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Sale & purchase

Important First-Time Homebuyer Considerations – Phew Conveyancing

At face value, the term first-time homebuyer is quite straightforward. If you have never owned a home before and would like to purchase one now, then voila, you are considered a First-Time Homebuyer.

But what if your spouse already owns a property? What if you already own commercial property? What if you own property outside the UK? What if you have not been in the country for the past year? All of the above would disqualify you from being a first-time homebuyer. Where the government and mortgage lenders are concerned, being a first-time homebuyer has some asterisks attached to it.

Who Qualifies as a First-Time Homebuyer

The circumstance that is most likely to affect you, presents itself when you marry. i.e., your spouse can affect your status. If they do not qualify as a first-time homebuyer, it extends to yourself as well.

You also cannot qualify as a first-time homebuyer if you have inherited residential property or a share in one; regardless of where in the world this property is situated. As the rules surrounding first-time homebuyers are based on ownership of property regardless of where it is located, any estate outside of the country disqualifies you. Additionally, the government tends to disqualify buy-to-let landlords even if it will be their first property purchase. This is to encourage availability of houses for first-time homebuyers who are looking to buy their first home to live in.

Assuming you do not fall within any of the circumstances mentioned prior, there are more criteria to consider. Commercial property is not classified as a home, therefore ownership of one does not disqualify you as a first-time homebuyer. However, if there is a residential element attached to it, the property is considered a dwelling and thus disqualifies you from being a first-time homebuyer. If you have previously owned or part-owned a property which you then sold, you will not be considered a first-time homebuyer.

Further, according to HM Revenue & Customs, even if you are a citizen of the UK, and you have not been present in the country for at least 183 days during the 12 months prior to completion of your purchase, you will be liable to pay 2% stamp duty on the first £300,000 and the 2% continues to all other stamp duty bands as well. Thus, even if you are a de facto first-time homebuyer, your stay –or lack thereof, can disqualify you.

Why does being a First-Time Homebuyer matter?

Okay, congratulations, after all this, it turns out you are a first-time homebuyer. What can being a first-time homebuyer mean to you?

To encourage home ownership, the government provides tax breaks and schemes to help people get on to the property ladder. If you are a first-time homebuyer, you do not pay any stamp duty on property purchases up to the value of £300,000 if the property you wish to purchase is £500,000 or less. Essentially, you will only have to pay tax on £200,000 out of the £500,000.

As for schemes, the most popular of the many available is the Help to Buy Equity Loan scheme. You can be approved for a loan with a deposit as low as 5% of the purchase price of the home you are interested in. Further, it allows you to borrow up to 20% (40% in London) as an interest-free equity loan. Even better, you do not have to pay interest on the equity loan for the next 5 years.

Turns out the rewards of being a first-time homebuyer can extend to the mortgage lender as well. You can have access to mortgages with special buyer-friendly schemes, reduced interest rates, and favourable terms & conditions.

Change in Interest Rates & its Effects on the Homebuyer

Recently, the Bank of England increased interest rates from 0.1% to 0.25%. It does not seem like much, but it has many economists concerned about the change given the current official rate of inflation of 5.1%. The hike in interest rates will impact mortgage repayments and thus will have an impact on home buyers, especially first-time homebuyers.

Geoff Garett, founder of the mortgage advisory firm Henry Dannell says that “Despite today’s increase, there’s arguably never been a better time to get on the property ladder.”

Conveyancing solicitors are generally unable to give stamp duty advice beyond that available from the HMRC stamp duty calculator, but they could point you in the right direction. You are responsible for making sure you are paying the correct amount of stamp duty and you must make your conveyancer aware of any relief you seek as they would need to be claimed within the relevant SDLT return. With several factors affecting the complexities of being a first-time homebuyer, the information provided can only be used as general information and must not berelied on for any specific transaction. You must obtain specific advice and guidance for your transaction. Phew’s expert conveyancing solicitors or conveyancers can help you with your property purchase.



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