How the First Homes Scheme can help first time buyers in London

How the First Homes Scheme can help first time buyers in London

The latest government programme aimed at helping first-time buyers on to the property ladder is the First Homes scheme.

The scheme could play a major role in helping London buyers secure their first home and, in this guide, we’ll explain:

• What the First Homes scheme is

• Who is eligible for the scheme

• How it works for first-time buyers in London

• The pros and cons you’ll need to consider

What is the government First Homes scheme?

The government First Homes scheme was announced in June 2021 and aims to help first-time buyers in England purchase their first home.

The scheme will see a number of new-build homes go on the market and be sold at a discount to eligible first-time buyers.

The government has demanded that at least 25% of new affordable housing in England be sold with a First Homes discount.

How will First Homes work for first-time home buyers in London?

Many first-time buyers in London have been left behind, with property prices in the capital among the highest anywhere in the world.

The First Homes scheme could help London first-time buyers, with properties coming on the market with a substantial discount.

London properties being sold under the scheme will have their purchase prices capped at £420,000.

If you buy a property under the scheme, the discount you receive must be reapplied if you later sell your home.

Any potential buyer must also meet the First Homes eligibility criteria.

What is the discount for first-time buyers?

Properties for sale under the First Homes scheme will have at least a 30% discount off their valuation, with some potentially being sold with a discount as high as 50%.

While 30% will be the standard discount under the scheme, if a local authority can prove there is a need for a higher discount, some areas may have properties for sale with 40% or even 50% off their valuation price.

Who is eligible for the First Homes scheme in London?

To be eligible to buy a property in London under the First Homes scheme, you must:

• Be a first-time buyer, meaning you’ve never owned a property before, including inheriting a home

• Both be classed as first-time buyers if you’re purchasing with someone else

• Have a household income of no more than £90,000

• Be taking out a mortgage that covers at least 50% of the property’s purchase price

• Be buying a property to live in as your main residence and not a buy-to-let

Priority for First Homes properties is also likely to be given to key workers and ‘local’ people, meaning you may have to prove you have a connection to the area in which you wish to buy.

Who is classed as a key worker in the housing scheme?

Key workers are expected to be given priority when properties under the First Homes scheme start to go on sale.

Those key workers could include:

• Doctors and nurses

• Police officers

• Teachers

• Firefighters

• Delivery drivers

• Supermarket workers

Military veterans are also set to be prioritised under the scheme.

How do I apply for the First Homes scheme in London?

The First Homes scheme doesn’t have an application process.

Instead, you should look out for new developments offering properties under the scheme and speak to developers about their plans.

As long as you meet the criteria for the scheme, you should be able to reserve a property.

First Homes scheme pros and cons

All home-buying schemes come with pros and cons you’ll need to weigh up against your personal circumstances before going ahead.

Here are some pros and cons of the First Homes scheme you should consider…

First Homes pros

First Homes cons

You’ll be able to buy a home with at least a 30% discount off its valuation

You’ll have to apply the same discount if you later decide to sell, and you can only sell to a buyer that meets the First Homes criteria

You may be able to buy in your local area, instead of being forced to look elsewhere for a property you can afford

Only new-build homes are available to buy under the First Homes scheme and competition for them will be high

Because of the discount, you’ll require a smaller deposit and a smaller mortgage

New-build homes are often sold at a premium price

Other schemes for first-time buyers in London

As well as the First Homes scheme, you have several other options available if you’re a first-time buyer in London.

Help to Buy equity loans

Help to Buy equity loans see the government loan you 40% of your deposit if you’re a first-timer buying a new-build home in London.

You then put down a 5% deposit, with a mortgage covering the remaining 55% of your property’s purchase price.

Not all new-build properties are sold under the Help to Buy scheme and those that are come with a maximum purchase price of £600,000.

You can find out everything you need to know about Help to Buy equity loans in London in our guide.

Shared Ownership

Under the Shared Ownership scheme, you purchase a ‘share’ in a property, usually between 25% and 75% and then pay reduced rent on the remaining share.

Over time, you can ‘staircase’ your way to owning more of your property, eventually reaching 100% ownership if you wish.

Find out more about how Shared Ownership works in this guide.

The 95% mortgage guarantee scheme

The government’s 95% mortgage guarantee scheme was put in place to encourage more lenders to provide high loan-to-value mortgages for first-time buyers.

Under the scheme, the government guarantees a portion of your mortgage, meaning more protection for your lender.

Meanwhile, you provide a 5% deposit and secure a mortgage for 95% of your property’s purchase price.

Find out more about the mortgage guarantee scheme here.

Further reading…

What to consider before buying a starter home

The ultimate checklist for first-time buyers

How to get on the property ladder in London