Launched in June 2021, the First Homes Scheme is a government programme that aims to help first-time buyers take that crucial first step on the property ladder.
How does the First Homes Scheme work?
The First Homes Scheme enables first-time buyers to buy a property with a discount of 30% or more.
This means that they won’t need to raise a prohibitively large deposit, which has proved to be something of an obstacle to many, and won’t need an uncomfortably large mortgage, which will make lenders more willing to offer them home loans.
Who is eligible?
First Homes Scheme properties are newbuilds and they have to be offered to first-time buyers with a minimum 30% discount off their valuation price. The scheme aims to offer affordable homes to first-timers, local residents and key workers.
Eligibility criteria include:
- Being a first-time buyer who’s never owned a property before
- Both being first-timers if it’s a joint purchase
- Having a maximum household income of £80,000 (£90,000 in London)
- Taking out a mortgage that covers no less than 50% of the property’s purchase price
- Using the property as a main residence, not a buy-to-let property.
Properties in the First Homes Scheme also have price caps; properties outside of London must have a purchase price of no more than £250,000 with the discount.
The pros and cons of the First Homes Scheme
- Buyers can purchase a new home with a discount of at least 30%
- The discount means a smaller deposit
- It also means a smaller mortgage
- Buyers may be able to buy in their local area rather than moving away
- Buyers can only purchase a new-build home under this scheme
- New-build properties can command a premium
- When it comes to selling the property, the same discount must be applied and only someone who meets the First Homes criteria can buy it
- Competition is likely to be fierce
What sort of deposit is necessary?
Any deposit for a property in the First Homes Scheme will be reduced due to the discount.
For example, a house valued at £350,000 will cost £245,000 with a 30% discount. If the buyers aimed to raise a 10% deposit on the £350,000, it would mean raising £35,000, but just £24,500 after the discount, making life much easier.
Applying for the First Homes Scheme
There’s no formal application process for the First Homes scheme; buyers simply need to watch out for newbuild developments in their area and then find out if the developer is offering any of the homes for purchase under the scheme.
The scheme launched in June 2021, so a lot of the homes eligible for the discount will be coming onto the market throughout 2022.