Your guide to the First Homes scheme
Homes England recently published in-depth guidance on the First Homes scheme for buyers. In this blog, our new build conveyancing solicitors explain how the scheme works and who can apply for the First Homes discount.
What is the First Homes scheme?
First Homes is a Government-led scheme that gives first-time buyers a discount on new build properties in England only.
The scheme aims to help more people onto the property ladder and gives buyers a discount of at least 30% of the newly built property’s market value, and local authorities can offer bigger discounts of 40% or 50%.
What happens to the discount when you sell?
The First Home discount applies to the property forever, meaning that the same discount, will pass on to future buyers of that home. The seller of the First Home will only receive the discounted amount, not the full amount of the property’s market value.
Who qualifies for First Homes?
The scheme is for first-time buyers who would otherwise find it difficult to get onto the property ladder. The First Homes discount applies to those whose household income does not exceed £80,000 (£90,000 in London). Priority is also given to local residents and key workers.
Buyers must get a mortgage that covers at least 50% of the cost of the new build after the First Homes discount has been applied.
Who is classed as a first-time buyer?
A first-time buyer is an individual who has never owned a property before. They cannot be an existing homeowner or buy-to-let investor. If you are buying with a partner you both must be first-time buyers to qualify.
Is there a price cap on First Homes?
Yes. The First Homes price cap is £250,000 in England and £420,000 in London after the discount has been applied. Local authorities will be able to set lower price caps. These price caps apply for the initial sale only.
Buyers may also need to pay stamp duty, depending on the amount that is paid for the home after the First Homes discount has been applied.
Can I use a Help to Buy ISA or LISA?
Yes, if the purchase complies with the rules of the Help to Buy ISA and Lifetime ISA schemes, and is within the ISA price caps.
Who is funding the First Homes discount?
The discounts will primarily be funded by property developers. When homes are being planned and built, developers usually allocate a number of plots to be affordable homes. As First Homes are a type of affordable housing, these form part of developers’ contribution.
How do I apply for the First Homes scheme?
You can find available First Homes by checking with local housebuilders. If they are selling First Homes, they will need to check your eligibility.
It is important to seek professional advice about mortgage availability from a mortgage advisor, and also find a conveyancing solicitor who advises on First Homes purchases. When you are looking for a conveyancer, you will need to find one who advises on purchasing new build homes.
If you are eligible to buy a First Home, the property developer will help you to complete an application that goes to your local authority.
Both the developer and mortgage adviser will need information from you which includes checking your household income and the likelihood of you being able to obtain a Mortgage in Principle.
Once your application is complete, you will sign the legal declaration on the application form (this goes to your local authority), reserve the property, and pay a reservation fee. You must reserve the new build as applications will not be considered without confirmation of your formal reservation.
If your application is successful, the local authority will issue a formal certificate to you, the developer, your mortgage adviser, and your conveyancer. At this point, you can apply for your mortgage.
Your conveyancing solicitor will start work on your purchase, following the local authority’s instructions. Once your mortgage offer is finalised and the contract is agreed with the housebuilder, your conveyancer will request to exchange contracts from the local authority.
At this point, you must pay your deposit (usually 5%) and exchange contracts. You are now legally committed to purchasing the property.
Once you have exchanged contracts, the developer will confirm timescales for getting your First Home ready to move into. The time between exchange and completion should be no more than six months.
When the builder gives notice of completion, your conveyancer will get your mortgage funds from your lender to pay them. Like with a regular house purchase, you will get the keys to your new build on the date of completion, and you can move in.
How do I sell a First Home?
Luckily, the process for selling First Homes is similar to that of selling a normal property. There are some differences, however, including:
- You must first notify the relevant local authority, who will then send you the relevant instructions for marketing the property, which must be sent to your estate agent.
- There are additional legal requirements involved in selling a First Home, so it is not advisable to attempt a private sale.
- Priority should be given to local buyers who meet criteria set by your local authority. If, after three months, you are unable to sell the home, your estate agent can market it to those who meet the national criteria for purchasing First Homes.
- The First Home must be valuation by a valuer who is qualified by the Royal Institution of Chartered Surveyors (RICS). The RICS surveyor will value the home’s full market value before the First Homes discount is applied.
- You cannot negotiate the price of your First Home upwards from the set discounted value, however, you can reduce the price.
- The same percentage reduction must be applied when you sell the property as was applied when you made your purchase.
Considering using the First Homes scheme? Contact our new build conveyancing solicitors
If you are considering the First Homes discount to buy your first home, our new build solicitors in Bristol can help. We are on the panel for a number of housebuilders and are recognised in the local area for our expertise in new build properties.