Buying your first home can be nerve-racking if you’ve spent years saving a deposit while watching house prices and mortgage rates rocket. If you’re wondering whether you’ve got enough to make it work, it can be reassuring to know what support is available to first-time buyers.
As an eligible first-time buyer, you may be entitled to the following:
- Stamp Duty relief: no tax is due on the first £300,000 of a qualifying property
- Lifetime ISA: allows you to save up to £4,000 a year and the government will top it up by 25%
- Low-deposit mortgages: there are a number of lenders offering 95% mortgages, with some lenders willing to lend with no deposit.
- First Homes: a government scheme offering a 30% to 50% discount on certain new build homes
- Shared ownership: where you buy a share of a property and pay rent on the rest
To get a better understanding of what’s available and what you’re entitled to, read on for our helpful guide.
For one-to-one advice about first-time buyer mortgages, get in touch with the mortgage experts at Bennison Brown.
Stamp Duty relief for first-time buyers
One of the most significant first-time buyer perks in England or Northern Ireland is relief from Stamp Duty Land Tax (SDLT). It can save you thousands of pounds upfront, leaving more money in the bank to go towards your deposit, fees or moving costs.
Here’s how it works:
- First-time buyers don’t pay Stamp Duty on the first £300,000 of the purchase price
- Only 5% is due on the portion of the purchase price between £300,001 and £500,000
- If the property costs more than £500,000, first-time buyer relief doesn’tapply
For example, on a £320,000 property, a first-time buyer would pay £1,000 in SDLT, saving £5,000.
If you’re buying with someone else, you must both be first-time buyers to be eligible, and the property must be your only or main residence.
Your solicitor or conveyancer can confirm whether you qualify for relief if you’re unsure, and they will claim it through your SDLT return.
See the latest Stamp Duty Land Tax rates here.
Using a Lifetime ISA for your deposit
A Lifetime ISA (LISA) is a special type of savings account. You can pay in up to £4,000 each year, and the government will add another 25%. That could mean an extra £1,000 each year towards your house fund.
To open a Lifetime ISA, you have to be aged 18 to 39. To use the money for a property purchase, the account must be open for at least 12 months.
Your LISA provider can confirm whether your account is ready to use, and your conveyancer or solicitor will handle the withdrawal for the purchase. If you withdraw the money for another reason, a 25% withdrawal charge normally applies.
The Lifetime ISA is still available to new applicants until April 2028. The government proposes to replace it with a new First-Time Buyer ISA at that time, following a consultation process.
First Homes scheme
The First Homes scheme offers qualifying first-time buyers a discount of 30% to 50% off the market value of certain new build properties.
To qualify, you need to have a household income of less than £80,000 (£90,000 in London) and take out a mortgage of at least 50% of the discounted price. The home must either be a new property built by a developer or a home bought through an estate agent, which someone else bought before through the scheme. The property must be used as your main residence.
Start by checking participating developments by contacting your local council. In some areas, priority is given to local buyers and keyworkers.
It’s important to remember that the discount stays with the property, so you must pass the same percentage discount on when you sell. So think about the future sale price as well as the saving you make when you buy.
Shared ownership
If buying a home outright is beyond your budget, you might consider shared ownership. This is where you buy between 10% and 75% of the property, then pay rent to a housing association for the rest. So you only need a mortgage on the portion that you buy.
It’s possible to increase your share of the property later, which is called ‘staircasing’, although valuation, legal and admin costs can apply.
To be eligible, your household income must be below £80,000 per annum (£90,000 in London), and you must be able to show that you can’t afford a suitable home on the open market.
To find out more about the criteria, see gov.uk.
To find a shared ownership property, search major property websites like Rightmove and filter your search to shared ownership. There are also dedicated shared-ownership sites, such asShare to Buy.
Not all lenders offer shared ownership mortgages, so it’s worth talking to a mortgage broker before you apply.
Low-deposit mortgages
The government’s Mortgage Guarantee Scheme (recently rebranded as Freedom to Buy) encourages lenders to offer mortgages of up to 95%. That means you can borrow with as little as a 5% deposit. A handful of lenders offer 100% mortgages in specific circumstances, for example, if the buyer has a strong rental payment history. These have very strict criteria, so they don’t suit everyone.
While this is great news if saving for a larger deposit is holding you back, a higher loan-to-value means higher interest rates and larger monthly mortgage payments.
If you are considering a high loan-to-value mortgage, it’s essential to understand the risks. Should house prices fall, you are at a higher risk of negative equity, i.e., your home is worth less than the amount you still owe on your mortgage.
It’s a good idea to talk things through with a mortgage adviser to ensure you understand the risks, costs and whether you could still make the mortgage repayments if rates were to rise.
How to make the most of first-time buyer support
Here are a few tips to ensure you choose the right support before buying your first home.
- Open a LISA early enough – your account must be activated at least 12 months before you can withdraw the money, so start saving in good time.
- Check local schemes – First Homes and shared ownership properties are not available everywhere, and local eligibility rules differ. Find out what is actually available where you want to buy.
- Get your documents in order early – make sure you can lay your hands on all the evidence you need to prove your income and ID, as this can make the application process a lot smoother.
- Don’t assume the smallest deposit is automatically the best option – a 5% deposit may get you onto the housing ladder sooner, but putting down a little more can give you access to better mortgage rates. Ask a broker to compare the numbers.
- Don’t forget to budget for house moving costs – solicitor’s fees, surveys, mortgage product fees, and moving costs run into the thousands, which may mean you have less available for your deposit than you think
- Get a Decision in Principle before you start viewing homes – this gives you a clearer idea of what you might be able to borrow so you can narrow your search to a realistic budget. It’s not an official offer though, and is subject to a full application.
- Speak to a mortgage broker – they can present you with options from multiple lenders, let you know what the monthly payments would be, and help you choose the most appropriate option for your needs.
What if I am buying with someone else?
For Stamp Duty Land Tax, all buyers named on the purchase must be first-time buyers. If the person you’re buying with has previously owned property they lived in, you won’t be able to claim the relief. The exception to the rule is if you have owned only commercial property in the past – you can still claim the relief if you are buying the first residential property that you intend to live in.
Lifetime ISAs are individual, and you can both use your savings and bonus towards the purchase.
First Homes scheme and shared ownership use household income, i.e., your combined income.
How Bennison Brown can help
It’s normal to have lots of questions when you’re buying your first home. At Bennison Brown, we’re here to help first-time buyers choose the right mortgage. Our friendly brokers can help you understand what support is available to you, how much you could borrow and the most appropriate mortgage products to suit your personal and financial circumstances.
We will support you throughout the entire mortgage application process and be quick to respond if you have a question.
Contact us for a free mortgage consultation
Frequently asked questions about first-time buyer benefits
What is first-time buyer relief?
The phrase “first-time buyer relief” is most commonly used to describe Stamp Duty relief. It applies to buyers in England and Northern Ireland. No tax is due on the first £300,000 or the property price, and only 5% is due on the portion between £300,001 and £500,000. Above that amount, the relief does not apply.
Is the Lifetime ISA being replaced?
The Lifetime ISA is due to expire for new applicants from April 2028. The government has announced plans to replace it with a new First-Time Buyer ISA, which is still under consultation at the time of writing. Existing LISA holders can continue using their accounts under the current rules while the new scheme is being developed.