• 26 March 2023 | UK

    First Homes scheme: discounts for first-time buyers

If you’re a first-time buyer, you may be able buy a home for 30% to 50% less than its market value. This offer is called the First Homes scheme.

The home can be:

  • a new home built by a developer

  • a home you buy from someone else who originally bought it as part of the scheme

The First Homes scheme is only available in England.

Eligibility

You must be:

  • 18 or older

  • a first-time buyer

  • able to get a mortgage for at least half the price of the home

  • buying the home as part of a household where total income is no more than £80,000 (or £90,000 if you live in London)

The local council may also set some eligibility conditions.

For example, some councils may prioritise giving First Homes discounts to:

  • essential workers

  • people who already live in the area

  • those on lower incomes

Exemptions for armed forces and their families

You’re exempt from council conditions about being an essential worker or living in the area if you’re:

  • a member of the armed forces

  • the divorced or separated spouse or civil partner of a member of the armed forces

  • a widow or widower of a deceased member of the armed forces (if their death was caused wholly or partly by their service)

  • a veteran who left the armed forces in the last 5 years

You still need to meet other eligibility conditions.

How it works

You can look for new homes in your area that are advertised by developers as part of the First Homes scheme.

Developers offer these homes to first-time buyers with 30% to 50% of the market value taken off the price.

Every home that’s sold is valued by an independent surveyor to make sure the discount is based on actual market value.

The homes cannot cost more than £420,000 in London, or £250,000 anywhere else in England, after the discount has been applied.

You can only sell the home to someone who is eligible to buy a First Home. You must give them the same percentage discount that you got, based on the home’s market value at the time of sale.

How to apply

Contact the developer (or estate agent if you’re buying from a previous First Homes buyer) and tell them you want to buy a First Home.

They’ll help you to complete the application, then send it to the local council.

You’ll have to pay a fee if the First Home you want to buy is a new build. The amount is set by the developer.

You’ll get the fee back if your application is unsuccessful.

What happens next

The local council will check your application to make sure you’re eligible.

They’ll contact you to tell you their decision. They’ll also contact the developer and your mortgage advisor.

If your application was missing any information, they may ask you to provide it.

If your First Homes application is approved

Follow these steps:

  1. Hire a conveyancer - this is a solicitor who can help you with the purchase.

 

  1. Apply for your mortgage.

 

  1. Make sure your conveyancer follows any local council instructions.

 

  1. Complete any legal documents the local council sends you.

After you’ve got a mortgage offer and agreed a contract with the developer, your conveyancer will ask the local council if you can exchange contracts.

The local council will check the conveyancer’s request to make sure it’s legal and tell you when they’ve decided.

Find a conveyancer

This can be either a conveyancing solicitor or a licensed conveyancer. You can:

Exchanging contracts

You need to pay your deposit at the same time as you exchange contracts with the developer. After you do this, you are legally committed to buying the home.

When you’ve exchanged contracts, the developer sets a completion date. This is the date when the home will be ready for you to move in.

Completing the purchase

On the completion date, your conveyancer transfers the money from your mortgage to the developer, you get the keys and can move in.

Selling the property

You can only sell the property to someone who is eligible to buy a First Home. You must give them the same percentage discount that you got, based on the home’s market value at the time of sale.

You’ll need to get the property valued by a surveyor who’s registered with the Royal Institution of Chartered Surveyors (RICS).

Letting the property

You can usually only let your First Home for a total of 2 years during the time you own it, no matter how many tenants you have.

To do this, you need to:

  • check if your mortgage agreement allows it

  • tell the local council

The 2-year limit resets if you sell the home to someone else.

Letting for longer than 2 years

You may be able to let out your First Home for longer than 2 years if:

  • the location of your job changes

  • a marriage or long-term relationship ends

  • you’re moving to get away from a situation that involves domestic abuse

  • you’ve been made redundant

  • you’re caring for a relative or friend

You can ask the local council. You may also need to ask your mortgage lender.

Letting out a room

You can rent out a room to someone for as long as you want, if you meet both of these conditions:

  • you live in the home while they’re renting

  • the home remains the only one you own

Remortgaging your First Home

You can remortgage your First Home, but the remortgage must be based on the value of the home minus the discount you got when you bought it.

For example, if you purchased the home with a 30% discount, the maximum mortgage you could take out would be one worth 70% of the value.

If your circumstances change

You do not have to sell your First Home if a change in circumstances after buying it means you no longer meet the eligibility rules. For example, if your income increases or you’re not a key worker anymore.

If you fail to make mortgage payments

Your mortgage lender may take action to get their money. For example, they could repossess the home.

Leaving a First Home as inheritance

You can leave a First Home to someone in your will. If they cannot follow the rules for owning a First Home, they must sell the home.

Stamp Duty Land Tax

The amount of Stamp Duty Land Tax you pay for a First Home is based on how much you paid for the home after the discount was applied.

 

Please contact AKEPB if you wish to seek further assistance or attend AKEPB virtual clinic every Monday from 8:15pm to 9:00pm for a private and confidential consultation.

AKEPB UK Personal Meeting (Zoom) ID - 813 899 6436

CAUTION: The above-mentioned write-up is extracted from various professional journals and articles including HMRC guidance notes where relevant.