Starter Homes scheme: Everything you should know

The Starter Homes scheme is a government initiative providing around 200,000 affordable new-build homes to first-time buyers.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

These homes are being built on brownfield land and sold at a 20% discount, making the purchase cheaper than market price.

This means to get on the property ladder, you’ll only need to raise a mortgage of 80% on the true sale value of the home, minus whatever deposit is required by the lender.

Is it currently available?

The first wave of Starter Home building got underway in 2017. If you’re interested in the scheme, we recommend requesting to receive updates for when these homes will become available in your area.

Am I eligible?

You must be strictly between 23 and 40 years old and never have owned a home before.

You will also need to show a combined household income of less than £80,000 (rising to £90,000 in London) and to be buying the home with a mortgage (cash buyers will not be eligible).

Is it worth it?

  • Buy a property at a 20% discount
  • Your mortgage deposit savings won’t need to be as high
  • You can’t sell the home at full market price for five years
  • Supply of homes is extremely limited in some areas

What are the alternatives?

As well as Starter Homes, the government offers a wide range of alternative home-buying schemes aimed at first-time buyers, as well as existing homeowners looking to move up the ladder.

Help to Buy equity loans

This scheme will help you get onto the property ladder quickly and give you cheaper repayments in the first five years, but it’ll be in your best interests to pay off the equity loan as soon as possible after that.

It works by allowing you to borrow up to 20% (or 40% in London) of a property’s value to add to your mortgage deposit.

The loans are available on participating new-build properties up to £600,000 and you only have to stump up a deposit worth 5% of a property’s value yourself.

That means you can potentially be granted a 75% mortgage (and the lower repayments that come with them), even though you’ve only saved up enough for a 95% mortgage.

This loan is interest-free for the first five years. After that, you’ll pay 1.75% in the sixth year and an extra 1% + RPI inflation after that, on top of your mortgage.

Right to Buy

This scheme allows council and housing association tenants to buy their property at a discount.

The size of the discount depends on whether you’re living in a house or a flat, as well as on how long you’ve been living there.

If you’ve been living in a council house for three years, you’ll be entitled to a 35% Right to Buy discount.

After five years, this discount increases by 1% per year, up to a maximum of 70%.

If you’ve been living in a council flat for three years, you’ll be entitled to a 50% Right to Buy discount. After five years, this discount increases by 2% per year, up to a maximum of 70%. Learn more about Right to Buy.

Shared Ownership

Shared ownership involves “part owning, part renting” a property.

You can apply to buy a portion of the property from a housing association (between 25% and 75%) and pay rent to it for the remaining portion. You’ll need to pay a service charge and ground rent as well.

It’s possible to buy additional portions of the property later on. This is called “staircasing” and the house will be revalued every time you apply to do it.

You only need a deposit worth 5% of the portion you’re buying, (meaning it could be as small as 1.25% of the home’s overall value).

You’re not allowed to bid over or under the asking price for shared ownership properties. This prevents gazumping, but this also makes it hard to stand out as the best buyer. Learn more about shared ownership.

Rent to Buy

Rent to Buy allows tenants to rent a property at 80% of the market rate, then receive a 10% gifted deposit from the housing association when they’re ready to buy it.

Your lease could last up to five years and there’s no obligation to buy, although there’s an expectation that you will.

While there are 10,000 Rent to Buy properties in the UK, half of these are in London, which may make things difficult if you want to live outside of the capital. Learn more about rent to buy.

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