The First Home Scheme | The Benefits & Who it Caters for
The First Home Scheme is a UK government initiative designed to assist first-time homebuyers purchase a property at a discounted price. Introduced in 2021, the scheme aims to increase homeownership, particularly among young adults and those with lower incomes who are struggling to enter the property market. Here we look at the scheme, its benefits, and the target audience it aims to serve.
What is the First Home Scheme?
The First Home Scheme is a government-backed programme that offers newly-built homes at a minimum 30% discount to eligible first-time buyers.
The initiative aims to make homeownership more accessible and affordable by reducing the initial costs associated with buying a property.
The discount is achieved through a combination of developer contributions and government funding, lowering the purchase price for qualifying buyers.
Who does the First Home Scheme apply to?
The First Home Scheme caters primarily to first-time homebuyers who meet certain criteria.
To be eligible, prospective buyers must:
- Be a first-time buyer, defined as someone who has never owned a residential property in the UK or abroad.
- Have a combined annual household income of no more than £80,000 (or £90,000 in London).
- Intend to use the property as their primary residence – buy-to-let investors are not eligible.
- Be able to get a mortgage to finance the property purchase.
There may also be additional criteria set by individual local authorities based on local housing needs and priorities. For example, key workers, such as teachers, nurses, and police officers, might be given priority in certain areas.
What are the benefits of the First Home Scheme?
The First Home Scheme offers several benefits to eligible first-time buyers:
Lower purchase price
With a minimum 30% discount on the market value of the property, the scheme makes it more affordable for first-time buyers to enter the housing market.
Reduced deposit requirements
Due to the lower purchase price, first-time buyers may be required to provide a smaller deposit. Making it easier for them to save for a home.
Greater accessibility
The scheme aims to address the affordability gap in the housing market. Making homeownership more attainable for a wider range of people.
Local connections
By prioritising local buyers and those with strong local ties, the schemes aim is to ensure that communities maintain their character and demographic balance.
How can first-time buyers access the First Home Scheme?
To take advantage of the First Home Scheme, prospective buyers should follow these steps:
- Research: Investigate your eligibility criteria and available properties under the First Home Scheme in the desired area.
- Mortgage: Speak to a mortgage advisor to discuss financing options and get a mortgage agreement in principle.
- Legal advice: Seek legal advice from a solicitor or conveyancer experienced in dealing with the First Home Scheme.
- Property search: Identify a suitable property available through the scheme and make an offer.
- Complete your purchase: Work with your conveyancer to complete the necessary paperwork, exchange contracts, and complete the purchase.
Are there any downsides to the first home scheme?
While the scheme offers many advantages to first-time buyers, there are potential downsides to consider as well:
Limited property choices
The Scheme only applies to newly-built properties, which might not appeal to those who prefer older or more characterful homes. Additionally, the number of available properties under the scheme might be limited in certain areas, restricting options for eligible buyers.
Future resale value
Due to the initial discount on the property’s market value, there may be restrictions on reselling the property at full market value, at least for a certain period. This could affect the homeowner’s ability to move up the property ladder or make a profit from their investment.
Impact on affordability
While the scheme aims to address the issue of affordability in the housing market, critics argue that it could contribute to an increase in overall property prices. By making it easier for first-time buyers to enter the market, the scheme could increase demand and drive-up prices, which might ultimately hurt affordability in the long run.
Complexity and bureaucracy
The application process for the First Home Scheme can be complex and involve a lot of paperwork. Navigating the eligibility criteria and securing a mortgage with the help of a legal advisor might be time-consuming and stressful for some buyers.
Regional variations
The eligibility criteria and property availability under the First Home Scheme may differ across regions and local authorities, leading to a lack of consistency and potential confusion for prospective buyers.
First home scheme – yes, or no?
Despite these potential downsides, the First Home Scheme remains an attractive option for many first-time buyers looking to enter the property market.
As with any significant financial decision, it’s essential to carefully weigh the advantages and disadvantages, know your budget and seek advice, before committing to anything.
Last Updated: September 22nd, 2024
