First-time buyer schemes in 2024

Last updated: May 2024 | 3 min read

Buying your first home can be exhilarating. There are many schemes available in the UK for first time homebuyers to make this process easier. Read on to learn all about the current schemes and how they can help.

Buying a house can be a nerve-wracking journey with many ups and downs. But if you are a first time buyer, then there are certain schemes that can help you iron out financial difficulties.

These schemes can be very important in helping individuals take their first step in getting onto the property ladder. Ask your estate agent to get more information.

What are first time buyer schemes?

First time buyer schemes in the UK present opportunities for individuals to purchase their own homes, making the process more financially accessible.

These schemes are often backed by the government or local authorities.

Varieties of these schemes include the Help to Buy equity loan, shared ownership, and the First Homes scheme.

Each scheme provides different methods for reducing the initial cost barrier of purchasing a property, offering support like equity loans, subsidies, or shared ownership options.

These schemes often prioritise local first time buyers, aiming to sustain local communities and provide housing opportunities tailored to local needs.

For detailed information on buying your first home, read our article. You will qualify for a first time buyer's stamp duty relief as well.

Current first time buyer schemes

Equity loan schemes

These offer a valuable leg-up for many first time buyers. In these, a percentage of the home's value is provided as an interest-free loan for a set period, typically the first five years.

This approach reduces the initial mortgage amount, making repayments more manageable.

Local authorities play a role in administering schemes. Some schemes focus on key workers, acknowledging their essential contribution to local community. Benefits include preferential rates or specific eligibility criteria.

Shared ownership schemes

These enable you to buy a part of a property – often between 25% and 75% – and pay rent on the remaining share.

Over time, you can increase your share in the property, a process known as "staircasing". This method is an effective way to break into the housing market with a smaller deposit and lower initial mortgage.

Help to Buy: mortgage guarantee scheme

The Mortgage Guarantee Scheme targets buyers with smaller deposits, aiming to increase home ownership.

Under this scheme, the government offers a partial guarantee, typically up to 15%, on the home's purchase value. This guarantee mainly benefits lenders, as it reduces the risks involved with low-deposit loans.

If a buyer defaults on a repayment mortgage, the government's guarantee shields the lender from some financial loss.

Buyers can purchase a newly built home or an existing property under this scheme.

The offer hinges on both the buyer's ability to pay a deposit – usually between 5% and 9% of the property's value – and their eligibility for a repayment mortgage.

This scheme doesn't reduce the amount a buyer needs to borrow; it merely reassures the lender through government backing.

Eligibility criteria for the mortgage guarantee scheme: to be eligible for the Mortgage Guarantee Scheme, several criteria must be met.

The scheme requires that the property being purchased is your only home and not an investment or second property. This stipulation ensures the scheme focuses on genuine first home buyers. or those moving up the housing ladder.

Your mortgage must be on a repayment basis, not interest-only. This requirement underlines a commitment to gradually gaining equity in the property, rather than just paying off the loan's interest.

The mortgage must be taken out with a lender participating in the scheme.

The property's purchase price must fall under the scheme's maximum limit. This price cap also ensures that the scheme remains targeted at average-priced homes, aiding those who might otherwise struggle to enter the housing market.

The household income of applicants also comes under consideration, as the scheme aims to support those who might not otherwise afford a home.

The buyer's credit score and lending history will be assessed by the mortgage lender. They require assurance that the borrower can responsibly manage their mortgage repayments.

First homes scheme

The First Homes scheme offers newly built homes at a discount. This scheme assists you in buying your first home, offering properties at a reduced price.

To access this discount, your eligibility is a key factor. The local council determines your first home's eligibility based on certain criteria like income and local connections.

Once eligible, you select a property from the designated First Homes. An independent surveyor then assesses the property's value.

The scheme mandates a minimum discount of at least 30%, which can be higher based on local council policies. For example, a home valued at £200,000 can be purchased at £140,000, accounting for the minimum discount.

The discounted purchase price will be reflected in the home's title deed. This ensures the discount is passed on to future first-time buyers.

On your part, you should prepare finances to cover the reduced price, similar to a standard property purchase. This includes saving for a deposit, considering mortgage options, and budgeting for associated house buying costs.

What you should be cautious about: be cautious about the discount on resale. The discount you receive remains with the property, meaning any future sale is also at a discounted rate. This could impact your return on investment compared to selling on the open market.

Property selection can be limited. First Homes are specific to selected plots within a development and the number of properties available is often restricted. Always check the availability in your desired location and consider if the homes on offer meet your long-term needs.

Pay attention to local area requirements set by the local authority or council. Some councils impose conditions like a maximum household income or a requirement to be a current or former resident of the area.

These factors dictate who can buy these homes, often prioritising local residents or those in certain occupations.

Help to Build: tailored for self-builders

Help to Build supports self-builders with an equity loan similar to the Help to Buy scheme. It's designed for those constructing their primary residence, with loans of up to 20% (40% in London) of land and building costs.

Eligibility requires owning a plot and having planning permission.

Lifetime ISA

The Lifetime ISA, often abbreviated as LISA, is an account specifically crafted to promote saving for either one's first home purchase or retirement.

Individuals can contribute up to £4,000 annually, and the government supplements this with a 25% bonus.

Rent to Buy: bridging renting and buying

Rent to Buy lets first-time buyers rent at about 20% below market value, often for up to five years. This scheme aids in saving for a deposit, with options to buy or enter shared ownership post tenancy. It's ideal for renters aspiring to homeownership.

Armed forces Help to Buy

'Forces Help to Buy' offers armed forces members an interest-free loan up to £25,000 for home purchase. Eligible after a set service period, this aids with mobility and assignment-related relocations.

The scheme is particularly beneficial for service members frequently moving or facing sudden changes in family circumstances.

It ensures they have a stable and affordable way to access the housing market, a significant step towards securing long-term family housing.

HOLD: homeownership for people with long-term disabilities

HOLD assists long-term disabled individuals to buy a home share while renting the remainder. Tailored for enhanced independence, it allows buying between 25% and 75% of a home, chosen from the open market, with rent paid on the unsold share.

This initiative caters to those needing homes adapted to their disabilities, offering a more flexible and accessible route to homeownership. By supporting lenders facilitating the purchase of a suitable home, HOLD contributes to the individual's autonomy and comfort, aligning with their living requirements.

Common misconceptions and clarifications

A frequent misunderstanding is that schemes like Help to Buy or shared ownership are only for newly built homes. While it's true that new build homes are a significant focus, several schemes also apply to existing properties.

Some buyers believe that participating in a government scheme means they'll pay below the market value. However, it's important to understand that these schemes often involve homes buyer paying the full market value, albeit with assistance in funding.

Another confusion surrounds eligibility criteria, especially regarding household income and employment status. Eligibility rules can vary between schemes and local councils, so check the specific requirements of local eligibility criteria.

There's a myth that you need a large deposit for these schemes. In reality, many of these initiatives aim to reduce the upfront cost of buying a home. For instance, the Help to Buy equity loan scheme allows for a smaller deposit.

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