Get On The Property Ladder With The First Homes Scheme
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From my last article about the Help-to-buy scheme ending in March 2023, I was unsure what alternatives there would be. Now, with some more clarity on what first-time buyers can use to help them get on the property ladder, I thought it was best we revisit this subject so I can inform you all know of what help is out there.
The First Homes Scheme (FHS)
Under FHS, first-time buyers may be able to buy a home for 30-50% less than its market value.
The home can be:
- A newly built property directly from the developer
- A home bought from someone else who originally bought it as part of the FHS
FHS is only available in England to first-time buyers who are over 18 years old and able to get a mortgage for at least half the price of the home and belong to a household where the total income is no more than £80,000 (or £90,000 if you live in London). The homes cannot cost more than £250,000 (£420,000 in London).
The relevant local authority may also set additional conditions, and often they restrict the FHS to essential workers and people who already live in the area or those on the lowest incomes. However, these additional restrictions cannot be applied to members of the armed forces.
If you want to sell the property, you are restricted to selling only to someone eligible to buy the First Home and you must give them the same percentage discount you received (based on the market value at the time of sale).
If you want to let out the property, you can only (in most cases) let the property out for a total of 2 years during the time you own it. The 2-year limit resets if you sell the home to someone else, and you may be able to let your home longer for 2 years if:
- The location of your job changes
- A marriage or long-term relationship ends
- You’re moving to get away from a situation that involves domestic abuse
- You’ve been made redundant
- You’re caring for a relative or friend
That said, you will still need to ask the local council and maybe your mortgage lender. If you would like to just rent out a room, you can do this for as long as you want if you live in the home while they're renting and your home is the only property you own.
Alternatively, you may want to remortgage your first home. This is also an option, but the remortgage must be based on the home's value minus the discount you got when you bought it. For example, if you purchased the home with a 30% discount, the maximum mortgage you could take out would be one worth 70% of the value.
When it comes to finalising your will, if you want to leave your First Home for someone in your will, you can! They just have to follow the rules of owning a First Home and if not, they must sell the home.
Stamp Duty Discounts
Special discounted stamp duty rates apply to first-time buyers. As of the 23rd of September 2022, the 0% band for first-time buyers was increased from £250,000 to £425,000 meaning any home priced up to this level is stamp-duty-free for first-time buyers.
Other schemes
There are a number of other government schemes that, whilst not targeted directly at first-time buyers, apply equally to them. These include discounted right-to-buy schemes for council & housing association tenants, and shared ownership schemes that help tenants buy a proportion of their property if they cannot afford the deposit and mortgage payments to buy a home that meets their needs.
If you have any further enquiries don't hesitate to email me at barry.soraff@raffingers.co.uk or click here.