First Homes scheme – what you need to know
The Government launched it’s new First Homes scheme earlier this month (June 2021), initially by way of a trial in Bolsover in the East Midlands, which its planned will be rolled out across the country from next month. The Government has promised that there will be at least 10,000 new homes made available under the scheme each year.
This is the first big new housing scheme since Help to Buy and could help thousands of aspiring first time buyers get on the property ladder. Here’s what you need to know:
- How does the First Homes scheme work? A number of homes being built as part of new developments will be allocated to the scheme and made available for sale with a genuine discount of 30%-50% off the open market value.
- Who is eligible for the scheme? You must be a genuine first time buyer (both parties if a joint purchase). If you have ever owned a share in a property, even if it was gifted or inherited you can’t use the First Homes scheme. The combined income of all buyers must not exceed £80,000 (£90,000 in London) and you must also have a ‘local connection’ to the area. This is a little bit vague at the moment, but we assume working or having family in the area would be a reasonable connection.
- How much will the properties cost? The maximum purchase price after the discount has been applied has been set at £250,000 (£420,000 in London). This means that before the discount is applied the maximum property value would be £357k-£500k in most areas, or £600k-£840k in London.
- What happens to the discount when the property is re-sold? The Government have said that the discount will stay with the property when it’s sold on in the future. So unlike the Right to Buy scheme where council / housing association tenants can pocket the discount after usually 5 years, the discount belongs to the property – not the owner. The new buyer must also meet the same eligibility criteria, subject to the rules at the time of selling. Logic would suggest that the price caps will have to move with the times, but the longer term implications of the scheme are worth bearing in mind. It may be difficult to get out of the property and into a non-discounted property – imagine having to pay twice the price just to get a similar property.
- How do I get ready for the scheme? Taking independent mortgage advice is a good starting point and we’d be happy to help you work out your buying power if you get in touch. You should also check your credit score using one of the free credit checking websites such as MSE Credit Club. Other than that, keep an eye out for local developments and set up a property search alert on Rightmove for new builds up to £250k (or £420k) in your area.
We’re really excited about this new scheme and would love to help you get on the property ladder, so if you’re thinking of buying why not get in touch and see how we can help, or sign up to our monthly newsletter, to keep informed of developments.