What is the First Homes Scheme and how do I use it?

The British government offers a number of reliefs and assistance programmes for different groups in society. In a rather privileged position are First Time Buyers, i.e. people who are buying a property for the first time and do not own any other property. We have described this status and other related benefits in another article, but in this one, we will focus on the First Homes Scheme, a scheme that makes it significantly easier for first time buyers to buy a home in England (This scheme is not available in other parts of the UK).

What is First Homes Scheme?

The First Homes Scheme is a government scheme that allows buyers to purchase a property at a discount of at least 30%. This applies to some newly-built properties and those bought from an owner who has taken advantage of the scheme themselves. This is because once a property is included in the scheme, it has this status forever.

As we mentioned earlier, the discount starts at 30%. Whether it is increased to 40% or 50% depends on the local authority - the terms of the First Homes Scheme can vary from location to location. The local councile sets the discount depending on the property prices in the area and the income level of the residents. The overall aim of the scheme is to enable people who need it most to buy a home.

The inclusion of new properties in the discount scheme is one of the obligations of developers - it is one of the requirements to be met in order to get planning permission. Once again, the number of dwellings on a development that will be included in the scheme depends on the council. This fact is important to realise in general how the First Homes Scheme works - unlike other assistance schemes, you don’t get money from the state, but the discount is imposed in advance on the developers, who are obliged to sell the housing at a lower price.

Who is eligible for the First Homes Scheme?

In order to participate in the scheme and purchase a property at an attractive discount, you must meet a few basic criteria. The basis, of course, is First Time Buyer status - as previously mentioned, this is someone who does not own any property either in the UK or internationally. Such people, in addition to being able to participate in the First Homes Scheme, are fully exempt from Stamp Duty Land Tax if the property costs no more than £300,000.

The second condition is an annual income limit. These must not exceed £80,000 (or £90,000 if buying in London) and this applies to all persons using the property as owners who will be resident and financially contributing to the mortgage. In theory, if the property will be financed entirely by just one person, being the sole formal owner, only their income may be taken into account. In practice, however, we advise caution with such arrangements, as the conditions are quite strictly enforced and the authorities may require additional statements of income situation.

In addition to this, the property cannot be bought for investment purposes - it is only to be used as a primary residence. Through the First Homes Scheme, a home cannot be bought with cash either - it must be financed with a mortgage with an LTV of at least 50%.

Priority period

Another important issue concerning the variation in the terms of the scheme between other parts of the country is the possibility for the authorities to give priority to purchase to a specific social group. The priority period is usually a 3-month period in which newly built properties covered by the scheme are only available to people who meet additional criteria set by the council. These can be:

• People who have lived in the area for x years;

• People who work in the vicinity of these properties;

• Key workers (Key community occupations) such as NHS staff, teachers or police officers.

At the end of such a period, the dwellings go on the open market, where they can be bought by anyone in the country who meets the conditions. Note that the priority period does not have to be applied at all - it is up to the local authority to decide.

How can I find housing included in the programme?

Finding a property covered by the First Homes Scheme is unlikely to be the easiest task. Such homes are scarce, and it is rarely possible to add a filter to separate such listings on the classifieds sites. One of the most popular sites, such as Rightmove, allows you to add a “Buying Schemes” filter, but this does not exclude schemes such as the popular Shared Ownership, resulting in sifting through dozens of different other listings. Searching through developers’ sites can also be quite tiresome and, as in the previous case - applying filters is not always possible.

In practice, there are 2 solutions. These involve contacting the developer directly or the local councillor. To start with, we strongly recommend the latter option - the local authority will know best what the plans are for the new development and how many discounts are foreseen. From the council you can find out straight away what the terms of the promotion will be and whether and under what conditions the priority period will apply.

How do I benefit from the First Homes Scheme?

If you have found a suitable home covered by the scheme, you will be faced with a number of necessary steps to buy a property. Admittedly, buying a property with the First Homes Scheme is not very different from the classic step-by-step procedure we have described in another article, but** the authorities must verify that you definitely qualify for the scheme.**

Before applying to qualify for the scheme, you will usually need to obtain a decision in principle, which will serve as proof of your creditworthiness. Remember that for the purchase of a home under the First Homes Scheme, you will need a dedicated mortgage. There are a limited number of these on the market, and finding one and choosing the most attractive one is not the easiest task, so the best way to do this may be to use an experienced mortgage broker - such as Extend Finance.

To obtain the form needed for qualification, contact the developer or sales agent. He or she will explain the whole procedure to you in detail and provide you with a list of the necessary documents. These will most often include:

• Proof of identity;

• Proof of address of residence;

• Income certificates;

• Confirmation of First Time Buyer status;

• Decision in Principle.

The application should be made to the institution designated by the developer or agent. This could be themselves, the council or a council partner - it all depends on the arrangements of the person selling the property. Once the application has been processed, you will receive an Eligibility Certificate, which will confirm your right to buy. After that, all you have to do is get the financing and make the purchase.

Summary

The First Homes Scheme is actively helping first time buyers into ownership of their own property, through discounts that reduce the market price by between 30% and 50%. This is a perfect example of the government caring for its residents and introducing solutions to the problem of record high property prices. Unfortunately, the number of homes covered by the First Homes Scheme is limited and there could be more, but we will see what the future holds. If you have First Time Buyer status and are looking to buy a property, definitely take an interest in housing covered by the scheme in the area you would like to live.