Amongst the release of the Government-backed Mortgage Guarantee Scheme, we’ve also seen the launch of the First Homes Scheme on the 4th June (2021).
Unlike the Mortgage Guarantee Scheme which aims to assist first-time buyers onto the property ladder with small deposits, the First Homes Scheme is more specifically aimed at local first-time buyers and keyworkers.
So what does this new scheme mean for you? What is it, how does it work and how can you apply? We’re taking a look.
What is the First Homes Scheme?
As we said, this new scheme was launched on the 4th June just after the Mortgage Guarantee Scheme.
The aim of the scheme is much the same as the Guarantee Scheme, it’s there to help get first time buyers onto the housing ladder and into owning their own home.
So what’s the difference?
The First Homes Scheme is aimed at local first-time buyers and keyworkers, so those who are looking into owning their own home in the locality of where they live and work.
These homes are a limited number of new build properties which are available within new build developments. Developers will further be able to offer any homes from their new development as part of the scheme.
Developments however will only be able to offer properties as part of the scheme in England.
The scheme aims to offer those earmarked properties at a minimum of 30% discount when compared to the market price. According to Own Your Home buyers could save an average of £70,000, which could work out more where areas offer a 50% discount.
The scheme and the availability of these properties though has eligibility criteria applicants will need to meet.
How does the First Homes Scheme work?
Developers in England will be able to offer a limited number of plots on their new developments so you’ll need to check with any local new developments to see if they’re offering the scheme. These plots will have strict criteria applied to them to meet the scheme.
Not only is there a national-level criteria for the properties but under the scheme, local authorities can apply their own additional criteria.
National criteria and eligibility for the scheme mean you must:
- Be a first-time buyer (if buying with someone else you will both need to be first time buyers)
- Have an income of no more than £80,000 (or £90,000 if you live in London)
- Have a mortgage that covers at least 50% of the property purchase price
- The property should be the buyers only home (no buy to lets)
Meet local authority’s pre-determined local connections and/or key worker status Section 106 agreements to do with planning permission and planning obligations between local authorities and developers mean that at a local level additional criteria can be applied.
According to the First Homes government guidance, they can apply lower-income caps (as long as they match local average first-time buyer incomes), ‘local connection’ tests and criteria based on employment status. These will be applied to applications which will also take into account where you live and work, family connections living nearby and any other special circumstances.
Authorities can further prioritise key workers for First Homes, and as the guidance states ‘are encouraged to do so’.
However, local eligibility criteria will only apply for a maximum of 3 months from the time it’s first marketed. If after 3 months a buyer has not reserved the property eligibility criteria and any income caps will revert to the national criteria to broaden the buying market.
Furthermore, the scheme also states that a cap of £250,000 (or £420,000 in London) is placed on properties under the scheme so buyers shouldn’t expect to pay above this. You should also know that if and when a First Homes Scheme property is sold on the equivalent discount will apply all to future buyers.
How can you apply for the scheme?
Unfortunately, there is no set way to apply for houses under the scheme i.e. via a website or online application.
You’ll first need to check in with any local developments to see if they are offering the scheme. If they are then applications will need to be made through them to the local authority.
You’re also likely to find that you need to legally confirm you and anyone you’re purchasing with are first time buyers as part of that application.
Once the local authority has your application they will assess it against their local criteria and the national criteria.
If you meet requirements the local authority will issue a First Homes ‘Authority to Proceed’ and Eligibility Certificate to you to hand to your mortgage broker and solicitors for conveyancing.
Once you’ve had your application approved you can then move forward with your full mortgage application.
The first properties in the scheme went up for sale in Bolsover, Derbyshire and further properties have been released in Cannock, Staffordshire.
An additional 1,500 units will also enter the housing market from Autumn 2021, with a promise of at least 10,000 homes being delivered in the years ahead.
You can find out more about the scheme and other Government-backed schemes via the Own Your Home website or by speaking to a mortgage broker.
Contact us at Online Mortgage Guru on 0345 3669799 or email us via firstname.lastname@example.org and we will put you in touch with a suitable specialist to handle your enquiry who has experience handling cases such as yours.