There’s a new scheme in town for first-time buyers. The First Homes Scheme is designed to help those who are priced out of the market finally get their feet on the first rung of the property ladder. But how does it work, and who can make use of it? Read on to find out.
What is the First Homes Scheme?
The First Homes Scheme is a new initiative from the UK Government, helping first-time buyers get on the property ladder. The government launched It in June 2021, in response to house prices rising at their fastest rate in 10 years.
How does First Homes Scheme 2021 work?
The First Homes Scheme 2021 lets first-time buyers purchase their first home at a discount of at least 30%. The maximum discount is 50%, but this only applies in a limited number of areas.
This makes buying your first home much more affordable. The UK Government claims that the discount saves buyers an average of £70,000.
Once you have bought your first property under the scheme, the 30-50% discount applies to the property forever. So, if you sell your property later, the same discount applies to the next buyer.
Who is eligible for the First Homes Scheme?
To be eligible for the First Homes Scheme 2021, you must be a first-time buyer. If you are making a purchase with a partner, they must be a first-time buyer too. You also must have a combined household income of £80,000 or less, or £90,000 if you live in London.
These are the firm criteria for eligibility. However, the scheme is designed to help people get on the property ladder in their local area. Therefore, local councils participating in the scheme are being encouraged to prioritise buyers with local connections, particularly key workers. If this applies to you, you should find it quicker and/or easier to be approved for the scheme.
At the moment, the scheme is only in place in England. Similar schemes are under consideration for other parts of the UK.
Is there a price cap on the First Homes Scheme?
The price cap for properties being sold under the First Homes Scheme is £250,000. The cap rises to £420,000 if the property is in the Greater London area.
Do First Homes Scheme properties still need a deposit?
You will still need a minimum deposit of 5% to secure a mortgage on a First Homes Scheme property. The discount of 30% (or 50% in some cases) just means that your required deposit will be significantly smaller.
Also note that you can use the government’s new 95% mortgage guarantee scheme to help secure the property.
Which UK areas offer First Homes Scheme developments?
Only new-build developments in England are currently offering the First Homes Scheme. The government claims that around 1500 homes will be available through the scheme by the end of the autumn 2021. From 2022 onwards, around 10,000 new homes per year should be offered as First Homes.
The first developments under the First Homes Scheme were launched in the East Midlands, Staffordshire and Durham.
How do I apply for the First Homes Scheme?
At the time of writing, there is no national application portal for the First Homes Scheme. You will have to find out which developers are participating in the scheme and if they have developments in your area.
Does the First Homes Scheme affect stamp duty?
Currently, first-time buyers pay zero stamp duty when buying properties worth up to £300,000. This means that all First Homes Scheme properties will be exempt from stamp duty.
The exception to this is properties in the Greater London area worth between £300,000-£420,000. Stamp duty will still apply when purchasing properties in this price range.
What benefits does the First Homes Scheme offer?
The key benefit of the First Homes Scheme is that it provides a significant discount on buying your first home. This can make all the difference when trying to get out of renting, and onto the property ladder.
Are there any drawbacks to the First Homes Scheme 2021?
The only drawback to the First Homes Scheme is that the same discount will still apply when you try to sell the property. Therefore, if house prices rise, the profit you make from a future sale will be reduced. This is because the same 30-50% discount will apply to the new house value – it won’t be the same amount of money off as when you purchased it.
Example: If you buy a house with a value of £250,000 and the scheme’s discount in that area is 30%, you would only need to pay £175,000. This is a discount of £75,000. If you later sold the house at a value of £300,000, the new buyer’s discount would be £90,000 – 30% of the new value.
This means that you’re still making profit, though not as much. This is something to bear in mind when you’re considering how to build equity and how long you want to live in your first home.
Is the First Homes Scheme worthwhile?
The First Homes Scheme 2021 provides a significant boost to first-time buyers’ purchasing power. It will make it much easier to secure that all-important first property.
Currently, the only issue is the small number of homes available under the scheme. However, this should be addressed in the next few years, with more property developers coming on board.
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