortgage provider (or broker) so that they can start the next steps.  
If there aren’t any First Homes in your area, it could be worth preparing for when they do come to market. Look into the price of local new-builds to see how much they’re likely to cost with the discount.
Then, review your budget and see what you can afford and if you can start saving towards a deposit.
It’s also worth checking your credit score. You can also request a mortgage in principle from a mortgage lender to get a good idea of what you can borrow.

Will I pay stamp duty?

First-time buyers are exempt from stamp duty, providing their purchase is £425,000 or less.
As the price cap is up to £420,000 under this scheme, you’ll unlikely need to pay any stamp duty.

Need advice on how to get on the property ladder?

Unbiased can quickly connect you with a qualified mortgage broker who can offer advice and find the most competitive mortgage for your circumstances.
Image of a promotion for a financial advisor from Unbiased
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