First Homes Scheme Explained

Recently launched by the U.K. government, the First Homes scheme is specifically designed to assist first-time buyers, particularly key workers, in getting onto the property ladder.

If you’ve ever dreamt of owning your own house but felt prices were always just out of reach, the good news is the First Homes scheme can, in some instances, provide a discount on the price of a new property of up to half its current market value.

With the help of an experienced mortgage and property advisor to guide you through the process, you could be sitting in your new home before you know it.

What is the First Homes scheme?

Launched in June 2021, the First Homes scheme allows first-time buyers to purchase a new-build property (both houses and flats are available) for a discounted price of anywhere starting from 30% up to 50% on the market value. After the discount, there’s a price cap on qualifying properties of £250,000 outside London and £420,000 within London.

The main idea and thrust behind this government scheme is to help people eligible to buy a property within their local area rather than feeling the need to move away due to rising house prices.

The government believes the First Homes scheme will be particularly advantageous for first-time buyers who are also key workers (NHS staff, firefighters, supermarket employees, etc.). It will help them get on the property ladder while still living near their place of work.

How the discount works

The discount is at the local council’s discretion in the area where the property is being built and is agreed upon directly with the developer.

The minimum discount is 30% but it can be as high as 50% in certain cases where the council deems appropriate. For example, if you’re a key worker and want to buy a house locally for ease of commuting, you can make a case for a higher discount.

Once a discount has been given, it becomes locked into that property. So, if you’re given a 30% discount to buy a home, that discount is passed on to potential first-time buyers who may want to buy it from you.

House prices are capped, after the discount, at £420,000 within the London area and £250,000 anywhere outside London.

Eligibility rules are covered in more detail below, but in a nutshell, if you’re a first-time buyer with a combined household income below £80,000 (£90,000 in London), you can apply for a discount on a qualifying new-build property.

Eligibility criteria

As the name implies, not everyone can apply for a discount via the First Homes scheme.

To see whether you’d be eligible for the first home scheme or not, take a look at the main rules here:

• Must be a first-time buyer
• Total household earnings
• Maximum house price
• Local homes for local people
• Locked-in discount
• Mortgage required

Must be a first-time buyer

If you’ve ever owned a property before – whether bought by yourself or inherited – you won’t be eligible for this scheme. You can apply if you’ve only ever rented properties up to this point. This rule also applies on a joint basis – you must fit these criteria to be eligible.

Total household earnings

If you’re applying for this scheme, your combined annual income must be below £80,000 (£90,000 if you live in London).

Maximum house price

The scheme aims to help lower-income households get on the property ladder. As we’ve already mentioned, the price cap on qualifying properties, after the discount, is £250,000 outside London and £420,000 in London.

This still gives plenty of scope for the availability of larger properties if that’s what you’re looking for. For example, a house outside London with a full market value of £350,000 would qualify for this scheme (£350,000 – 30% = £245,000).

Local homes for local people

A key aspect of the First Homes Scheme is giving first-time buyers the opportunity to identify a property to buy in their local area. When vetting applications, councils will give priority to anyone currently living in their jurisdiction with a desire to remain there.

The definition of what qualifies someone as ‘local’ is unclear. However, any first-time buyer who lives and works locally and has family connections in the same area should be viewed favourably for this scheme.

Again, this illustrates the value of speaking with an advisor who has previously dealt with the application process for a First Homes scheme. They’ll be able to help you with all the relevant paperwork involved to give you the best chance of qualifying for the discount on a new-build property in your area.

Locked-in discount

Whatever discount is given on a qualifying property under the scheme must also be passed on to prospective first-time buyers who want to buy it from the current owner in the future. It’s not just a ‘one-time’ incentive; it remains in place on that property for others, too.

Mortgage required

After the discount, a mortgage must be approved for at least 50% of the purchase price. This means that even if you have enough savings to purchase the property outright, you won’t qualify for the discount.

This is good news for anyone who has struggled to save enough for a large mortgage deposit. Many well-known lenders are keen to get involved with this scheme, and the experienced mortgage brokers we work alongside will help you find the best offers that match your needs.

How to apply for a mortgage through the First Home scheme

If you fit the above criteria and want to apply for a discount through this scheme, the best way is to contact a mortgage and property expert. They will already know which developers in your area are participating in this initiative.

As things stand, no dedicated website is available to help you identify who’s involved. If you get in touch with us, we can introduce you to an advisor in your location who will be able to help you through this process and secure the discount you may be entitled to.

The government has announced that it expects 1,500 qualifying homes to be completed and available in the first year, with a further 10,000 homes each year thereafter. So, if you want to take advantage of this opportunity, it’s worth making a move immediately to avoid missing out.

How a mortgage broker can help you get a loan through the scheme

You’ll need to take out a mortgage of at least 50% of the property’s value, but with many of the major banks and mortgage lenders already signed up to support the scheme, there should be lots of great deals on offer.

This is where working with an experienced mortgage broker, rather than trying to navigate the process on your own, will provide major benefits and save you a lot of time, effort, and potentially some money as well.

Our advisor-matching service is designed to select a professional with appropriate experience in the mortgage and property markets. They’ll already know and understand what’s available for first-time buyers and be able to select a range of packages that best suit your particular circumstances.

Alternative schemes for first-time buyers

The First Homes scheme is a brand new initiative that sits alongside several existing incentives designed to help people take their first steps on the property ladder, such as:

• 95% mortgage guarantee scheme
• Shared Ownership
• Right to Buy
• Lifetime ISA

If you don’t qualify for the first-home discount, as you can see, many options are still available. When you speak with one of the advisors we work with, they will go over all of the options open to you so you can decide which works best in the long run.

Get matched with a first homes scheme expert

Taking those first steps onto the property ladder can be the hardest step. The First Homes scheme has been created to alleviate many of those worries by making this move much more realistic.

There’s never been a government initiative launched quite like this one. To a degree, it feels a little too good to be true, but it isn’t. However, it’s really important to seek guidance from an advisor who knows and has experience with this and all other incentives so you can make the right choice.

This is where we can help. We pay great attention to your needs and requirements to ensure that the advisor we match you with is able to hit the ground running and guide you through the process of buying a new house from start to finish.

Call 0330 818 7026 or enquire, and we can arrange a free, no-obligation call with a mortgage and property specialist today.