First Homes Scheme

The First Homes scheme, which provides discounted homes for first time buyers, launched in June 2021 as another government initiative to help first time buyers get on the property ladder. But how does it work, who is eligible and how does it measure up against other schemes? Here’s everything you need to know.

Angela Kerr Director, Editor

With house prices staying stubbornly high, the First Homes scheme offers hope to first time buyers by offering homes at discount of at least 30%.  

What is the First Homes scheme?

The First Homes scheme offers newly built homes to first time buyers with a discount of at least 30% compared to the market value of equivalent properties. 

According to the government, homebuyers can save on average £70,000; making buying a home much more affordable. In some areas, up to a 50% discount is being offered. This discount stays on the First Home forever. This means that, every time the property is sold, the new buyer benefits from the discount. 

How the First Homes scheme works

For example, if the First Homes scheme property you want to buy has a market value of £250,000 and you’re eligible to use the scheme, you could buy it with a 30% discount of £75,000. So the purchase price for you would be £175,000. As a result you’ll be able to buy the property with a smaller deposit and your monthly mortgage repayments will be lower too.

But when you sell your property, the discount you received must be passed on to the next buyer – who must also meet the criteria for the First Homes scheme.

Who is eligible for the First Homes scheme?

• The First Homes scheme is open to first time buyers in England only. 
• Purchasers must also have a household income of less than £80,000 (or £90,000 in London). Although local authorities have the flexibility to reduce the household income limit.
• Local authorities also have the flexibility around other elements of the qualifying criteria. The First Homes scheme is designed to allow people to get on the housing ladder in their local area, and in particular to ensure that key workers are able to buy homes in the areas where they work. Therefore, local authorities are being encouraged by Government to prioritise local key workers for First Homes.
• A First Home should be the buyer’s only home and a mortgage must be used for at least 50% of the purchase price.

Is anyone exempt from needing to meet the local connection criteria?

Yes.  Members of the Armed Forces and recent veterans do not need to meet any local connection or key worker requirements set by local authorities.  

If you’re buying with a partner, do they also have to be first-time buyers?

Yes. If the First Home is being bought by more than one individual all purchasers must be first-time buyers.

Are there price caps on the property prices?

Yes. First Homes scheme properties cannot cost more than £250,000 (or £420,000 in London) after the discount has been applied. Local authorities have the power to reduce these caps in their local area, but not to raise them. 

What deposit will I need for the First Homes scheme?

You’ll need to take out a First Homes mortgage if you’re buying through this scheme. Lenders including Halifax offer 95% First Homes mortgages. So if you are buying a house in the First Homes scheme for £175,000, you would need a minimum 5% deposit of £8,750. Read on for more about First Homes mortgages.

Whenever you’re considering getting a mortgage it’s always best to speak to a fee-free mortgage broker as they’ll search the market and find the best mortgage for you.

First Homes scheme locations

The First Homes scheme launched on 4th June 2021 with developments in Bolsover, East Midlands. The following month, a second launch took place at Cannock, Staffordshire which would initially feature 10 homes under the First Homes scheme (in addition to affordable homes and shared ownership homes on the site).

The third development was announced in August 2021 when new homes came onto the market in Newton Aycliffe, Durham. The Elder Gardens development by Keepmoat Homes is on the edge of Newton Aycliffe and promised to deliver 12 new First Homes.

In November 2021, the government announced that Eastleigh Borough Council, in Hampshire, would deliver 201 First Homes across a proposed 2,500-home development known as One Horton Heath. The 310-acre multi-phase scheme was also the first in the South of England to be part of First Homes.

More sites are due to launch across the country. Sign up to our newsletter and we’ll let you know when and where new First Home properties are announced

First Homes scheme near me: How do you apply?

Your first step is to research First Homes schemes near you. Start by looking for First Homes scheme properties for sale that are advertised by developers. Next, contact the developer, or the estate agent if you’re buying from someone who has previously bought through the First Homes scheme and is now selling, to check whether you meet the local and national criteria of the scheme.

If the home is available you’ll need to complete an application form, then send it to the local council. If the First Homes scheme property you want to buy is a new build, you’ll need to pay a fee to reserve the property. But you’ll get this back if your application is unsuccessful. See below for a full step by step guide to applying. 

How is the First Homes scheme in London different?

The main differences if you’re looking at the First Homes scheme in London are:

• household income must be lower than £90,000, rather than less than £80,000 outside London; and
• the property price cap on the First Homes scheme in London is £420,000 rather than £250,000 outside London.  

If you’re looking for First Homes scheme properties near you in London, you’ll need to follow the same process of searching for developers that are selling First Homes.

Mortgages for First Homes

There are a number of major high-street lenders such as Lloyds, Halifax and Nationwide Building Society, along with local building societies that are currently offering 95% loan-to-value mortgages for First Homes. 

1. Chorley Building Society
2. Darlington Building Society
3. Halifax
4. Leeds Building Society
5. Lloyds
6. Mansfield Building Society
7. Nationwide Building Society
8. Newcastle Building Society

For more information on 95% mortgages, see our guide on the mortgage guarantee scheme or speak to our mortgage brokers who can advise you on the mortgage products available to you.

What about stamp duty?

Under the current stamp duty rates, first time buyers pay no stamp duty up to a property price of £425,000. See our guide on stamp duty for first time buyers for more information.

What are the benefits of the First Homes scheme?

Unlike shared ownership schemes, the First Homes scheme means you have full ownership of your home. It also offers you a significant discount on the market value of the home. This means you’ll need a smaller deposit and your mortgage payments will be lower.

What are the pitfalls of the First Homes scheme?

There are some potential downsides to consider including:

• Beware the new build premium: Newly built homes are likely to come at a premium and you may find something older and cheaper on the open market in the same area. See our guide on the pros and cons of new versus older homes.
• Limited availability: In areas with higher prices, such as areas where holiday homes are popular, commuter towns and cities, this scheme could make a big difference to the lucky few who are eligible and act quickly. The scheme has limited availability at the moment, so competition will be high and not as accessible to all first time buyers in all regions.
• It’s also worth noting the new scheme isn’t without its critics. For example, the scheme, which has been compared to the government’s failed Starter Homes initiative, has attracted criticism from the social housing sector. Organisations like the National Housing Federation have concerns that funding the scheme initially through Section 106 obligations (private agreements between local authorities and developers when granting planning permission) could eat into the amount of social housing delivered.

Can you use the Help to Buy equity loan with First Homes?

No. The Help to Buy 2021-2023 scheme has now closed but when it was still open you were unable to use both schemes in conjunction.

What do you need to do next? A step by step guide  

1. Apply for a mortgage in principle

If you haven’t already done so, you will need to see whether you are able to obtain a mortgage, via a decision in principle. This will give you an idea of how much you will be able to borrow in the first place. There are a handful of lenders who offer 95% mortgages for First Homes.   See our guide for more advice on getting your mortgage agreement in principle or speak to our mortgage brokers to assist you. Get free mortgage advice and arrange your mortgage agreement in principle now.

2. Find your property

Once you’ve found a property you will need to reserve the home and pay the reservation fee (this is refundable if you are found not to be eligible).  Applications cannot be considered by local authorities if you have not reserved your First Home, or if any required information is missing.   

3. Legally confirm you are first time buyers

As part of the application you need to legally confirm that you and anyone you are purchasing with are first time buyers. 

4. Application is reviewed

The local authority will review your application.  If you meet all the requirements it will issue a First Homes ‘Authority to Proceed’ and Eligibility Certificate to you. You should give this to your mortgage broker and conveyancer.  You can usually expect a local authority to issue their Authority to Proceed within five working days of application receipt.

If your First Homes application is approved

You’ll need to:

• Apply for your mortgage and appoint your conveyancer Apply for your mortgage.  It is very important that you do not submit your full mortgage application until you have the Authority to Proceed. 
• Exchange contracts: Once your mortgage offer is made and the contract agreed, you are ready for exchange. On this date you must pay your deposit (usually 5%) and exchange contracts to buy.  At this point you are legally committed to buy and you will have a date for completion (when you move in). This date should be no more than six months from exchange. 
• Complete the purchase: On the completion date, your conveyancer transfers the money from your mortgage to the developer, you’ll receive the keys and you can move in.

How do I sell my First Homes home?

The First Home discount is applied to the property on its first purchase but the discount stays with the property every time it is resold. The same criteria applies, and you will need to sell your home to another first time buyer that fits the scheme’s criteria, with the same discount you bought it with.

You’ll need to get the property valued by a surveyor registered with RICS.

Can I let out a First Home?

Yes. But you can usually only let your First Home for a total of 2 years during the time you own it. In order to do this you must:

• Check if your mortgage agreement allows it
• Tell the local council

This 2-year limit will reset when you sell the home.

However, you may be able to let out your First Home for longer than 2 years if:

• Your job location changes
• Your marriage or long-term relationship ends
• Moving to escape domestic abuse
• You have been made redundant
• You’re caring for a relative or friend

In these circumstances you can ask your local council. You may also need to ask your mortgage lender.

Can I let out a room in my First Home?

Yes. You can rent out a room for as long as you want, providing:

• You still live in the property while letting the room
• The home remains the only one you own

Remortgaging a First Home

You can remortgage First Homes properties but your remortgage must be based on the value of the property, minus the discount you had taken off.

Do I need to sell my First Home if my circumstances change?

No. You will not need to sell your First Home if your circumstances change and you no longer meet the eligibility rules, such as if your income increases or you’re not a key worker anymore.

Can I leave my First Home as inheritance?

Yes you can leave your First Home to someone in your will. But if they don’t meet the eligibility criteria, they will need to sell the property.

Other government schemes & advice to help you buy

As the number of homes currently being offered under the First Homes scheme are currently few and far between, see our guide to buying your first home where we simplify the essential first steps and what help you can access to enable you to buy your first home.  You may also find our guide to first time buyer mortgages a useful starting point. 

If you need help getting on the property ladder you may want to look at what other support the government offers. To help you save, there is the Lifetime ISA.  Help to Buy has come to an end but you could consider Shared Ownership.  For full details see our guide Government schemes to help you buy a home in 2022.