First-Time Homebuyer Programs in the UK

For UK first time home owners, purchasing a home is a massieve step, so this guide introduces different schemes that are designed specifically to help the first-time home buyer, in order to help them choose wisely about home purchasing.

Understand First Time Homebuyer Programs (FTHBPs)

Government or privately arranged programmes designed to help first-time homebuyers (people buying a house for the first time) by giving out money, or offering lower interest rates or the option to buy with a smaller deposit – especially aimed at first-time buyers.

Shared Ownership

Shared Ownership means that homebuyers can purchase between 25 per cent-75 per cent share of a property at the beginning and rent back the rest currently, with the possibility of purchasing more equity later. This form of ownership is largely dependent on a household’s income and first-time buyer status – whether or not a household qualifies is based on these two variables, at times, depending on the local housing association.

In Home Ownership for People with Long-term Disabilities (HOLD), we support them to be permanent homeowners in housing programmes that offer permanent residence in a home of their choice.

HOLD (Home Ownership for People Living with Long-term Disabilities) provides several affordable home ownership options to individuals with chronic disabilities.

HOLD was specifically established to help first-time-buyers, long-term disabled – those who didn’t meet the needs criteria set out for Shared Ownership – to purchase properties on the terms of shared ownership schemes, if they couldn’t find anything that would meet their individual needs that way. The eligibility criteria for HOLD are the same as those set out for Shared Ownership, but are further shaped by taking applicants’ disability needs into account.

England offers 30 to 50 per cent discounts off market prices to first-time buyers and key workers through its First Homes Scheme, making ‘First Homes’ available at at up to 50 per cent below market value for discount sale or lease purchases.Users might need to be over 18, from the local area and have a certain household income. A priority lottery for local connections or employment is usually held; applications can then be made to a developer or estate agent.

Help To Purchase: Mortgage Guarantee Scheme

This program helps first-time home buyers who need only a 5 per cent down payment by providing lenders with guarantees on behalf of the government. Different lenders have different requirements; financial stability is a key consideration as this will be their first and only home.

Help to Buy Equity Loan

It lends up to 20 per cent (40 per cent London) of the purchase price of a new-build home as an equity loan that doesn’t have to be paid back until the home is sold and doesn’t have to be paid for five years. All that’s left is the 5 per cent cash deposit and the mortgage on the remaining 75 per cent. It’s a loan designed for first-time homebuyers. It’s easy to take out.

Help to Build would offer an equity loan, along the lines of Help to Buy: Equity Loan, to self-builders planning to create their own homes. Eligibility criteria could include ‘first-time buyers’ (ie, those who have not bought or inherited a home previously) and other financial filters.

Rent-to-Buy schemes offered tenants the chance to rent fully furnished accommodation at below-market rates for up to five years and, subject to proof of income ‘eligibility’, become first-time owner-occupiers. Almost by definition, qualifying tenants are nearly always first-time buyers, with the beneficial policy of ‘allowing first-time buyers’ suffering only if total annual earnings are above specified thresholds.

Right to Buy tenants can buy their home at a discounted price through Right to Buy, if they have been a public sector tenant for three years (regarded as having lived in their home as a public sector tenant for three years). A property eligible under the rules for Right to Buy must be the tenant’s only or main residence for the prescribed statutory period, ie, the action of purchasing as a homeowner has to commence within three months of one of the eligible tenants moving in.

A ‘public sector tenant’ is defined as a tenant who rents the property either from the local authority in whose area the property is located or from a housing association where the zone of benefit is the wider England. To qualify under all the rules, a property that is eligible for Right to Buy must have been occupied by one of the qualified tenants as their only or principal home for the required time.

First Time Home Buyers in UK

However, it also of crucial importance, for our hypothetical first-time buyers to navigate the multitude of schemes made available to them in the UK. Therefore, it is of utmost importance that, accompanying the benefits of participating to any particular scheme, first-time buyers are duly reminded of the obligations that come attached to each one oft hese schemes. That being said, the text below provides a succinct summary of some of the main features of first-time homebuyer programmes.

Britain’s First Homes Scheme offers discounts of 30-50 per cent to qualifying first-time buyers on homes being sold up to 30-50 per cent below market value: first-time homebuyers who are eligible to purchase such properties receive discounts of 30-50 per cent of market value, provided that 50 per cent of their mortgage is in place and their household income does not exceed £80,000 (£90,000 in London). Here, the meeting of local needs takes precedence over first-time buyers: councils can decide whether to allocate First Homes to key workers or local residents.

Help to Build:

The government loan is designed especially for those trying to build a home themselves, who can benefit from both better mortgage rates depending on deposit size, and significant savings on upfront costs and fees.

‘SO’ means that homebuyers own anywhere between 25-75 per cent of a property, and rent the rest – meaning you just need a deposit to buy and an income of less than £80,000/£90000 in London to buy (that said, you have to be eligible to achieve this – first-time buyers can, but otherwise you’ll probably need to live in London). London people basically mean an L socioeconomic group.

Lifetime ISA:

Save up to PS4,000 a year towards buying your first home or retirement (possibly both) and receive a bonus of 25% from government on savings each year.

Rent-to-Buy (RTB) schemes provide low-income tenants with the chance to lease new-built dwellings at lower rents under the premise that this temporary concession will eventually make their way onto the housing ladder by helping them afford to buy the home later on.

Council tenants benefit from a Right to Buy policy that allows them to buy their home at a discount (the degree of discount varies according to location, length of tenure and type of property).

As they consider swapping traditional homebuying for one of the emerging alternative homebuying schemes, prospective home buyers should keep in mind that there may well be mortgage assistance programmes available:

Fannie Mae HomeReady and Freddie Mac Home Possible programmes:

These programs offer low-down payment loans to first-time home buyers with moderate or low incomes, including the ability to accept family gift dollars to contribute towards down payments or closing costs.

FHA Loans: Smaller down payments or lower credit scores can be accommodated with FHA loans, carrying deposits as low as 3.5 per cent for credit scores over 580, and payments as low as 3.5 per cent down.

VA Loans and USDA Loans: Offer no-down-payment mortgages, with VA loans for service members, veterans and eligible surviving spouses as well as USDA loans for buyers in rural or suburban areas.

Additionally, various grants and assistance programs provide additional support.

Down Payment Toward Equity Act:

Because use of this proposed cash grant, of up to $25,000, which would go only to first-timers, is still pending (government interventions tend to take a while), it is not presently available.

Homebuyers’ Direct Grant:

a non-repayable cash grant (up to 5 per cent of the purchase price of the property) which may be used as a down-payment towards qualifying first mortgages through the National Homebuyers Fund.

For instance, the Good Neighbor Next Door Program (GNNDP) involves selling foreclosed homes at half price to ‘community service professionals’ (frontline teachers, firefighters, Full-time law enforcement officers, or EMTs) as an inducement to live in their community of service so as to keep existing teachers in their district – that is, to induce them to stay in the district where they are providing community services. The GNNDP seeks to keep them living near where they serve as a matter of keeping them there as part of providing their community services.

It is important to investigate these two programmes thoroughly, including speaking with financial or real estate advisors, in order to determine which fits each set of circumstances and needs.

Conclusion

In the UK, there are a number of first time buyer schemes which can accommodate the needs and circumstances of different first-time homebuyers and so provide different routes towards homeownership.
It is important to know about these programmes and how they work in order to make a well-informed decision regarding homeownership; you need to to take the right road towards buying your first home – do your homework before taking this significant life step.