For many people yet to step foot on the property ladder, the idea of having enough money for a deposit is somewhat fanciful.
Saving for a deposit is difficult, especially when it has to be done alongside paying rent, and the process is especially tough for those living in London, where living costs are higher than elsewhere in the country.
The government is aware that many young people would like to buy a home but, largely due to financial limitations, are unable to do so. In a bid to combat this, numerous initiatives have been launched, all of them set up to make the buying process easier and more viable.
In April, Rishi Sunak announced the welcome return of 95% mortgages, allowing buyers to purchase a home with just a 5% deposit, while the Help To Buy scheme, designed to help people across England to own a new-build, has enabled more than 313,000 households to buy a property.
The latest initiative to hit the headlines is the First Homes scheme, but if you haven’t yet heard of it, don’t worry – all will be revealed in this article!
What is the First Homes scheme?
As with various other government initiatives, the focus of the First Homes scheme is to assist first-time buyers to get on the property ladder. By offering discounts of up to 50% (but more commonly 30%) on new-build properties, first-time buyers and key workers will be able to buy a home in the area where they live or work at a massively reduced cost.
The scheme is very much in its infancy, with properties currently only available in Bolsover, Derbyshire, but it will be rolled out across the country in due course. The government has declared that by the end of 2021, around 1,500 homes will be available to purchase via the scheme, with a total of 10,000 properties eventually set to be part of the initiative.
Due to the incredible savings on offer via the scheme, demand is liable to be fierce, and not everyone who registers their interest will be able to take advantage. One of the best ways to key a leg up on the competition is to speak to a mortgage broker prior to filling out any application, as they will be able to guide you along the way and ensure you are in the best possible position.
As with all schemes of this nature, there are certain conditions in place that individuals must fulfil. There are five key requirements:
Rule 1: The scheme is only open to people who are first-time buyers. This rule also means that anyone who has inherited or been gifted a home is ineligible.
Rule 2: The scheme is only open to those who earn less than £80,000 (or £90,000 in London). This limit remains the same whether buying as an individual or in a couple.
Rule 3: The price of the new-build property must not exceed £250,000, or £420,000 in London.
Rule 4: The buyer must have a ‘local connection’ to the area. This point has not yet been thoroughly defined, and is likely to be assessed on a purchase-by-purchase basis. It has been stated, however, that key workers – NHS employees, retail workers, delivery drivers, police, firefighters – will be prioritised.
Rule 5: The property must be for keeps, so to speak. As part of the government’s plan to ensure affordable homes do not get into the hands of those looking to sell them on quickly for profit, every subsequent buyer of the property will also be privy to the same discount as was available during the initial purchase.
The pros (and some cons)
The most obvious pro is that the scheme will allow people to get on the property ladder without having to save up a huge deposit – something that will be music to the ears of thousands of would-be buyers. Also, due to the relatively low cost of the property, it will be far easier to attain a financially beneficial mortgage.
Another key pro is that it will allow people to remain within their local area. When buying a first home, many people – especially those resident in London – have to contemplate moving areas so as to find something affordable, but this scheme has been designed to ensure that property ownership does not have to come at the expense of convenience.
Though there are few cons related to this scheme, one aspect that could potentially prove somewhat detrimental further down the line is that should the buyer decide to sell in the future, they are unlikely to get a significant sum of money (see rule 5 above). Unless the initial buyer has been able to bolster their savings during their ownership of the property, they will likely have to take a sideways – or even a backwards – step with regard to the size and location of their second home.
Getting one step ahead
If you believe you are eligible for the scheme and want to know when and how you can register your interest, keep an eye on the government’s dedicated page for updates.
In the meantime, speaking with a mortgage broker will not only provide you with a better understanding of what you can afford, but will also give you an idea of the mortgage deals available to you that take into account your bespoke circumstances. Mortgage brokers are well placed to help you take advantage of discounts and offers, so if you are looking to get on the property ladder in the near future, get in touch with one today.
Want to speak to a reliable, knowledgeable and experienced mortgage broker? Get in touch with Alexander Hall today.