With the Help To Buy equity loan deadline fast approaching, Centrick has seen an influx of questions from first-time purchasers. Although the term ‘First Time Buyer’ sounds rather self-explanatory, there are a few exceptions to the rule that must be understood prior to securing your first property. In this blog, we’ll be covering precisely who qualifies as a First Time Buyer, and why this matters:
If you’re searching for your first home, and any of the following criteria apply to you, you will be ineligible to receive the benefits of most First Time Buyer Schemes.
However, it is worth noting that those who own or have owned, a commercial property are still regarded as first-time buyers for residential properties.
Now you’ve determined whether you are a first-time buyer or not, it’s important to understand what is available to you. First-time purchasers can benefit from a range of schemes and exemptions:
This policy allows residents in social housing to purchase the property they are living in for a greatly reduced price, thus bringing them into private ownership. Currently, those living in council houses can receive a huge reduction in the market value of their home, making it far more manageable for first-time buyers to get on the property ladder. This discount of up to £87,200, or £116,200 inside London, is applicable for those who have been public sector tenants for a minimum of three years.
This scheme allows first-time purchasers to put down a 5% deposit for their home, with the government subsidising 20% of the property’s value (or 40% in London) in the form of an equity loan. First-time buyers can benefit from the Help To Buy scheme – but not for too much longer. Homebuyers are encouraged to submit their equity loan applications in advance of 31st October 2022 – check out our Help to Buy blog and webinar for further guidance.
The Lifetime ISA is open for individuals between 18 and 40 preparing to purchase their first home in the near or far future. Prospective buyers can put £4,000 into the ISA each year, with the government contributing an additional 25% up to a maximum of £1,000 per year until the age of 50. These funds can then be used to purchase your first property or can be withdrawn once you reach 60 to fund your retirement. If you do withdraw from your LISA to secure your first property, you can then keep the account open to continue to save for your retirement, however it’s important to remember that you will have to pay a penalty if you withdraw cash and don’t use it for your first home or retirement.
Properties that offer shared ownership options allow homebuyers to purchase a percentage of the property and pay the developer or housing association rent on the remaining portion. This is a great option for individuals wanting to get a foothold on the property ladder, but who may lack the initial deposit funds to secure an entire property. As time goes on, most owners will be able to purchase additional shares of their property – which is colloquially termed ‘staircasing’ – until they are the sole owners of their home. Although shared ownership schemes are primarily aimed at first-time buyers, they are actually available to anyone who meets the eligibility criteria. To qualify, your household income must be less than £80,000 outside London or less than £90,000 in London.
In 2017, the government introduced Stamp Duty exemptions for first-time buyers, to make purchasing a property more accessible. First-time buyers are exempt from paying Stamp Duty Land Tax on their first property purchase under £300,000 and will pay a reduced rate for purchases less than £500,000. You will pay normal Stamp Duty rates if your first property exceeds the value of £500,000.
At Centrick, we understand that the process of purchasing your first property can be a daunting one. That’s why our Sales and New Homes teams are on hand to help guide you through what options are available to you so that you can start your property journey with ease. For more information on how Centrick can help you take your first steps onto the property ladder, fill in the form below and a member of our team will be in touch:
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