HOUSE THAT
First-time buyer schemes that could give you up to 50% discount on your ideal home – check if you’re eligible
Expert says half of first-time buyers could be missing out on government initiatives
THOUSANDS of Brits across the UK are eligible to receive up to 50% off their first home - but may not even realise it.
With house prices steadily rising again, it's more important than ever for first time buyers to take advantage of whatever support is available to get on the housing ladder.
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Yet, thousands of young people could be missing out because they simply don't realise they're eligible.
Fiona Peake, personal finance and consumer expert at Ocean Finance, said: “Many UK residents may not realise they’re eligible for first-time buyer schemes, which can be a real game-changer for getting on the property ladder.
“Based on our [recent] survey, an estimated 50% of first-time buyers could be missing out on these government initiatives, simply because they’re unaware of them or assume they wouldn’t qualify.”
There are a number of schemes that give people a discount on their first home.
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But one particular scheme, the First Homes Scheme, allows first-time buyers to pick up a new-build home built by a developer for a whopping 30% to 50% off the asking price.
The scheme, which launched back in June 2021, also allows a buyer to purchase a home through an estate agent, provided that the home was previously acquired through the scheme.
But who is eligible and how do they apply?
Who is eligible for the First Homes Scheme?
The First Homes scheme is eligible for first-time buyers across England who meet certain criteria.
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In order to qualify, a buyer must be able to get a mortgage for at least half the price of the home.
The new home also needs to cost less than £250,000 after the discount has been applied, or £420,000 in London.
And the collective household income of the buyer, or buyers, purchasing the home must not exceed £80,000 a year before tax, or £90,000 if they are buying in London.
In some cases, local councils may prioritise giving First Homes discounts to key workers, people who already live in the purchase area, or those on lower incomes.
For those in the armed forces and their relatives, exemptions do apply.
How do you apply?
In order to access the scheme, typically a first-time buyer will need to contact a new-build developer and tell them they would like to buy through the housing scheme.
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If you’re purchasing from a previous First Homes buyer, you will need to contact their estate agent and say you intend to buy through the scheme.
Once you have been confirmed as having passed the eligibility criteria, they will help you complete your application.
In some cases, you may need to pay a reservation fee if the property is a new build. Don’t worry though, you will get the fee back if your application isn’t successful.
Developers may also offer you incentives such as free goods or cash back, but these are unlikely to be worth more than 5% of the discounted purchase price.
How does the First Homes scheme work?
The First Homes scheme is designed to assist first-time buyers onto the housing ladder in an increasingly difficult market.
The average house price in the UK is £287,924, according to the latest data from Land Registry.
This means that through the First Homes scheme, a buyer could expect to save between £86,377 and £143,962 on their first home.
However, there are some pros and cons to consider before buying through the scheme:
Pros
- You don’t need such a big deposit
- You can take out a smaller mortgage, meaning smaller monthly repayments
Cons
- When you sell the home, you must pass the discount onto the buyer
- You can typically only sell to someone else who is eligible for the scheme
- You can only find eligible properties by checking with local developers
Must knows about the First Homes scheme
Here is a list of what you must know about the First Homes scheme
Discount
The scheme offers a minimum discount of 30% off the market value, but local areas can set a discount of up to 50%.
Price cap
The first sale of a home bought through the scheme must be at a price no higher than £250,000, or £420,000 in London.
Eligibility
The scheme is restricted to first-time buyers with a household income of no more than £80,000, or £90,000 in London. They must also use a mortgage for at least 50% of the purchase price.
Selling
To sell a First Homes property, the seller must try to find another first-time buyer who is using the scheme. The seller must also apply the same percentage discount to the new valuation as they received when they bought their home.
Local authority involvement
When selling a First Homes property, the seller must notify the local authority who will provide instructions on marketing and eligibility requirements.
What other schemes are available?
The mortgage guarantee scheme
The mortgage guarantee scheme has encouraged more banks and building societies to offer 95% loan-to-value (LTV) mortgages, meaning you only need a 5% deposit.
This scheme is available for both first-time buyers and second steppers across the UK. One caveat is the property must not cost more than £600,000 and it must be your only home.
We recently revealed how this scheme is very under-utilised, accounting for just 3.8% of transactions for 18-30-year-olds between 2021 and 2023.
The Shared Ownership scheme
Shared ownership is designed to help people on low incomes in England through purchasing part of the property and renting the rest.
You can start with as little as 10% and increase the part you own when you can afford to, which is known as ‘staircasing’.
The other benefit here is that you only pay a deposit on the share of the property you are buying.
To be eligible for the scheme you must have a total household income of less than £80,000 a year, rising to £90,000 in London.
The Lifetime ISA
The Lifetime ISA is there to help first-time buyers save for a deposit by topping up their savings by 25%, or to aid in retirement.
As part of the terms, an account holder can save up to £4,000 a year, which the government will add a 25% bonus to.
In more good news, any interest an account holder incurs is tax free.
In order to be eligible to receive the bonus, you must use the money to buy your first house up to a maximum £450,000 purchase price, or to aid your retirement.
Interested parties can only open the account between 18 and 39, but you can keep paying into it until 50.
Help to Build: Equity loan
The Help to Build: Equity loan scheme is a government initiative for those who wish to build their own home or convert a commercial property into one.
This option is for both first-time buyers and those looking for their second home.
The Government will top up a buyer’s deposit with a loan that is interest free for five years.
The equity loan amount of the total estimated cost can vary however, ranging from 5% to 20%, and rising to 40% in London.
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To access the initiative, you must apply for a self-build mortgage from an approved lender first, and then apply for a Help to Build loan.
As you progress through the build you will receive parts of the mortgage to cover the costs, and the build must be complete within three years.
Expert view on low take-up of schemes
By Pete Mugleston, managing director and mortgage expert at Online Mortgage Advisor
It’s concerning to see how many first-time buyers in the UK are either unaware of, or unable to access government schemes specifically designed to support them.
Schemes like Help to Buy, Shared Ownership, and the First Homes initiative were introduced to address the challenges young people face in getting on the property ladder, especially with rising house prices and the cost-of-living squeezing affordability even further.
As Help to Buy ended in 2023, many first-time buyers are left feeling stranded, with fewer options to bridge the gap between their deposit and what lenders will offer. It’s a missed opportunity for those who could have benefited.
The Lifetime ISA remains a solid tool for saving towards a deposit, but it requires early planning, something not everyone is prepared for.
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