Every First-Time Buyer Scheme in the UK Compared

Understanding the routes available to first-time buyers can be confusing. To simplify the choices, we compared every first-time buyer scheme in the country, from Help to Buy and Shared Ownership to the Lifetime ISA and First Homes scheme.

Demand for property skyrocketed online as lockdown eased across the country back in June. Google searches for 'first-time buyers' leaped by almost 50% compared to last year as buyers flooded back to the UK market, with searches for 'new build homes' and 'houses for sale UK' jumping by 34% and 64% respectively. Now, as work from home becomes the new normal for the foreseeable future, people across the country are on the hunt for the perfect space.

Fortunately, there are loads of routes onto the property ladder, both for first-time buyers and second steppers looking to upsize. Here's what you need to know:

Which First-Time Buyer Scheme is Right for You?

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Help to Buy is a Quick Way to Step Onto the Property Ladder

With a 5% deposit, buyers using the Help to Buy scheme can benefit from a 20% loan from the government, which means a mortgage only needs to be secured for the remaining 75% of the property's value. Help to Buy London gives those buying in the capital a 40% loan, with a mortgage requirement of up to 55%. A Help to Buy loan is interest-free for the first five years.

Pros

Buy a home quickly
Deposits are low
Interest-free borrowing for five years

Cons

Limited to specific new-build homes and Help to Buy properties
Can't buy a home for more than £600,000
The loan becomes more expensive over time

Find out more

The New Help to Buy Equity Loan Scheme Will Benefit First-Time Buyers

The new scheme is set to replace the existing Help to Buy scheme in April 2021. The offer is still largely the same; borrow between 5% and 20% (or 40% in London) of the purchase price of a new build, and pay no interest for the first five years.

Pros

First-time buyers don’t need a large deposit
Interest-free repayments for five years
Get good mortgage rates

Cons

Limited to first-time buyers only
Regional caps around the country
The loan becomes more expensive over time

Find out more

Shared Ownership is Helpful if You Have a Small Deposit

This scheme gives you the chance to buy between 25% and 75% of your home's value while paying rent on the remaining share. When buying 25% of a home, you typically only need to put down a 5% deposit on the share you are buying instead of full market value. You then have the option to purchase more shares in your home at a later stage through a process called 'staircasing', until you own 100% of the property.

Pros

The portion of the home that you own will grow in value
Deposits are low
Mortgages are more accessible, even if you are on a lower wage

Cons

You are responsible for 100% of the ground rent and service charges on your property regardless of how low your share is
There will be restrictions on home improvements
Not all lenders offer Shared Ownership mortgages

Find out more

A Lifetime ISA Is Great if You're Already Saving For a Home

A Lifetime ISA (Individual Savings Account) enables you to put up to £4,000 a year into an account to save for your first home. If you're already saving for your first property, it makes sense to transfer your funds into this type of account to benefit from the additional bonus. The government adds a 25% bonus to your savings of up to £1,000 a year. You can then withdraw the money from your account to buy your first home.

Pros

Grow your funds quickly to buy a home faster
Benefit from a 25% bonus on your savings
You can top up your account annually or monthly

Cons

Can't buy a home for more than £450,000
Those with an inherited property are not eligible
An account must be active for 12 months before the bonus kicks in

Find out more

The First Homes Scheme Helps You Save on a New Build

This is a new scheme that enables first-time buyers to get a 30% discount against market value on homes across the country, reducing deposit and mortgage needs. Details of this scheme have not yet been finalised, but it does intend to help first-time buyers afford property in the areas they grew up in, rather than be priced out.

Pros

Get a discount of up to 30% on the market price
Pay a reduced deposit

Cons

Can't buy a home for more than £250,000 in England or £420,000 in London
Income caps apply – you must earn less than £80,000 in England and £90,000 in London

Find out more

First Dibs Gives Locals the Most Competitive Advantage

This scheme was announced by Mayor of London Sadiq Khan in 2018, to ensure locals get 'first dibs' on new homes for three months before they are marketed to an overseas audience. First Dibs for Londoners gives anyone living in the capital a month head start on the three months before it rolls out to the rest of the UK.

Pros

Exclusive access to new builds on the market
You only need to compete with the local market
There are plans to start construction on 90,000 new homes by 2021, but this has yet to be confirmed by the government

Cons

The scheme only applies to homes up to £350,000
Supply can't currently meet demand
The policy is voluntary and not all housing associations offer it

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Discount Market Sale Is Ideal if Location is Not a Priority

This low-cost home ownership scheme enables new build properties to be purchased with discounts of up to 20% or more. To be eligible, you must live in the area in which you want to buy. Each council has its own requirements to be eligible.

Pros

Helpful for low and middle-wage earners
Benefit from discounts of up to 20% and more
Purchase a property in an area you grew up in

Cons

You must be a resident in a borough that offers the scheme
Your annual household income can't exceed 45% of the property's discount market sale price
Not all councils and housing associations offer the scheme

Find out more

Save Even More on your First Home with Stamp Duty and Tax Relief

Until March 2021, anyone buying a home in England will pay reduced Stamp Duty Tax. In England, properties less than £500,000 will require no stamp duty. This rate will last up until 31^st March 2021 and can help first-time buyers save a chunk of cash when buying their first home.

Find your ideal home in London with the help of specialist agents at Douglas & Gordon.

Sources
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/903024/Help_To_Buy_Equity_Loan_2020_Q1_Statistical_Release.pdf
https://https://commonslibrary.parliament.uk/research-briefings/
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/894771/ISA_Statistics_Release_June_2020.pdf
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/864265/First_Homes_consultation_document.pdf
https://www.london.gov.uk/press-releases/mayoral/homes-under-350000-to-be-offered-to-londoners<br