First Homes Programme

Posted by The Commercial Mortgage Hut on 5th June 2020 -

Here's what you need to know about the First Homes programme.

If you’re a key worker or a first-time buyer hoping to purchase a new build property in your local area, you’re going to want to hear about the new First Homes programme. 

Housing Secretary Robert Jenrick enlightened listeners in his speech of the Government’s ambitious plans to restart and renew the property market. 

As he announced that construction companies were now allowed to reopen after Covid-19 restrictions, Mr Jenrick also conveyed the Government's desire to offer opportunities for first-time buyers and key workers, stressing the vital role that construction companies and workers play in delivering these homes.

We’ve gathered the information available on the scheme and have broken down the major points in sizable chunks below but feel free to ask for help via our live chat if you have a burning question.

Our First Homes programme guide includes:

• What it is 

• The key features 

• How it will work

• How much deposit you might need 

• Other costs to consider

• Where you can go for advice

What is the First Homes programme?

First Homes are new-build flats and houses built on developments situated up and down the country, sold with a discount of at least 30%. Local councils can decide to allocate further discounts to make the scheme more affordable for local applicants.

Key workers and first-time buyers eligible for the scheme will be prioritised too which is potentially exciting news for a lot of people who had previously written off the possibility of home ownership.

Key features of the First Homes programme:

• Properties sold with a discount of at least 30 percent.

• Sold to local people who want to stay in the community where they live or work but are struggling to purchase a home at market prices.

• First-time buyers, serving members and veterans of the Armed Forces, and key workers, such as NHS nurses, police and teachers will be prioritised.

• The discount will be passed on to future buyers when First Homes are resold so more people can be helped onto the ladder.

How will it work?

The First Homes programme provides properties sold with a minimum discount of 30% below the market value. That means that if a First Homes property were to be valued at £300,000 a key worker such as an NHS nurse could receive a 30% discount of £90,000, purchasing the property at £210,000.

However, when the owner of the property wants to sell, the 30% discount they received must be passed on to the next seller, who will also be a key worker or local first-time buyer.

So, if in 10 years, that same property were to increase in value by 10% to £330,000, the new seller would receive £231,000 from the sale.  

Of course, these figures are purely used as an example. The property market and the rates of growth are unpredictable and as with every large financial purchase, independent advice should be sought. 

How much deposit would I need for a First Homes programme house?

A 30% discount could make homeownership possible for many first-time buyers and key workers, though it’s important to bear in mind that a mortgage will need to be obtained to finance the purchase. 

Your mortgage lender will likely require you to pay a deposit, though the sum you’re asked for can vary widely, depending on your lender’s appetite to lend to someone with your circumstances. Some lenders may not need you to add any additional deposit to the amount already discounted as per the Right To Buy scheme.

Essentially, what that means is that if you present a high risk of defaulting on your loan, your lender will likely ask you for a larger deposit.

A lower risk borrower, for example an applicant with a clean credit history and a reliable source of income, may be able to access products with lower interest rates, though every case is unique. 

Many first-time buyer mortgages require a minimum of 5% deposit. If a First Home programme home was sold to an eligible applicant for £210,000, a 5% deposit would equate to £10,500. 

Buying a First Homes programme property - are there other costs to consider?

Buying a home, whether through the First Homes programme or not, can be a big decision and as with any other property purchase, there may be other costs to factor in. These might include:

• Solicitor’s fees

• Removal costs

• Valuation fees

• Surveyor’s fees

• Insurance 

How can I find the best deal for a First Homes programme mortgage?

Our team of experts have the right technology and knowledge to access and compare the various costs associated with buying a property and making a mortgage application.

 

If you’re considering the First Homes programme as an option for homeownership and you’re wondering whether you can afford a mortgage, speak with one of our advisors who can check your eligibility and calculate how much you could borrow, without damaging your credit score.
 

First Time Buyers Expert Article by

Nicola Arbon (Managing Director)

The Mortgage Hut