Introduction to First Time Buyer Schemes
Getting on the property ladder can feel impossible, especially in expensive areas. Several government-backed schemes exist to help first time buyers purchase their first home with a smaller deposit or at a reduced price.
Shared Ownership
Shared Ownership lets you buy a share of a property (between 25% and 75%) and pay rent on the remaining share. You can increase your share over time through a process called 'staircasing'.
Shared Ownership key points:
- Buy a share of 25-75% of the property
- Pay subsidised rent on the share you don't own
- Only need a deposit on the share you're buying (e.g., 5% of your 25% share)
- Available on new builds and resales through housing associations
- Household income must be £80,000 or less (£90,000 in London)
Example: A property worth £300,000. You buy a 25% share (£75,000) with a 5% deposit (£3,750). You get a mortgage for £71,250 and pay rent on the other 75%.
First Homes Scheme
First Homes is a government scheme offering new build homes at a discount of at least 30% (up to 50% in some areas) compared to market value. The discount remains with the property for future sales.
First Homes eligibility:
- Must be a first time buyer
- Household income under £80,000 (£90,000 in London)
- Must get a mortgage for at least 50% of the discounted price
- Property must be your only home
- Local connection requirements may apply
Lifetime ISA
The Lifetime ISA isn't a home-buying scheme per se, but it's a tax-efficient way to save for your first home. The government adds a 25% bonus to your savings.
Lifetime ISA details:
- Save up to £4,000 per year
- Government adds 25% bonus (up to £1,000 per year)
- Must be aged 18-39 to open one
- Property must cost £450,000 or less
- Must have been open for at least 12 months before using
Open a Lifetime ISA as soon as you can, even if you only put £1 in. The 12-month clock starts from when you open it, not when you start saving seriously.
Deposit Unlock
Some housebuilders offer Deposit Unlock on new build properties, allowing you to buy with just a 5% deposit while accessing rates normally reserved for 15% deposits.
Which Scheme is Right for You?
The best scheme depends on your circumstances. Shared Ownership is good if you want to live in an expensive area but can't afford a full purchase. First Homes offers great value but limited availability. The Lifetime ISA helps anyone saving for a first home.