Knowledge Guides

First Homes Scheme Explained

Posted September 29, 2023
First Homes Scheme Explained

The First Homes scheme is an initiative rolled out by the UK government designed to aid local first-time buyers in purchasing affordable homes in their area. It does this by offering homes at a discount of at least 30% of their market value. This can work hugely in your favour, as it reduces the price you’ll need to pay upon purchase as a first time buyer to help you get onto the property ladder.

Imagine a house has a market value of £300,000. Under this scheme, you would only have to pay £210,000. When you decide to sell on your property in the future, that same discount must be passed on to the next eligible buyer.

Please note that Guinness Homes does not offer homes through the first home scheme. We have provided information on this scheme so you can compare it to Shared Ownership and see if it right for you.

What is the eligibility criteria?

The eligibility criteria set by the UK government is as follows:

  • You should not have owned property before applying for this scheme.
  • The combined annual household income must not exceed £80,000 (£90,000 in London).
  • Requirements may vary across local authorities but generally, there’s a preference towards those already living or working in the same area where a property under the scheme is located.
  • The property you buy using this scheme must be your primary residence. It cannot be used for rental purposes or bought for someone else to live in.

Remember though, these eligibility details may vary from case-to-case so always double-check via official sources when considering application process within this scheme.

Who is given priority?

The priority order for the scheme is provided by the individual local authority.

They give initial priority to:

  • First-time Buyers: The scheme is mainly targeted at those folks who are buying a property for the first time.
  • Local Residents/Workers: People already residing or working in the area where a ‘First Homes’ scheme property is located might be granted initial priority.
  • Military Personnel: Current or former members of the UK armed forces could also take precedent in some cases.
  • Key Workers: Certain frontline workers like nurses, police officers and teachers may be given priority, particularly in places where it’s difficult for these groups to own homes within their work area due to escalating housing prices.

Bear in mind that each local authority can have unique prioritisation policies subject to their individual housing needs so always check using official sources when considering an application process.

Advantages of First Homes Scheme

While every potential homeowner has circumstances that could affect whether the scheme is right for them or not, here are some stand-out benefits for anyone considering taking advantage of it:

  • You’ll be able to buy your home at significantly discounted prices.
  • The savings gained via discounts could assist in making mortgage repayments much more manageable.
  • In certain circumstances where there’s competition between several interested parties who match eligibility criteria equally well: then priority goes to key workers such as nurses and police officers.

Remember though that it might not be ideal for everyone; revolving factors like personal preferences and unique financial situations will differentiate from buyer to buyer. Speak with a mortgage advisor or another financial expert if unsure whether this option suits your needs best. However, amidst these considerations ,the ‘First Home’ scheme emerges as an incredibly helpful tool aimed at supporting first-time house buyers like yourself.

Disadvantages of First Homes Scheme

There are several potential disadvantages of the First Homes scheme which you may want to consider:

  • Limited House Choice: The houses included in this scheme might not always meet your preferences or expectations. They may be situated in locations you do not desire, lack certain amenities you wish for, or simply not fit the kind of home you had envisioned.
  • Income Threshold: The cap on combined annual income (£80,000 generally and £90,000 in London) means that higher earners will not qualify for this scheme.
  • Resale Restrictions: When selling your property bought under this scheme, it must be sold at the same discount with which it was purchased. This ensures future first-time buyers also benefit from the discount but limits your potential property value gain.
  • Complicated Process: In instances where prospective local buyers compete over a house and they all meet eligibility criteria adequately–the final decision can end up on a ‘first come first served’ basis or via a ballot system which potentially adds uncertainty to the process.

First Homes Scheme vs Shared Ownership

First Homes Scheme

Shared Ownership Scheme

Accessibility: For first-time buyers who are local to the area; must earn less than £80,000 (£90,000 in London).

Accessibility: Available for people who don’t currently own a home or used to but can’t afford to buy one now; no specific income cap. Some Shared Ownership homes prioritise key workers.

Home Ownership: You own 100% of your home from the beginning.

Home Ownership: You initially buy a share of your new home (between 25% and 75%) and pay rent on the remainder.

Costs: Houses are sold at a discount of at least 30 percent of their market value.

Costs: Generally cheaper as you’re only buying a share of the property with an option for ‘staircasing’, meaning that over time, you can buy more shares until you eventually own 100% of your home.

Resale: You can sell your home at any time, but it has to be sold at the same discount with which it was bought.

Resale: If selling before owning 100%, housing association has first refusal on buying it back. If owning full 100%, house is sold through estate agent like any other property sale.

First Homes Scheme

Shared Ownership Scheme

Accessibility: For first-time buyers who are local to the area; must earn less than £80,000 (£90,000 in London).

Accessibility: Available for people who don’t currently own a home or used to but can’t afford to buy one now; no specific income cap. Some Shared Ownership homes prioritise key workers.

Home Ownership: You own 100% of your home from the beginning.

Home Ownership: You initially buy a share of your new home (between 25% and 75%) and pay rent on the remainder.

Costs: Houses are sold at a discount of at least 30 percent of their market value.

Costs: Generally cheaper as you’re only buying a share of the property with an option for ‘staircasing’, meaning that over time, you can buy more shares until you eventually own 100% of your home.

Resale: You can sell your home at any time, but it has to be sold at the same discount with which it was bought.

Resale: If selling before owning 100%, housing association has first refusal on buying it back. If owning full 100%, house is sold through estate agent like any other property sale.

How do I apply?

To purchase a First Home, get in touch with the developer or estate agent (if you’re buying from a previous First Homes buyer) and express your interest. They will guide you through the application process and submit it to the local council.

If the First Home you wish to buy is a new build, you will be required to pay a fee determined by the developer. In the event that your application is unsuccessful, the fee will be refunded to you.

You would have to follow these general steps:

  1. Check Eligibility: Confirm if you meet the criteria – first-time buyer, income restrictions, local area ties etc.
  2. Find a Property: Look up properties included in this scheme to buy a home located in your interested area via a local estate agent or housing developer.
  3. Submit an Application: Once you find a suitable property, make your interest known to the responsible agents or developers and initiate the application procedures. These could vary from place-to-place so always double-check all necessary documents and procedures required beforehand.
  4. Mortgage Pre-Approval: You may also want to try getting pre-approved for a mortgage before making an offer on a home; that way sellers know you’re serious about purchase intentions.
  5. Legal Process: Seek professional legal help (e.g., conveyancing solicitor) when ready to finalise sale contracts.
  6. Completion of Purchase: After contracts are exchanged with buying and selling parties agreeing on sale completion dates, now comes the final step! This usually involves paying any outstanding costs and receiving keys to your new home.

Remember that this process varies depending on individual circumstances and professional advice should be sought at all stages for peace of mind.