FirstBuy
This content applies to England only.
Housing laws vary between England and Scotland. Get advice relating to Scotland
FirstBuy is an equity loan home ownership scheme for first time buyers. It will be available for two years from September 2011.
Who is eligible?
The scheme is open to first time buyers with a household income of £60,000 per year or less. Special categories of people, such as military personnel, may be given priority.
What homes are included?
The scheme includes newly built flats and houses in certain developments across England – it is not available in all areas. A limited number of places are available on this scheme.
How does it work?
You pay for the purchase of your home with:
- a deposit of at least 5 per cent
- an equity loan for 20 per cent, and
- a mortgage for up 75 per cent of the purchase price.
The equity loan is provided by the Government and the house builder. The loan, on top of your deposit and the equity loan means that you only have to find a mortgage for the other 75 per cent of the purchase price. This may enable you to access better value mortgage deals.
There are no charges for the equity loan for the first five years, but after this you will be charged a fee each month. The fees paid do not reduce the amount of the equity loan.
You can increase your share of the equity in the property by repaying the equity loan (usually in instalments). When you sell the property, you have to repay the equity loan.
What if I want to sell?
You are free to sell the property on the open market whenever you are ready. When you sell, you will have to repay the mortgage and the equity loan (and any other loans secured against the property).
The amount of the equity loan to repay will vary according to the value of your home – the value of the loan goes up or down according to how much your home is worth. For example, if the loan was for 20 per cent of the purchase price of the property (and haven’t increased your share of the equity), you will repay 20 per cent of the price when you sell.
Want to know more?
For more information, see our page about home ownership schemes. To find out more about the schemes, properties available in your area or to apply, contact your local HomeBuy agent, or First Steps agent if you live in London.
You can find out more equity loans and charges/fees from Directgov.
Where can I get advice?
It is important to get independent financial advice before you decide to go ahead with any property purchase. An adviser could help you work out the best option for you and what you can realistically afford. Independent financial advisors should be registered with the Financial Services Authority. They usually charge for their services. Alternatively, your local advice centre may be able to help you. Use our directory to find one.
