Are you a first-time buyer in the UK dreaming of owning your own home? Congratulations on taking the first exciting step towards building your future! Becoming a homeowner is a significant milestone, and in this article, we will explore the benefits of buying a home for the first time in the UK. From financial perks to long-term stability, we’ll explore why purchasing a property is a smart decision for those starting their homeownership journey.
But first…
What is a First-Time Buyer?
Before diving into the benefits, let’s clarify what a first-time buyer is. In the UK, a first-time buyer is defined as someone who has never owned a property before, whether it’s a house, apartment, or any other type of residential building.
If you’re wondering if you’re a first-time buyer, ask yourself:
- Have you ever purchased a house or flat, to live in or to rent, in the UK or abroad?
- Have you ever inherited a property or been given a place to live as a gift?
- Do you have a property in your name that you could sell to buy a new home?
If your answer is ‘no’, to all these questions, congratulations! You’re officially a first time buyer.
Benefits for First-Time Buyers
Purchasing your first home will always be a big moment in anyone’s life, but there are plenty of schemes, government initiatives and benefits that make it easier for first-time buyers.
Government incentives and schemes
Reduced Stamp Duty
The UK government has implemented various incentives and schemes to support first-time buyers. One significant benefit is Stamp Duty Land Tax (SDLT) relief. As a first-time buyer, you’ll benefit from a higher stamp duty threshold, which can save you a substantial amount of money during the home-purchasing process!
A permanent change to the initial stamp duty threshold for first-time buyers means that anyone buying their first home won’t be liable for stamp duty if the purchase price is below £425,000. Further relief is available for purchases up to £625,000 to help first-time buyers in more expensive locations such as London.
Those who aren’t First Time Buyers will have to pay Stamp Duty on the part of the property that’s worth more than £250,000.
Help to Buy Schemes
The government’s Help to Buy schemes offer valuable support for first-time buyers. These schemes include shared ownership, equity loans, and the recently introduced First Homes Scheme:
- Shared ownership allows you to purchase a portion of a property and pay rent on the remaining share.
- The Help to Buy Equity loan is a government loan that lends buyers up to 20% of the property’s value (40% in London) as an equity loan.*
- The First Homes Scheme offers discounted properties to first-time buyers, enabling them to purchase new-build properties at a lower price.
*The Help to Buy Equity Scheme ended in England on 31st March 2023. Help to Buy is now only available in Wales. Help to Buy Wales provides a shared equity loan to buyers of new-build homes. The scheme supports the purchase of homes bought through a registered Help to Buy Wales builder.
With Help to Buy – Wales:
- you must provide a 5% deposit
- the scheme provides a shared equity loan of up to 20% of the purchase price
- you must take out a repayment mortgage to cover the remaining amount
Rent to Buy Tenancies
Rent to Buy tenancies provide another avenue for first-time buyers to enter the property market, with this scheme allowing first-time buyers to rent a property at a discounted rate for a fixed period, with the option to purchase the property at the end of the tenancy. This arrangement gives people the opportunity to save for a deposit while living in the property and provides a stepping stone towards eventual homeownership.
Potential for lower mortgage rates
First-time buyers sometimes have access to exclusive mortgage deals, lower interest rates and other incentives. For example, the recently released Track Record Mortgage from Skipton is exclusively for those renting, and aren’t currently homeowners.
Lenders recognise the potential long-term value of first-time buyers as customers, and will tailor mortgage products specifically for this group. These products offer lower interest rates, reduced fees, or flexible terms. The aim is to make homeownership more affordable and manageable by securing a mortgage with a lower interest rate that translates into lower monthly repayments and potentially significant savings over the term of the loan!
First-time buyers don’t have to sell their house first
Many people looking to get a mortgage or buy a home will likely own a home already, meaning they’ll likely have to sell it before they can buy. This means there may be all sorts of legal and financial delays in this process, which the seller may not have the time or patience for. However, first-time buyers aren’t tied to an existing property, which can be really attractive to sellers on a quick deadline!
By taking advantage of government incentives, exploring various schemes, and seeking professional advice, first-time buyers in the UK can reap the benefits of homeownership! From potential savings through SDLT relief to the flexibility of shared ownership and the stability of long-term investment, the path to owning your first home is filled with exciting possibilities.
If you’d like to speak to one of our team about purchasing your first home, why not get in touch with a member of the team? Or for more quick guides, why not check out:
Mortgage Rates Explained
All the Different Mortgages Explained
Debunking Mortgage Myths
The Complete Guide to Stamp Duty
