With the Help to Buy scheme now finished, property demand outweighing supply and the current cost of living crisis, it feels more difficult than ever for first time buyers to get their first foot on the property ladder. However, there are four useful schemes in place to help first time purchasers obtain their dream home – the First Homes Scheme, Shared Ownership, LISA, and Right to Buy. In this piece, we’ll be running you through each of these options, including whether you’re eligible, to help you make your first property purchase as easy and affordable as possible.
The First Homes Scheme
What is the First Homes Scheme?
The First Homes Scheme is an incentive aimed at first time buyers that provides considerable discounts on their first property purchase. The scheme aims to provide local residents with local housing solutions, specifically key workers, by offering first time buyers 30 per cent off any eligible new build properties when compared to properties of equivalent market value, which the government claims can help buyers save up to £70,000. To be eligible, properties must cost £250,000 or less post-discount, or £420,000 or less in London post-discount.
Who is eligible?
First time buyers looking to make their first home purchase. If you are purchasing your property alongside another person, both of you must be purchasing your first home.
What else should I know?
You must be using a mortgage on at least 50 per cent of the property’s purchase price, and the property in question must be located in England. Additionally, you must have an accumulative household annual income of less than £80,000, or £90,000 if based in London. Please note that if your property is involved in the First Homes Scheme, it will remain part of this scheme if you choose to sell your property – as such, you won’t be able to recoup the 30 per cent discount you saved upon initially purchasing your property.
Shared Ownership
What is shared ownership?
Shared Ownership is a scheme which allows first time buyers to purchase a percentage of a property with a traditional deposit and mortgage and pay rent to a housing association on the remaining portion of the property. This is particularly advantageous for those who have a small deposit available but have the monthly income to comfortably afford mortgage or rent payments. Homeowners can choose to take ownership of more portions of their home in a process called ‘staircasing’, until they eventually own the entire property outright, if they choose to do so.
Who is eligible?
Your annual household income must be below £80,000, or below £90,000 for those living in London, to be eligible for the scheme.
What else should I know?
Before purchasing your shared ownership property, be sure to clarify what is included in your rent: the nature of shared ownership means that you will partially own a leasehold property, and may still have to pay a service charge, despite technically renting the property in-part. You should also clarify who is responsible for any maintenance issues – is it you, or the housing association you are paying rent to? What’s more, your rent may increase over time, as may your service charge.
If you choose to staircase and increase the portion of the property that you own, you must get a valuation, pay for a conveyancing solicitor, and pay more stamp duty – this will get more expensive if the value of your property increases, which seems likely with the state of the current property market.
Upon sale, if you don’t yet own 100% of your home, you must inform the housing authority you purchased from that you intend to sell. What’s more, you can only sell the portion of your property that you own – the more you own, the more difficult it may be for first-time buyers to afford. However, you will be able to use the capital growth on your portion of the property to put down a deposit on a new home, or invest elsewhere.
Lifetime Individual Saving’s Account (LISA)
This savings account can be used to save up exclusively for the purchase of your first home or your retirement, and the government will contribute an additional 25 per cent to your savings once per year. You can place up to £4,000 per year in the account that is eligible for the 25 per cent bonus, meaning that you will receive an additional £1,000 bonus each year.
Who is eligible?
People between 18 and 39, who haven’t purchased property before, can open a LISA.
What else should I know?
This savings account can only be used for the purchase of your first property or your retirement: to ensure proper use, when you purchase your first home your conveyancing solicitor will withdraw the funds on your behalf. The account can hold cash, stocks, or a combination of both, and you can continue to deposit into the LISA until you are 50.
You can withdraw funds for non-property purposes on two conditions: you are over 60, or you have a terminal illness with less than one year to live. If you withdraw for any other purpose that is not for the purchase of a property, you will pay a 25 per cent withdrawal charge to counteract the government bonus.
Right To Buy
What is RTB?
This scheme offers the tenants of council houses the right to buy their property for a discounted price. Londoners can get a discount of up to £116,000, and the rest of England can obtain a discount of up to £87,200.
Who is eligible?
Secure tenants where the following conditions are all met: the property is your main or sole abode, those who are renting a self-contained property, and those who have had a public sector landlord for over 3 years (these years do not need to be consecutive).
What else should I know?
If you were a tenant of a council-owned property, but your home was purchased by a landlord, you may still be eligible for the Right to Buy scheme via Preserved RTB. However, you may not be eligible if your home is due for demolition, have an outstanding possession order, or have been bankrupted or in debt.
First published in March 2023 https://centrick.co.uk/news/whats-available-for-first-time-buyers/