The First Homes scheme is a homebuyer initiative announced by the government in 2021 and it has been created to help first-time buyers struggling to afford to buy on the open market get on the property ladder with a brand new home in England at a discounted price.
Here, we explain what you need to know about First Homes.
What homes are available through First Homes?
Housebuilders and developers will be signing up and working with local councils to offer the First Homes scheme at sites across England. First Homes is right now available on selected new build homes but will also be available when you buy from someone else a home which was originally purchased through the scheme.
Housebuilders offer the First Homes option to first-time buyers on selected properties with 30% to 50% of the market value taken off the price. So, a home for sale with a full price of £200,000 might be available for £140,000 when a 30% discount is applied. You’ll need a deposit of at least 5% of the discounted price.
There’s a price cap of £420,000 in London, or £250,000 anywhere else in England, after the discount has been applied. A local council may set a lower price threshold. The scheme’s rules mean that every home that’s sold must be valued by an independent surveyor to ensure the discount is based on actual market value.
The number of homes available to purchase through First Homes is on the rise and you can search for them here.
Am I eligible for First Homes?
The scheme is aimed at first-time buyers and with a household income not exceeding £80,000 (£90,000 in London).
The exact qualifying criteria are set by each council, but priority may be given to:
- essential workers, for example NHS workers, teachers, delivery drivers and supermarket staff
- people who already live in the area
- people on lower incomes
You’re exempt from local authorities’ conditions about being an essential worker or living in the area if you are:
- a member of the Armed Forces
- a veteran who left the Armed Forces in the last five years
- a divorced or separated spouse or civil partner of a member of the Armed Forces
- a widow or widower of a deceased member of the Armed Forces (if their death was caused wholly or partly by their service)
If you are one of the above, you will still need to meet other eligibility conditions.
With First Homes, will I have to pay Stamp Duty Land Tax?
The amount of Stamp Duty Land Tax (SDLT) you pay is based on how much you paid for the home after the discount was applied.
If your discounted property costs under £300,000, as a first-time buyer you won’t have to pay any SDLT at all. If it is priced between £300,000 and £420,000, you won't have to pay SDLT on the first £300,000 and you’ll pay SDLT of 5% on the price above that – so if it is priced at the maximum £420,000, you’ll have to pay £6,000.
When can I apply for First Homes?
Firstly, ensure that the housebuilder is offering First Homes on the development where you want to buy. There’s no application deadline and the scheme is open to eligible applicants whenever there are plots available. You can formally apply for First Homes when you are ready to reserve a plot under the scheme.
How do I apply for First Homes?
It’s best to start by talking to a mortgage advisor and ensure that you qualify for a relevant loan. You’ll need to use a mortgage or home purchase plan for at least 50% of the purchase price of the home.
Contact the developer (or estate agent if you’re buying from a previous First Homes buyer) and tell them you want to buy a First Home. They can help you to complete the application, then send it to the local council. If you’re buying a brand new home, the housebuilder will charge a fee for applying which is fully refundable if your application is unsuccessful.
The local council will check your application to make sure you’re eligible and contact you, your mortgage advisor and housebuilder with their decision.
If your application was missing any information, they may ask you to provide it before making their decision.
What happens if I am approved for First Homes?
You can now formally apply for your mortgage. You should also hire a conveyancer/solicitor to help you through the property purchase procedures, following any local council instructions and filling in all the necessary forms.
After you’ve got a mortgage offer and agreed a contract with the developer, your conveyancer will ask the local council if you can exchange contracts. The council will check to make sure the conveyancer’s request meets all the necessary terms and conditions, and tell you when they’ve decided.
How do I find a conveyancer?
This can be either a conveyancing solicitor or a licensed conveyancer and you can find them on the Law Society website (www.lawsociety.org.uk) or on the Council for Licensed Conveyancers website (www.clc-uk.org) respectively.
How long will the First Homes buying process take?
Processing the application, and the length of time it takes to complete the purchase, may vary based on the location.
Exchanging contracts and completion
You need to pay your deposit at the same time as you exchange contracts with the developer and at that point you are legally committed to buying the home. When you’ve exchanged contracts, the developer will set a completion date, when the home will be ready for you to move into.
On the completion date, your conveyancer transfers the money from your mortgage to the housebuilder, who can then give you the keys to your brand new home.
Can I let my First Homes property?
While it should be your only home (not a holiday home or investment property, for example), in general you can let the whole property out to tenants for a total of up to two years during the time you own it. You’ll need to tell your local council and ensure that your mortgage agreement allows you to do this.
However, if your council and mortgage lender approve, you may be able to let out your First Homes property for more than two years if:
- you’ve been made redundant
- your job location changes
- your marriage or long-term relationship ends
- you’re moving in order to leave a situation that involves domestic abuse
- you’re a carer for a relative or friend
You can rent out a room to someone for as long as you want if you live in that home while they’re renting, and the home remains the only one you own.
What happens if my circumstances change after I’ve purchased through First Homes?
If there’s a change in your circumstances after buying a home through the First Homes scheme – for example if you stop being a key worker, or your household income goes about the qualifying threshold, you won’t have to sell your home.
What happens when I want to sell my home?
When you come to sell the property, you must do so to someone who is eligible to buy a First Home. You must give them the same percentage discount that you got, based on the home’s market value at the time of sale. To ensure a reasonable sale price, the property will need to be valued by a surveyor who’s registered with the Royal Institution of Chartered Surveyors (RICS).
Can I leave my First Homes property in my will?
You can leave your property to someone in your will but they will then have to sell it if they don’t qualify for the First Homes rules.