What is the First Homes Scheme?

A bit more of an informative blog this week as I’ve had a few clients ask me about the “First Homes Scheme”. So, what is the First Homes Scheme?

Many people were aware of what the Help2Buy scheme was, which allowed buyers to put down a 5% deposit and receive a further 20% loan from the government. This 20% loan was interest free for the first 5 years and allowed buyers to unlock better rates as they technically had a higher deposit versus mortgage (known as loan-to-value). It was only available on certain new build homes and unfortunately, is now no longer available.

The First Homes Scheme was advertised as its replacement, though it differs in quite a few ways and the only real similarity it has, is the type of home that can be bought. It must be a “qualifying new build”, or a home that was originally purchased on this scheme – as it is a relatively new scheme, it’s highly unlikely that you’ll find a second-hand home that was bought with this scheme previously, so for now, it’s qualifying new builds only.

With the First Homes Scheme, you are essentially buying at a discounted price of between 30% to 50% of the full market value. So, if you buy a home worth £300,000 at full market value, then you could instead purchase it at £150,000 if you get the full 50%. Rather than requiring a mortgage of £285,000 with a deposit of £15,000, you would then only need a mortgage of £142,500 with a deposit of £7,500.

Some restrictions apply, so your combined household income can’t be more than £80,000, (or £90,000 if you’re buying in London) and the maximum property value you can apply this scheme to would be £250,000 after the discount is applied (or £420,000 if the property is in London). Some local councils may impose further restrictions, so that would be something to check with your local council before applying.

Furthermore, when you sell the property, it will have to be sold to someone else who is purchasing through this same scheme, so you will have to take this into consideration when making a First Homes Scheme purchase.

If you are thinking of purchasing using this scheme, then it is essentially a standard purchase, but with a few extra steps, so as always, make sure you find yourself a good mortgage advisor and a conveyancer you trust – of course, at RBM/ROK, we can handle this all in house, so give us a call today to kick start the process to owning your first home.

By Oli Smith (CeMAP)

Mortgage & Protection Advisor
Email: oli@rbmsolutions.co.uk
Mobile: 07306 430212
Direct Dial: 02394 217261
Gatcombe House, Copnor Road, Portsmouth, PO3 5EJ