First Time Buyer Schemes
Everything You Need to Know About House Buying Schemes for First Time Buyers
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Being a first-time buyer can be both an exhilarating and highly stressful experience. It seems like there’s a world of possibilities ahead of you, and the idea of finally owning a place that’s your own makes your heart skip a beat.
But then, on the other side of the fence, it’s becoming increasingly difficult for anyone to save for their first home. In that case, most of us will have to consider applying for a mortgage. And in this economy? It seems like owning your first home might be nothing but a pipe dream after all.
Fortunately, the UK government has implemented multiple first-time buyer schemes over the years to help budding homeowners achieve their dream of owning a home. In fact, with so many options available, it can be difficult for first-time buyers to choose the best programme for their needs!
Fret not; we’re here for you. We’ve compiled this comprehensive guide outlining a first-time buyer’s scheme, how it works, and the current government schemes available. By the end of this, you’ll be able to confidently pick the right scheme for your needs and kick off your journey to becoming a first-time homeowner!
This Article Covers
What Are First-Time Buyer’s Schemes?
Those who have never been homeowners can take advantage of any of the UK government’s First-Time Buyer’s schemes, designed to make purchasing a home a less daunting and more financially feasible prospect. Those who are having trouble getting a mortgage or saving for a big down payment may be eligible for one of these programmes.
Each of the many accessible schemes has its own set of prerequisites and requirements for participation. While some programmes are designed specifically for low-income or critical workers, others are available to everyone who satisfies the requirements. First-time homebuyers might gain a leg up by taking advantage of these programmes, which make it easier to afford a home.
These initiatives have been very successful, allowing many people to fulfil their dream of becoming homeowners even in locations with high property costs. If you’re a first-time buyer, it’s definitely in your best interest to investigate these programmes to see whether they can help you!
How Do First-Time Buyer’s Schemes Work?
First-time buyers having trouble saving for a down payment or being approved for a mortgage may find one of these government schemes to be a fantastic choice. However, eligibility requirements for these programmes are different for each one, but they all apply to first-time homebuyers.
First-Time Buyer’s Schemes Available In the UK
Here is the complete list of first-time buyer’s schemes that are currently available in the UK, along with their eligibility requirements:
Selling a Shared Ownership Property
This scheme allows first-time homebuyers to acquire a brand-new construction home for as little as a 5% down payment. For the first five years, the government offers an interest-free equity loan of up to 20% of the property’s worth (40% in London). In addition to lowering monthly payments, this loan enables borrowers to take advantage of historically low rates.
Who is eligible?
The Help-to-Buy Equity Loan Scheme is only available to those looking to buy their first home in England. It’s a great option for first-time buyers looking to purchase a newly constructed home that falls within the price range for their area. You can’t use this to purchase a second house or investment property; it’s just for your primary abode.
2. Mortgage Guarantee Scheme
The Mortgage Guarantee Scheme, announced in the 2021 Budget, allows first-time buyers to buy a mortgage guarantee with a minimum 5% down payment.
In the event of a foreclosure, the mortgage lender’s net losses are reduced thanks to the guarantee. The net losses are covered by the guarantee to the tune of 95%, which applies to 80% of the purchase price of the assured property. As a result, the lender is responsible for 5% of any losses that aren’t covered by the guarantee. This guarantees that the lender keeps some of the risk associated with each loan they facilitate.
Who is eligible?
This scheme is available for both first-time owners and current homeowners. The Mortgage Guarantee Scheme only applies to those looking to buy a home that’s valued up to £600,000.
3. First Homes scheme
Under the UK government’s First Homes scheme, first-time homebuyers in England will be able to purchase homes at reduced prices. In particular, under this plan, first-time buyers will receive a 30% reduction off the market price of a newly constructed home in their area. The First Homes scheme is especially attractive to those looking at new builds.
The First Homes programme finances the construction of brand-new residences with the express intention of offering them at a reduced price to first-time homebuyers. All other features should be comparable to those found in homes selling for the full market price. The resulting inventory of foreclosed homes will be offered for sale at a minimum of 30% below market value. But, in places with exceptionally high property values, for example, local governments may enhance this reduction by as much as 50%.
Who is eligible?
In order to take advantage of this programme, you must be a first-time homebuyer. Also, you must purchase a home in your immediate region with the purpose of making it your permanent residence — as in, it cannot be a holiday home or buy-to-let.
Everyone from all walks of life will be eligible to participate, but those in specific fields will be given preference. Key employees such as nurses, police officers, firefighters and teachers are included here, as well as active and former members of the armed services.
The government has also placed certain price caps to ensure that the First Homes scheme is accessible to only those who need it.
- Price limits: After taking into account any applicable discounts, the maximum price for a house purchased through this plan in England will be capped at £250,000. The limit is £420,000 in London.
- Income limits: The combined income of buyers is capped at £80,000 in England and at £90,000 in London. Even so, for the first three months of sales, local planning authorities can impose lower caps.
4. Shared ownership scheme
In order to help first-time buyers get their foot on the property ladder, the government has created a scheme called “Shared Ownership,” which allows people to buy a portion of a home while renting the other portion. Homeownership could be made more accessible because purchasers only need to put up a fraction of the money they would if they were buying the whole thing.
Under Shared Ownership, buyers can increase their home equity and perhaps lower their monthly rent payments by purchasing additional shares in the property at any time. As an added layer of security, the housing association or developer that owns the remaining share of the property typically has the right of first refusal to buy back the portion sold by the buyers.
The First Homes programme finances the construction of brand-new residences with the express intention of offering them at a reduced price to first-time homebuyers. All other features should be comparable to those found in homes selling for the full market price. The resulting inventory of foreclosed homes will be offered for sale at a minimum of 30% below market value. But, in places with exceptionally high property values, for example, local governments may enhance this reduction by as much as 50%.
Who is eligible?
Shared Ownership is only available to those whose annual household income is below a specific threshold — less than £90,000 in London or £80,000 outside of London. Those who are interested in this scheme need to prove that they can’t currently afford a deposit or mortgage payment for a home.
According to GOV.UK, one of the following criteria also must be met in order to qualify:
- you’re a first-time buyer
- you used to own a home but cannot afford to buy one now
- you’re forming a “new household” — i.e. after a divorce or separation
- you’re an existing shared owner, and you want to move
- you own a home and want to move but cannot afford a new home that meets your needs
5. Right to Buy scheme
Council and housing association tenants who have lived in their current residence for at least three years are eligible to participate in the Right to Buy programme. For a period of time equal to or greater than their lease, tenants are eligible for a rent reduction towards the purchase of their rental unit.
Who is eligible?
If you are a resident of England or Northern Ireland, you can take advantage of the Right to Buy programme. Discounts are possible of up to £116,200 in the capital region, £87,200 in the rest of England, and £24,000 in Northern Ireland.
It’s important to note that the Right to Buy scheme only applies to you if:
- you’ve been a council or housing association tenant for at least three years
- the home you want to buy will be your main home
- the property is self-contained — i.e. you don’t share it with other people
- your landlord is the council, a housing association, NHS trust or other public sector landlords.
6. Right to Acquire scheme
In England, renters of participating housing associations have access to a programme called “Right to Acquire,” which is very similar to the aforementioned Right to Buy programme but is available to them rather than also to council tenants. This scheme allows renters to purchase their rental property at a discount of up to £16,000 (or £24,000 in London).
Tenants of certain housing associations may not have access to the Right-to-Acquire because their buildings are not included in the programme. Tenants who are eligible for the Right to Acquire programme may be able to purchase a house at a discount, but this reduction is typically smaller than the Right to Buy discount.
Who is eligible?
Only those living in England can apply for the Right to Acquire scheme. A housing association tenant who has lived in the same home for at least three years, whose home was constructed or purchased with public funds, and whose home is their sole or primary residence is eligible to apply for the Right to Acquire scheme.
The Bottom Line
Now we’ve covered the six options when it comes to first-time buyer schemes, you should be properly equipped to decide which scheme is the right one for you! Each of these schemes for first-time buyers is designed to help you save for and purchase your first house. Whether that is through a loan, shared ownership or discounted costs, all these government house-buying schemes can help first-time buyers get on the property ladder.
Remember: when viewing homes under a first-time buyer scheme, it’s important that you ask all the essential house viewing questions to make sure you know exactly what you’re buying!
Find out more first time buyers guides here.
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