Government Schemes For First-Time Buyers

If you’re a first-time buyer looking to get on the property ladder, it can be difficult saving up for a deposit and trying to get a mortgage.

From the First Homes scheme to Shared Ownership, plenty of government schemes are available to help you get your first home.

This article will guide you through the key programs available, detailing how they work, and help you make an informed decision before you buy your first home.

Government schemes for first-time buyers

The housing market can be tough if you’re a first-time buyer, but several government schemes are designed to make it easier. The initiatives listed below offer financial assistance, lower deposit requirements, and other benefits to help you purchase your first home.

Lifetime ISA

If you’re struggling to build a large deposit, the Lifetime ISA is a great way to help you build one before you buy your first home. You can put up to £4,000 a year into the ISA, with the government adding a 25% bonus up to £1,000.

You can open the ISA if you’re between the ages of 18 and 39, and it can only be used for properties that cost £450,000 or less. Be aware, there are penalties for taking money out of your ISA before 60 if you’re not using it for a deposit.

First Homes scheme

The First Homes scheme provides first-time buyers with the opportunity to buy a new build property at a discounted price. This is typically from 30% to 50% below market value.

You will have to meet certain criteria to apply such as being over 18 and able to get a mortgage for at least half the price of the property. Other criteria might apply depending on where you live, such as councils prioritising key workers such as nurses, teachers or people who live in the area.

Shared Ownership

If you have a small deposit, the Shared Ownership scheme is worth considering. As you can buy between 25% to 75% of the property, you can normally get a mortgage with a deposit with a 5% to 10% deposit.

It’s important to remember you will be on a leasehold mortgage and you will have to pay rent, albeit reduced, on top of your monthly repayments. However, you can buy more shares in the property until you own 100% through a process known as ‘staircasing.’

Rent to Buy

Rent to Buy allows you to rent a property, typically a new-build, for between six months to five years for a reduced rate. This is often 80% of the market value, with the expectation that the 20% you save will be put towards a deposit.

The scheme is available in England, Scotland and Northern Ireland, while the rules are slightly different in Wales. So it’s worth checking out the rules here if you live in Wales. It’s important to note that availability across the UK depends on your local authority, and it can vary from place to place.

There’s also a separate scheme if you live in London, called London Living Rent. It’s the same principle as Rent to Buy but the minimum tenancy is three years.

Mortgage Guarantee Scheme

The Mortgage Guarantee Scheme is an initiative launched by the government to encourage lenders to offer 95% loan-to-value (LTV) mortgages. The government guarantees a portion of the mortgage offered, sharing the risk with lenders.

The scheme is running until 30 June 2025 and allows first-time buyers to get on the property ladder with a 5% deposit, although you can go up to 9%. The property must be valued at under £600,000 and be your primary residence.

Right to Buy

If you’re a council tenant struggling to get on the property ladder, the Right to Buy scheme is a good one to look into. It allows you to buy your council house for a discount depending on criteria such as being a tenant for at least three years and your only property.

The discount is deducted from the cost of the property, and in some cases, this might mean you don’t need to put down a deposit. The scheme is open to most council tenants in England and Northern Ireland but has been abolished in Scotland and Wales.

Help to Build

If you want to build your own property rather than purchase one, the Help to Build scheme is the scheme for you. You can apply for the scheme if you’re over 18, get a self-build mortgage from a lender registered with the scheme, live in England, and will live in the property once it’s built.

You can spend up to £600,000 on the property, which must include the cost of the land if you don’t already own it. You also can’t spend more than £400,000 on building the property.

Is the Help to Buy scheme closed?

Yes, the Help to Buy scheme is now closed. The scheme closed for new customers in October 2022 and ended for existing customers in March 2023. If you already have a Help to Buy ISA, you can continue paying in until November 2029 and you can claim the 25% bonus until November 2030.

Country specific schemes

As well as the schemes listed above, there are other schemes specific to certain countries within the UK you might be able to apply for.

Help to Buy – Wales

The Welsh Government has its own version of the Help to Buy scheme which is still running. It’s similar to the one that was closed in England and allows first-time buyers to access a shared-equity loan, of up to 20%, in a new build property provided they have a 5% deposit and a repayment mortgage to cover the remaining amount.

Homebuy – Wales

Homebuy is another scheme by the Welsh Government that allows first-time buyers to purchase an existing property through a shared equity loan. The loan is interest-free and between 3o% to 50% of the value of the property. The remaining 50% to 70% will need to be funded via a mortgage, savings or both.

New Supply Shared Equity – Scotland

The New Supply Shared Equity scheme offered by the Scottish Government allows first-time buyers to buy a new build property from a local housing association or council. You typically purchase between 60% to 80% of the property’s value with the remaining share owned by the Scottish Government. It’s similar to Shared Ownership and allows you to eventually own 100% of the property.

Open Market Shared Equity – Scotland

The Open Market Shared Equity scheme is similar to the New Supply Shared Equity scheme but allows first-time buyers to receive up to 40% of funding towards purchasing a property on the open market.

How a mortgage broker can help

If you’re wondering which of the above schemes best suits your needs, it might be worth speaking to a mortgage broker. They can assess your circumstances and advise which scheme is best for you.

Brokers have access to a wider range of lenders, with some of the market not available if you decide to go alone.

Speak to one of our OMA®Verified experts to discover the best deal available to you, and get advice on handling the application process for these schemes and the subsequent mortgage. We can put you in touch with a broker who specialises in first-time buyer mortgages to ensure you get your application off to the right start.