First Time Buyer Schemes

Everything You Need to Know About House Buying Schemes for First Time Buyers

firs time buyer schemes

Government Schemes for First Time Buyers UK

firs time buyer schemes

When saving for your first house, it can be extremely confusing trying to determine which of the many first time buyer schemes are the best for you. There are so many different schemes for first time buyers to choose from now, that knowing which is the right one is almost impossible.

Luckily for you, we have put together this helpful guide, outlining each of the government schemes for first time buyers and what each of them offers. Take a look and find out everything you need to know about first time buyer schemes in 2022. 

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Shared Ownership Schemes

What is Shared Ownership?

help to buy first time buyers

As a first time buyer, if you can’t afford to purchase a property outright, Shared Ownership offers you the chance to buy a percentage of the house instead.

With the Shared Ownership scheme, you can purchase between 25-75% and pay low-cost rent on the remaining share you don’t own. However, it is worth noting that, the more of the property you do own, the lower the rent will be. 

This first time buyer scheme is usually available on new-build homes or flats, and is ideal for those who might need a larger house or don’t yet have the funds to buy a property outright. 

Who is Eligible for Shared Ownership?

first time buyer stamp duty

Unfortunately, not everyone is eligible for Shared Ownership. To be eligible for this scheme, you must meet the following criteria:

  1. Your combined income is £80,000 or less (£90,000 in London, £60,000 in Wales)
  2. You are not in mortgage or rent arrears
  3. You have a 5-10% deposit for your share of the property
  4. You are unable to afford a suitable home on the open market

You must meet all of the above criteria in order to apply for the Shared Ownership scheme. If you don’t then one of the other first time buyer schemes available might be better suited to you and your circumstances.

Selling a Shared Ownership Property

closing first time buyer isa

You can share your share of your Shared Ownership property at any time as long as you notify your housing association first and obtain a valuation from an independent RICS surveyor. 

The process of selling your share in a Shared Ownership home is referred to as ‘assignment’. The housing association will have the right to find a buyer before you can put your Shared Ownership property on the market with an estate agent.

However, you must remember that there will be added fees using an agent and the buyer must always meet the Shared Ownership eligibility criteria. 

The total amount you and the housing association receives will depend on the RICS surveyor’s valuation of the property at the time – you will not be able to accept a higher or lower offer for your share in the property. However, this does not apply if you have previously staircased to own the full 100% of the property. 

What is Shared Ownership Staircasing?

first time buyer schemes

Usually, once you have lived in your Shared Ownership home for a certain period of time, you can purchase more shares in the property. The process of buying more shares in your Shared Ownership property is known as staircasing, and it enables you to own a greater proportion of your home.

The greater the share you buy in your home, the less rent you will have to pay to your housing association. Eventually, if you staircase to 100%, you can become an outright owner of the Shared Ownership property, and will no longer need to pay any rent at all.

If you decide you want to staircase, you can acquire additional shares in your Shared Ownership home at a price equal to the relevant proportion of the current full open market value of the property. For example, if your property is valued as £200,000 and you want to purchase an additional 25% share, the price of the extra share would be 25% of the valuation (£50,000).

Help to Buy Scheme

What is the Help to Buy Scheme?

Like Shared Ownership schemes, the Help to Buy scheme assists first time buyers who wish to purchase a new build home. The main benefit of this first time buyer scheme is that you don’t need to save as much for a mortgage deposit.

With Help to Buy schemes, you will require a lower deposit than normal because the government provides an interest-free loan to cover a share of the property’s cost.

This Help to Buy loan covers 20% of the property’s value and lasts across 5 years. However, in year six, interest known as ‘loan fee’ kicks in at 1.75%, which then increases each year thereafter at the RPI measure of inflation, plus 1%.

Who is Eligible for the Help to Buy Scheme?

first time buyer help to buy scheme

To apply for this scheme for first time buyers, you must meet a number of Help to Buy eligibility criteria, including:

  1. You must be a first time buyer
  2. The new build home you buy must be within the relevant regional price cap
  3. You must not already own a home or residential land
  4. You must not be in mortgage arrears

Sadly, if you don’t meet all of the above criteria, you cannot apply for the Help to Buy scheme. However, one of the alternative schemes for first time buyers might be a better fit. 

Selling a Help to Buy Property

selling help to buy scheme

The Help to Buy scheme has helped thousands of first time buyers get onto the property ladder, but what happens when you want to sell your home?

When you buy a home with Help to Buy, a second charge is placed on your property title at the Land Registry. This means that you must repay your loan to the HCA to sell your home. Unless you have repaid your loan in full, you will repay the Agency’s equity loan simultaneously when you sell.

For example, if you purchased your home with a 75% mortgage and 5% cash deposit, you will repay the HCA 20% of the value when you sell.

You can sell your Help to Buy property on the open market just as you would with a normal home. Once you have found a buyer and received an offer, you’ll need to have the property valued by a chartered surveyor.

Next, you must let Target (the firm the HCA use for all Helpy to Buy administrative duties) know the amount of the offer you have received and that you have instructed a surveyor. Target will then contact you once it has received the valuation report to let you know what happens next.

Right to Buy Scheme

What is the Right to Buy Scheme?

right to buy scheme first time buyers

If you’re a tenant in a council or housing association property, the Right to Buy scheme for first time buyers allows you to purchase your home for a discounted cost.

This first time buyer scheme is ideal for those who may be on a lower income and want to get on the property ladder.

Who is Eligible for the Right to Buy Scheme?

eligible first time buyer scheme

The first thing to consider when deciding which first time buyer scheme to opt for is eligibility. When it comes to the Right to Buy scheme, you will only be able to take advantage of its benefits for first time buyers if:

  1. You are a secure tenant 
  2. The property is your only/main home 
  3. The property is self-contained 
  4. You’ve had a public sector landlord for 3 years 

If you fit the Right to Buy eligibility criteria and want to buy the property you live in, then a discount will apply to the value of your home. This will mean that you don’t have to borrow as much money through a mortgage when you buy it. The maximum discount available is £82,800 in England and £110,500 in London.

Mortgage Guarantee Scheme

What is the Mortgage Guarantee Scheme?

first time buyer mortgage scheme

The mortgage guarantee scheme for first time buyers was unveiled in the March 2021 Budget. It is designed to help buyers with a small deposit get a mortgage on properties costing up to £600,000.

This first time buyer scheme works in a similar way to the Help to Buy mortgage guarantee scheme which ended in 2016. Mortgage lenders are provided with a guarantee from the government which will compensate them if the property is repossessed or sold for less than the value of the outstanding mortgage.

Under the terms of the mortgage guarantee scheme, lenders must offer a five-year fixed-rate within the new product range. This gives first time buyers the peace of mind that their payments won’t change if interest rates increase in the future.

Who is Eligible for the Mortgage Guarantee Scheme?

mortgage guarantee scheme

The Mortgage Guarantee scheme is available to anyone who is looking to buy a house. While this house buying scheme isn’t just for first time buyers, there are other eligibility criteria you must meet.

Unlike the Help to Buy Scheme, the purchased house doesn’t have to be a new build to be eligible for the Mortgage Guarantee scheme. However, the property does have to be valued at less than £600,000.

So, now we’ve covered four options when it comes to first time buyer schemes, which one do you think is right 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. 

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.


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