First-Time Buyer Benefits

Let’s be honest – the experience of buying your first home can be very exciting despite the challenges involved.

After all, owning a property with your hard-earned money is a great achievement. Besides, buying a home is possibly one of the largest investments that you can make in your lifetime.

On that note, first-time home buyers in the UK can utilise several benefits that can make the process a bit less daunting and help towards the purchase of your first home.

In this guide, we have discussed first-time buyer benefits in greater detail so that you can confidently get on the property ladder.

So, without any further ado, let’s get started!

First-Time Buyer Benefits

1. There Is No Need To Sell First

One of the biggest advantages of first-time home buyers over other buyers is that they do not have to sell anything before purchasing a property. Obviously, this is due to the fact that they do not own any other property in the first place. 

In any case, such a benefit can speed up the purchase process considerably, making it convenient for the buyer and the seller of the property.

Homemovers who already own a property may need to sell their existing property first, which can take a lot of time due to the legal and financial hassles involved.

Thankfully, first-time buyers don’t have to worry about such things, which makes the purchase process smoother and puts you in a strong position when making property offers against other individuals who may still need to sell their homes. 

2. You Can Save Money On Taxes

Disclaimer: When it comes to taxes, this is just general advice and not to be relied upon as fact. When it comes to tax everyone’s position and circumstances are different and the rules are changing all the time. Only by seeking advice of a qualified tax professional can you be certain you are complying with all the relevant tax rules & regulations.

Tax savings is another benefit that first-time home buyers get. If you purchase a property for the first time, you will have to pay less tax than those with existing properties.

The tax we are talking about is the stamp duty land tax (SDLT). It is the tax that prospective homeowners have to pay to the government.

For regular homebuyers who already own a property, the tax is levied on any residential property they purchase with a value of over £250,000. 

For example, if they buy a property worth £300,000, they will need to pay a 5% tax on it, equating to £15,000 of SDLT.

On the other hand, first-time home buyers do not have to pay SDLT if the value of the residential property they are purchasing is less than £425,000.

Use our Stamp Duty Calculator for more details.

So, if you want to purchase a home worth £400,000, you won’t have to pay any taxes for it. However, for properties that are valued above that threshold, a rate of 5% is applicable.

Interestingly, this threshold was previously £300,000, which means that the government has made it easier for first-time buyers to purchase a home in the short term.

In other words, by increasing the SDLT threshold for first-time buyers, the government actively encourages people to get on the property ladder.

3. Government Help Available

After going through the above point, you might have guessed that the government wants to help individuals purchase their first home. 

In this regard, the government has placed several other systems and frameworks besides tax exemptions, all of which aim to make the purchase process easier for first-time buyers. We have discussed some of these frameworks below.

A. First Homes Scheme

The First Homes Scheme is possibly the most useful system that first-time buyers can get.

According to this scheme, first-time buyers may be eligible to get a discount of 30% to 50% on the market value of a property when purchasing through a new-build developer who is signed up to the scheme.

Naturally, it helps to ease the financial load of buying a new property to a great extent.

Of course, there are certain conditions that need to be met here.

The buyer must be over 18 years old and have an annual income of less than £80,000 (£90,000 in London). Also, they should be able to get a mortgage that covers half of the property’s price.

B. Shared Ownership Scheme

This is another scheme that aims to provide financial assistance to first-time home buyers and also existing homeowners.

Under this scheme, the buyer can purchase a share of the property, usually between 10% and 75%, from a housing association instead of buying the whole property at once. 

The buyer needs to pay the mortgage on the share they own. Subsequently, they need to pay rent for the share that they don’t own. 

Further down the line, they can even purchase the whole property through a “staircase” method if they have the funds. Once they have 100% ownership, they won’t need to pay any rent.

C. Mortgage Guarantee Scheme

This is a scheme that aims to help both first-time buyers and mortgage lenders. In simple terms, it encourages lenders to provide mortgages with 95% loan-to-value (LTV) ratios, which are often seen as financially risky.

If you can afford to pay only a 5% deposit, this scheme will be quite helpful. And since lenders can be assured that the government will guarantee any losses under the scheme, it minimises their risk if the buyer cannot pay the mortgage.

In that scenario, the property will be repossessed, and the guarantee will cover most of the losses sustained by the lender.

4. You Can Maximise Your Savings

It goes without saying that you will need some savings to buy your first home. These savings will allow you to pay the initial deposit and furnish your new home.

As a first-time buyer, you have access to a Lifetime Individual Savings Account (LISA). It is a type of savings account that helps you to increase your savings each year.

If you opt for a Lifetime ISA, the government will pay a 25% bonus on the savings you make, up to a maximum of £1,000 every year.

Of course, this means that you can only put a maximum of £4,000 in your Lifetime ISA.

For example, if you put £2,000 in your Lifetime ISA, the government will add a 25% bonus to it, which is £500.

So, at the end of the year, your savings will be £2,500. Over time, the savings will accumulate, ensuring that you have the financial resources to buy your first home in the future.

Related: What Is a Mortgage Illustration?

Conclusion

We hope that by now, you are feeling a lot more confident about purchasing your first home.

As you can see, getting on the property ladder might not be as hard as you think with help given to first-time buyers get started on the property ladder. 

Of course, if you are still feeling a bit unsure about it all, then we fully understand. In that case, we’d recommend seeking out a qualified advisor.

You can contact our team of expert mortgage advisors by submitting a quick form.

We’ll connect you with an advisor who can guide you through every step so you can confidently buy your first property.

Your home may be repossessed if you do not keep up repayments on your mortgage.

All content is written by qualified mortgage advisors to provide current, reliable and accurate mortgage information. The information on this website is not specific for each individual reader and therefore does not constitute financial advice.