Can I be a first-time homebuyer? does it matter? Who qualifies?
With house prices rising faster than ever, first-time homebuyers are finding it increasingly difficult to buy their own homes and get on the property ladder.
The average house price is more than nine times the average annual full-time salary (£31,980). The last time the gap was this wide was more than 140 years ago. Various schemes that first-time buyers can use make buying a home a little easier.
Just because you have never bought a residential property before does not mean that you qualify as a first-time buyer.
The term “first-time buyer” is a bit of a misnomer.
A first-time homebuyer is not someone who has never bought a residential property before, but someone who has never owned their own home before.
When is a first-time homebuyer not a first-time buyer?
Various restrictions on buyers exclude them from being first-time buyers. Therefore it is important to check whether you qualify for first-time buyer benefits and reliefs before embarking on your house hunt.
Can I be a first-time homebuyer if I have only inherited a property?
No. You are not a first-time buyer if you have inherited a house or it was transferred to you as a gift.
Can I be a first-time buyer if I have only owned a house abroad?
No. You do not qualify as a first-time buyer if you own residential property in another country, even if you have never owned property in the United Kingdom.
This restriction exists because first-time homebuyers are widely seen as having difficulty with obtaining mortgages and saving for a deposit. If someone already owns property, even if they did not buy it, it is assumed that they can sell the property or borrow on it to raise money to buy another property.
Can I take advantage of first-time buyer schemes or reliefs for a buy-to-let purchase?
No. You are not considered a first-time buyer if the first residential property you are buying is for buy-to-let purposes. It must be purchased for you to live in.
Does owning a commercial property exclude me from being a first-time homebuyer?
No. It does not stop you from being a first-time buyer, buying your own home.
I own property through a limited company. Does this prevent me from being a first-time homebuyer?
No. If a limited company owns the property, it is owned by a separate legal entity, and you are therefore not the owner of that property. You only own shares in the limited company that owns the property. Consequently, you can still be classified as a first-time buyer.
Can I be a first-time buyer even if my spouse is not?
Even if you are a first-time buyer, you will not be able to use first-time buyer schemes or take advantage of first-time buyer reliefs if you are buying jointly with someone else (such as a spouse or civil partner) who is not a first-time buyer. The same applies even if you are buying in only your name but the person you are married to owns a residential property.
I am a first-time buyer. What schemes can I use to buy my first home?
|What can be bought?
|How does it work?
|Deadline for scheme
|Help to Buy: Equity Loan
|New build properties from participating housebuilders
|You pay 80% of the purchase price using a deposit and mortgage (60% of the purchase price in London) and the government gives you an equity loan for the remaining 20% (40% in London)
|The government’s loan is interest only. That means your monthly payments only pay off the interest, so you need to save up separately to pay off the capital.
|The scheme closes on 31 March 2023; the last applications are due by October 2022
|Mortgage Guarantee Scheme
|Properties up to £600,000
|You pay a 5% deposit, and a participating lender provides a 95% mortgage.
Properties up to £600,000
|31 December 2022
|New build leasehold properties from participating housebuilders
|You buy an initial share of between 10% and 75% of the property. Over time, you can gradually increase your share by at least 5% (known as staircasing).
|You pay rent to the housebuilder on the share they own. As you increase your share, their share reduces and hence the rent you pay comes down.
|First Homes (new scheme)
|Homes in your local area (England)
|You can buy your new home at a heavy discount of at least 30%. You only need a 5% deposit and a mortgage.
|The discount is available to successive buyers, so if you sell the property in future, you may not receive the full value of the property.
|Right to Buy
|Eligible council and housing association tenants can buy the property they are living in.
|A right to buy property can be bought at a maximum discount of £87,200 (£116,200 in London).
|If the property is a flat, the council or housing association will still own the building and common areas. Time restrictions on when you can sell the property mean you could face financial penalties if you sell before.
|Help to Build: Equity Loan (new scheme)
|You can spend up to £600,000 on buying a plot of land and building a home
|As with Help to Buy, the government will give an interest-only equity loan for up to 20% of the estimated cost (40% in London).
|Buying land and building your own home can be more stressful and complicated than buying a ready-made home, but it can also be quite rewarding.
Several different schemes that have been designed to help first-time buyers purchase their own homes are clearly explained on the Government’s Own Your Home website. Each scheme has its eligibility criteria. A licensed conveyancer or conveyancing solicitor can provide advice on how each can affect your position as a homeowner and the conveyancing process.
Below we offer a summary of the main first-time buyer schemes available:
These are not the only opportunities available to first-time buyers. Lenders, housebuilders and local councils may operate their own schemes and products, so it is a good idea to shop around.
The government has already recently announced other proposals for schemes that could help first-time buyers on low incomes, such as saving housing benefit payments to get a mortgage.
Even if you can use first-time buyer schemes, you need to live in the UK for at least 183 days (roughly six months) in the 12 months before completion of your purchase to get the full benefit. If not, you will have to pay an additional 2% stamp duty across all bands:
|First-time buyer living in the UK for more than 183 days
|First-time buyer living in the UK for less than 183 days
|Up to £125,000
|£125,001 to £250,000
|£250,001 to £925,000
|£925,001 to £1.5 million
|The remainder above £1.5 million
Whether you are a first-time buyer or not, buying your own home is a stressful and expensive process. The friendly and expert team of conveyancers and solicitors at Phew Conveyancing can help you navigate around the various first-time buyer schemes and advise on how they may affect your legal rights.