First Homes- Who and Where will the scheme help the most?
Offering first-time buyers over the age of 18 in England the chance of home ownership with discounts of 30-50 per cent of market value, the Government’s First Homes programme is a successor to Help to Buy.
If buying as a couple, neither partner can previously have owned a home. It must be either a new home built by a developer or a home you buy from someone else who originally bought it as part of the scheme.
Who can afford a First Home?
First Homes has a combined earnings eligibility cap of £90,000 in London and £80,000 elsewhere and you must all be first time buyers.
Must be able to get a mortgage for at least half the price of the home. The local council may also set some eligibility conditions:
For example, some councils may prioritise giving First Homes discounts to:
- essential workers
- people who already live in the area
- those on lower incomes
Value Caps
First Homes value caps are set at £420,000 in London and E250,000 for the rest of England.
The primary consequence is that developers in these locations may only build smaller First Home properties that will fall within the value cap, rather than delivering a range of sizes, including larger properties suitable for family housing.
How far will this enable people to get on the housing ladder?
First Homes aim is to open home ownership to more First Time Buyers, including a larger number of less affluent households than the previous Help to Buy scheme which finished in 2023.
Buyers also need to be aware of the restrictions that apply in the future. When they come to resell the home, the discount will be passed on to the purchaser, and the purchaser must meet the local authority defined eligibility criteria.
But despite these restrictions, the scheme does offer another route to home ownership and enables people who would likely otherwise be renting to have increased security of tenure and be settled in a location for the long term.
How it Works
You can look for new homes in your area that are advertised by developers as part of the First Homes scheme. You can also buy a home through an Estate Agent, which someone else bought before through the scheme.
Developers offer these homes to first-time buyers with 30% to 50% of the market value taken off the price.
Unlike shared ownership, there’s no rent to pay.
Every home that’s sold is valued by an independent surveyor to make sure the discount is based on actual market value. The scheme discount will be re-applied to this new value for the new owner.
The homes cannot cost more than G420,000 in London, or G250,000 anywhere else in England, after the discount has been applied. The local council can lower this maximum price.
You can decorate or improve the property but if you let or sell this, you’ll need to follow First
Home scheme rules.
You can only sell the home to someone who is eligible to buy a First Home. You must give them the same percentage discount that you got, based on the home’s market value at the time of sale.
Local Eligibility Criteria
Councils may set local eligibility criteria. For example, they may prioritise giving First Homes discounts to key workers (as defined by the council), people who already live in the area or those on lower incomes.
How to Apply
Client contacts the developer (or estate agent if buying from a previous First Homes buyer) and tells them about wanting to buy a First Home.
They’ll check you meet the eligibility criteria, help you to complete the application, then send it to the local council. There may be a fee to pay if the First Home property is a New Build, the amount is set by the Developer. The fee will be refunded if the application is unsuccessful.
The local council check an application to make sure it’s eligible under the scheme. They contact the client to confirm their decision and contact the developer and mortgage adviser.
If your First Homes application is approved
After receiving approval for your application, the client follows these steps:
- Hire a conveyancer – this is a solicitor who can help you with the purchase.
- Apply for your mortgage.
- Make sure your conveyancer follows any local council instructions.
- Complete any legal documents the local council sends you.
After you’ve got a mortgage offer and agreed on a contract with the developer, your conveyancer will ask the local council if you can exchange contracts.
The local council will check the conveyancer’s request to make sure it’s legal and tell you when they’ve decided.
Selling the property
You can only sell the property to someone who is eligible to buy a First Home. You must give them the same percentage discount that you got, based on the home’s market value at the time of sale.
You would need to firstly tell the local council you want to sell, then find an Estate Agent to sell your property under the First Homes scheme. Finally, get the property valued by a surveyor who is registered with the Royal Institute of Chartered Surveyors (RICS)
Once your property has been on the market for more than 3 months your buyer will no longer have to meet local criteria.
Letting the property
You can usually only let your First Home for a total of 2 years during the time you own it, no matter how many tenants you have.
To do this, you need to:
- check if your mortgage agreement allows it and tell the local council.
The 2-year limit resets if you sell the home to someone else.
Letting for longer than 2 years
You may be able to let out your First Home for longer than 2 years if:
- the location of your job changes
- a marriage or long-term relationship ends.
- you’re moving to get away from a situation that involves domestic abuse.
- you’ve been made redundant.
- you’re caring for a relative or friend.
You must have permission from the local council and may also need to ask your mortgage lender.
You can contact one of our independent advisers for personalised advice and support in making confident, informed decisions by using our Facebook or Contact Us pages, or speaking to a colleague in our office on 01329 282882.
Please note: The content of this blog is for your general information purposes only and does not constitute as mortgage advice.
Your home may be repossessed if you do not keep up repayment on your mortgage.