With rents rising for tenants across the UK, saving for a deposit on a home for first-time buyers has become increasingly challenging over the past year. The government’s First Homes Scheme is designed to help people get onto the property ladder and support local communities for years to come.
At the end of October, applications for the government’s popular Help to Buy scheme closed. The scheme helped many first-time buyers get onto the property ladder, and now many will be wondering what alternatives are available.
Intending to increase homeownership across the country, the government has introduced a new scheme called the First Homes Scheme. With a similar goal of helping first-time buyers purchase a property and own their own homes, the scheme works slightly differently than the familiar Help to Buy scheme.
How Does the First Homes Scheme Work?
The headline benefit of the First Homes scheme is that the properties are discounted by at least 30% compared to their market price. Some areas will see applicants benefit from up to 50%, allowing for even larger savings for first-time buyers. The added benefit to this scheme is that the discounts will apply to the homes forever, meaning local areas will see increases in homeownership for first-time buyers for generations to come. Younger generations’ ability to purchase their own properties will encourage development and support local communities for years to come.
Targeted at first-time buyers and key workers in local areas, purchasers need a minimum of a 5% deposit against the discounted property price. This should help buyers purchase their own homes sooner than they would have had the opportunity to otherwise. There are other eligibility criteria that applicants will need to consider, such as a household income limit of £80,000 or £90,000 in London. The property must also be the applicant’s only home, and they must use a mortgage for the purchase.
The scheme is currently only available in England, and 1,500 homes are being built over the next two years in over 100 areas across the country.
What are the drawbacks to the scheme?
Overall, there is no doubt that the scheme offers first-time buyers the fantastic opportunity to own their own home. However, there are some factors to be aware of prior to submitting an application for the scheme. For one, it’s only applicable to new build properties, and not all developers have yet signed up. With a constant demand for new build properties regardless of government schemes, if developers can sell their properties without a discount, then they will. This means that the number of homes available for applicants is currently very limited. As such, it’s especially important to check with a developer in advance to see if the property you are interested in will be eligible for the discount.
With very few properties currently being built for the scheme, supply will not meet demand, meaning competition for these homes will be rife. The key to securing these properties will be speed, so speaking to a broker is essential to help you get all the documentation you need ready, and a mortgage decision in principle to put you in the best position.
How to apply
As the new scheme gradually gets rolled out across the country, the idea is that First Homes Scheme will be available on a limited number of plots in the majority of new developments. Again, it’s essential to speak to the developer to learn whether the property you are considering will qualify for the scheme’s discount.
For more information about the scheme, the government website has plenty of information about the application process and eligibility. If you would like advice or support with your mortgage application for your own home, get in touch with our residential consultants on 0345 345 6788, or by submitting an enquiry here.
15th November 2022