The Help to Buy: Equity Loan scheme closes to new applicants in October this year. However, a new government loan scheme has been released to fill this gap for first-time buyers. The First Homes scheme will enable first-time buyers to buy a property for 30% to 50% less than its market value.
This scheme is only available in England and can only be used on new build properties built by a developer. Alternatively, you can buy a property from someone else who originally bought their home as part of the scheme.
If you’re a first-time buyer wanting to get on the property ladder find out everything you need to know about the First Homes scheme below.
Government First Homes scheme eligibility
There are criteria you will need to meet to ensure you’re eligible to buy through the First Homes scheme. You must be:
- A first-time buyer
- Able to get a mortgage for at leas half the price of the home
- Have a household income of less than £80,000 (or £90,000 for London)
There is a possibility for local councils to put in their own rules regarding the scheme. First Home discounts may be awarded to priority groups such as:
- Those who live in the local area
- Those on lower incomes
- Essential workers
However, any council rules do not apply to the following as long as you meet the criteria:
- Armed forces personnel
- The divorced or separated spouse of an armed forces member
- A widow or widower of an armed forces member
- A veteran who left the armed forces in the past 5 years
How does the new First Homes scheme work?
Developers in your area will advertise if they are part of the First Homes scheme. However, it does not hurt to contact them directly if it isn’t obvious. They will have a selection of properties available to offer to first-time buyers with 30% to 50% discounted off the market value.
So, what’s to stop developers adding an additional 30% to the asking price of a property? If you view a home that is part of the First Homes scheme it will be valued by an independent surveyor to make sure the market value and discount are appropriate.
If you’re buying in London the property cannot cost more than £420,000 after the discount has been applied. For the rest of the country, properties need to be £250,000 or under following the discount.
In the future, if you want to sell your First Homes property, it will need to be sold to a first-time buyer. You would have to sell with the same percentage discount that you received. However, it will be based on the property’s market value at the time.
How can you find first homes scheme developers?
Scout out new build developments in your area and contact them directly if they’re not advertising their First Homes properties. Typically, however, you will be able to visit their website and eligible properties will be labelled as being part of the scheme. Alternatively, if you’re buying from a previous First Homes buyer, this will likely be through an estate agent.
How can you apply for First Home scheme properties?
Your point of contact at the development of choice will be able to help you completed the application. They will then send this to the local council. The developer will charge a fee if the property you wish to purchase is a new build. There is no fixed price, and this will vary between different developers.
As the developer should have done their due diligence it is likely the council will accept your application. The council will contact you directly following an accepted application, as well as your developer and mortgage advisor.
However, you will receive feedback if your application is rejected.
What happens after a successful First Homes scheme application?
If your application is approved by the local council you will need to carry out the following four steps:
- Hire a solicitor or conveyancer to help you with the purchase process
- Apply for your mortgage
- Make your solicitor or conveyancer aware of any local council rules
- Complete paperwork provided by the local council
Once this is all completed and a contract drawn up, your solicitor will ask the local council if contracts can be exchanged. The council will look over everything and get back to you with a response.
You will need to pay your deposit when you exchange contracts. At this point you are legally committed to buying the First Homes scheme property. Once you’ve exchanged contacts you can set a completion date with the developers. This is the date you can move into the property.
On completion day itself your solicitor will transfer the money from your mortgage lender to the developer. Once this has happened you will be handed your keys and the property is all yours.
Can I sell my First Homes property in the future?
You can sell your home, but it will need to be to a first-time buyer that is First Home scheme eligible. You will have to give the same discount that was applied when you originally purchased the property but based on its current value. You will have to get your home valued by a surveyor who is registered with the Royal Institution of Chartered Surveyors.