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A Complete Guide to the Government’s Home Buying Schemes

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A Complete Guide to the Government’s Home Buying Schemes
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Purchasing a property is an exciting milestone but can also be a daunting financial challenge. However, the government’s range of home-buying schemes, tailored to your circumstances and location, can significantly ease this burden. 

Whether you’re a first-time buyer navigating budget limitations, an existing homeowner seeking more space, or a council housing tenant envisioning owning your current home, these programmes can empower you to take control of your property ownership aspirations, making them more achievable. 

This blog will outline the key initiatives available so that you can understand the options and determine if you’re eligible for assistance. We’ll also guide you through the application process, from gathering the necessary documents to submitting your application, and provide an estimate of the timeline for approval. 

First Homes Scheme

Launched in 2021, the First Homes Scheme offers newly built homes at a minimum discount of 30-50% off the market price to qualifying first-time buyers in England. The aim is to provide discounted housing for local people and key workers who wish to remain in their communities. 

Eligibility

To be eligible, buyers must:

  • Be first-time purchasers
  • Have a combined household income not exceeding £80,000
  • Be purchasing the home as their primary residence.

 Local authorities releasing land for First Homes will also be able to set additional criteria regarding determining eligibility and prioritising certain groups. 

While discounts will be set at a minimum of 30%, local authorities can require developers to offer higher discounts on new builds in their area based on need. 

For example, in regions with high property prices, authorities may request 40-50% discounts to make purchasing feasible for more buyers. Legal restrictions will also be placed on First Homes to preserve the discount and eligibility criteria upon resale. These restrictions prevent properties from quickly entering the open market at total value, maintaining discounted access for future first-time buyers. 

The Benefit for First Time Buyers

The First Homes Scheme is not just about affordable housing, it’s about securing your future. This programme is designed to overcome budget limitations that often exclude first-time buyers. It offers a lifeline to younger generations or key workers to gain their first foothold on the property ladder, providing a sense of security and stability.

Don’t just take our word for it, here’s what Sarah, a first-time buyer who recently purchased her home through the First Homes Scheme, has to say

‘I never thought I could afford my home, but the First Homes Scheme made it possible. I’m so grateful for this opportunity.’

– Sarah, first-time home buyer

Shared Ownership

Shared ownership allows buyers to purchase a share of a home from a housing association or home builder and pay subsidised rent on the remaining portion. The buyer can later increase their share through ‘staircasing’ until they own 100% of the property. 

How Does Shared Ownership Work?

  1. Your household income must be £80,000 or less outside London and £90,000 or less in London to qualify for shared ownership. 
  2. Buyers initially purchase between 25% and 75%, depending on what they can afford. 
  3. This portion will require a mortgage, and buyers will need a 5-10% deposit for their share. 
  4. They then pay reduced rent set up to 3% of the unsold value to the home builder or housing association on the remainder of the property. 

The Benefits of Shared Ownership

Shared ownership is a flexible and adaptable scheme. As your financial situation improves, you can purchase more shares and increase your ownership over time. Depending on the lease agreement, many lenders allow staircasing in 10% increments. 

Some builders and housing associations require a minimum two-year period between staircasing purchases, but this will enable you to buy larger shares gradually as your budget allow, giving you more freedom and less restrictions. 

Shared ownership provides several benefits. 

  • It makes buying cheaper upfront and more feasible for first-time buyers. 
  • Purchasing a 25-75% share also means owning a larger home than possible with an outright sale. 
  • The scheme offers stability through one landlord and regulates maximum rent increases. 

Right to Buy: Purchasing your council home.

Right to Buy allows eligible council tenants in England to buy their home at a discount of up to £87,200. To qualify, tenants must have rented from their local authority for at least three years. Maximum discounts are based on length of tenancy, with a reduction of 35% available after three years, rising to 50% after five years and 70% after 20 years. 

Who is Right to Buy for?

The Right to Buy scheme is a gateway to homeownership for council housing tenants. With substantial discounts, monthly mortgage repayments often match or are lower than previous rent amounts. 

This makes purchasing a realistic, affordable goal rather than a distant dream. Even if you only stay for the minimum qualifying period, you can still buy your council flat or house. But longer tenancies reward tenants with higher discounts. 

While Right to Buy is a national scheme, local authorities now have greater powers to exempt properties in high demand or development. This helps ensure councils maintain sufficient affordable housing stock for those who rely on council housing. 

Reinvesting proceeds from sales into building new properties also aims to replenish depleted reserves. However, within those constraints, Right to Buy has helped hundreds of thousands of council tenants become homeowners since its inception. 

Right to Acquire: Purchasing your housing association home

Right to Acquire allows eligible housing association tenants in England to purchase their rental accommodation. It functions similarly to the Right to Buy scheme but with crucial differences. Qualifying rules are the same, with some slight differences in limitations.

Right to Aquire Rules:

  • Tenants are required to have rented for at least three years. 
  • The maximum discounts are lower, at £16,000 in most of England and £24,000 in the London boroughs. 
  • In rural designated areas, there may also be exceptions with higher discounts available depending on property values. 
  • Housing associations can also impose purchasing conditions beyond statutory requirements. 

The Right to Acquire Depends on Housing Associations

Significantly, the Right to Acquire depends on housing associations voluntarily participating in the scheme. 

Not all associations offer the Right to Acquire, and some may prioritise tenants they deem most needing assistance purchasing. Availability varies regionally depending on participating landlords. 

Where offered, Right to Acquire provides housing association tenants with a potential route to homeownership. While discounts are lower than those for Right to Buy, they can still make buying more affordable. 

So, the scheme is worthwhile exploring for qualifying tenants aspiring to purchase their rented homes. 

Lifetime ISA 

The Lifetime ISA is another government initiative to help people save for their first home. It allows eligible savers to put away up to £4,000 annually, supplemented by a 25% government bonus each tax year. 

Lifetime ISA Eligibility

To open a Lifetime ISA, you must be 18-39 years old. The savings and bonus can be used towards the deposit on your first home worth up to £450,000. 

If you withdraw your savings for any reason other than buying your first property, you will not be able to access the bonus and will be charged a withdrawal penalty. 

Once you’ve purchased your first home, you can continue saving in the account and receiving the bonus for retirement.

A vital benefit of the Lifetime ISA is the 25% extra contributed by the government each year, providing a considerable boost to your savings. 

While limits and eligibility criteria apply, using a Lifetime ISA can be an effective way for younger adults to save and grow their deposits for a future home purchase.

Are there any extra schemes available in Scotland and Wales?

While the programmes above focus on England, there are similar home-buying initiatives available in Scotland and Wales.

Schemes in Scotland

Since 2007, Scotland has implemented the low-cost Initiative for First-Time Buyers (LIFT) shared equity schemes, benefiting over 12,000 individuals in purchasing homes. LIFT comprises two distinct schemes: 

The Open Market Shared Equity (OMSE), which facilitates the purchase of a house on the open market subject to specific price thresholds, and the New Supply Shared Equity (NSSE), which assists buyers in purchasing newly built properties. 

Schemes in Wales

In Wales, the Help to Buy – Wales scheme supports first-time buyers with an equity loan of up to 20% of the property value, enabling them to secure a mortgage with a smaller deposit. 

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