How does the first homes scheme work?

What is the First Homes scheme?

The First Homes scheme is a government initiative designed to make it more affordable for people to buy their first home. Through the scheme, developers offer eligible first-time buyers in England a discount of 30% to 50% on the market value of a new-build property.

It might sound appealing, but it’s worth knowing that – since the scheme’s launch in 2021 – only 1,500 First Homes have been built, according to Money Saving Expert. So you may struggle to find one to buy in your area.

First Homes scheme eligibility

To be eligible for the First Homes scheme you must:

• Be 18 or older

• Be a first-time buyer

• Be able to get a mortgage for at least half the price of the home

• Have a household income of no more than £80,000 before tax (£90,000 if the property is in London)

If you’re buying with another person/people:

• They must all be first-time buyers

• You must apply together even if you won’t all be on the mortgage

• Your combined income can’t be more than £80,000 a year before tax, or £90,000 if the property is in London

There may be other eligibility criteria depending on your local council, and different rules for those in the armed forces, which you can read more about at Gov.uk.

First Homes Scheme maximum property price

The First Homes scheme is only available on homes in England costing a maximum of:

• £250,000 (after discount), or

• £420,000 in Greater London (after discount)

Some local councils may set a lower price cap, so depending on where you live you may have fewer options.

How much deposit do you need to buy through the First Homes scheme?

You’ll need a minimum 5% deposit. For example, for a £200,000 home a 5% deposit would be £10,000.

How to apply for the First Homes Scheme

If you find a property that’s available via the First Homes scheme, you’ll need to:

• Contact the housing developer or estate agent and let them know you’re interested

• If you’re eligible, submit your application to the local council – the estate agent or developer should take you through the process

• Possibly pay a reservation fee for the property, which you should get back if your application is successful

• Await the council’s decision

• If the council approves your application, find a solicitor or conveyancer, get a mortgage and move through the rest of the usual home-buying process.

You can find a more detailed overview of the First Homes scheme process at Gov.uk.

Selling a property bought through the First Homes scheme

You’ll need to try to sell the home to another First Homes buyer. And you’ll have to give them the same percentage discount that you received when you bought the property.

These are the steps to follow:

• Tell your council that you want to sell

• Find an estate agent willing to sell a First Homes scheme property

• Get the property valued by a RICS-registered surveyor

• Put your home on the market at the price recommended by the surveyor, minus the percentage discount that you received when you bought it (you can choose to sell it for less than this, but not more)

If you don’t find an eligible First Homes scheme buyer, you’ll have options which may include selling it on the open market or selling it back to the council – see Gov.uk for more on this.

What other schemes are available?

If you can’t find any properties through the First Homes scheme or you’re not eligible, you may have other options:

Lifetime ISA

The Lifetime ISA is a savings account designed to help people save for their first home, or for retirement. You can deposit up to £4,000 each year and the government will add a 25% bonus to your savings up to a maximum of £1,000 a year.

The money can be used to buy your first home or withdrawn after you turn 60. Eligibility criteria and other rules apply – find out more in our guide to lifetime ISAs.

Shared ownership

With shared ownership, you buy a share of the property – typically between 25% and 75% of the market value. You then pay rent on the remaining share. Shared ownership can be a more affordable way to get on the property ladder as the deposit and mortgage payments are typically lower than buying outright, though you’ll often have to pay a service fee too.

Find out more in our guide to shared ownership.

How is the First Homes scheme different from Help to Buy?

The first thing to say here is that Help to Buy equity loans are now only available in Wales.

In terms of the difference between the two, the First Homes scheme offers a simple discount on homes: the developer offers a set percentage off the cost of the property, then the buyer puts in a deposit of at least 5% of the price (after discount) and borrows the rest as a mortgage.

With Help to Buy, buyers put down a 5% deposit, borrow up to 20% of the home’s value from the government in the form of an equity loan, and borrow the rest via a mortgage.

Help to Buy ISAs are a different thing again: they’re a type of savings account where you get a government bonus of 25% on your savings when you use them to buy your first home. These ISAs are no longer available to new applicants, but if you already have one you can continue paying into it until 2029. You’ll then have 12 months to claim your government bonus if you buy your first home in that time.

If you missed the boat on applying for a Help to Buy ISA, you might be interested in taking out a lifetime ISA instead.