Guidance

First time buyers' initiative: buyers' guide (accessible version)

Published 1 January 2006

This guidance was withdrawn on 26 March 2024

This content has been withdrawn as this scheme is now closed. Visit Own Your Home for information on other schemes.

Applies to England

This scheme is now closed for applications, but you can find other home ownership schemes on Own Your Home.

What is the First Time Buyers’ Initiative

The First Time Buyers’ Initiative (FTBI) aims to make more affordable homes available to first ­time buyers priced out of the housing market. It is part of the government’s HomeBuy low ­cost home ownership initiative, and is available in England through Local HomeBuy Agents. FTBI is delivered as part of HomeBuy by the Homes and Communities Agency.

The ‘stepping stone’ into home ownership

Buy a new build home on an FTBI development with an affordable mortgage and with government assistance.

Government will assist with up to 50% of the full purchase price. Buyers have 100% title to the home.

Buyers:

• must take out a first mortgage (with a qualifying lending institution) – this mortgage and any cash contribution must be a minimum of 50% of the full purchase price
• must repay the assistance when they sell. If government contribution was 25% of the full purchase price, the seller must repay 25% of the total value at the time of sale
• can make part repayments (‘staircasing’) at any time.
• pay fees to government on its contribution after three years of ownership: 1% after three years, 2% after four years and 3% thereafter.
• can sell their FTBI home on the open market.

Local HomeBuy Agents assess and approve buyer eligibility for FTBI. Not all buyers will qualify for the maximum 50% assistance. This is assessed by the Local HomeBuy Agent

How the scheme works

It enables aspiring first­time buyers, who cannot otherwise afford to buy a new home, to purchase a new property with an affordable mortgage and with government assistance on a designated FTBI development. Assistance is paid to the participating housebuilder, not the first­time buyer. The government then has an entitlement to a share of the future sale proceeds which will be equal to the initial percentage contribution required to assist the buyer. This enables an FTBI buyer to take out an affordable mortgage (minimum 50% of the total purchase price) on which they make repayments.

For the first three years of FTBI home ownership there is nothing to pay on the amount that the government contributed. After three years, buyers will pay a fee to the government (through the National HomeBuy Agent) of 1% per annum on the amount the government funded. This fee will increase each year by a fixed percentage reaching a maximum of 3% after five years in the property.

Because it is made affordable, FTBI is a ‘stepping­stone’ to assist buyers into full home ownership. When owners sell their FTBI home, they will repay the government’s contribution by way of a share of the sale proceeds. So, if the government initially assisted the purchase with a 25% contribution, the repayment will be 25% of the total value when it is sold.

FTBI homeowners can also choose to reduce the amount payable to the government at any time by making repayments at the prevailing market value. The minimum additional repayment is 10% of the market value. The government’s entitlement to a share of the future sale proceeds is enforced through a second charge on the property. This is done in the same way that a buyer’s mortgage lender will secure its lending through a first charge on the property.

Although FTBI buyers will have a mortgage less than the full purchase price of the property, they will be the legal owner with 100% title to the home.

Example of FTBI home ownership

In this example, the FTBI buyer has purchased a £150,000 home for an initial mortgage and deposit totalling £112,500 and the government has contributed 25% of the total price. When the home is sold, the government will be entitled to 25% of the total sale price.

Open market total purchase cost of new home	£150,000	100%
FTBI buyer affordable mortgage @ 70%	£105,000	70%
FTBI buyer pays 5% equity deposit*	£7,500	5%
Government contribution on which an FTBI buyer pays fees after 3 year	£37,500 (cost at time of purchase)	25% (entitlement to percentage share of future sale proceeds)

The buyer’s mortgage and cash contribution must be a minimum 50% of the full purchase price.

 The first 3 years

For the first three years of FTBI home ownership there is nothing to pay on the amount of government contribution. After three years, the homeowner will pay a fee to the government (through the National HomeBuy Agent) on this contribution of 1% per annum. The fee will increase by a fixed percentage each year reaching a maximum of 3% after five years (see below for an illustration of how fees work).

Buyers can reduce the amount payable to the government at any time by making payments at the prevailing market value (see below). Therefore, FTBI offers aspiring buyers an opportunity to establish themselves in home ownership, when their income is most likely to be stretched, and progressively move to reducing the government’s entitlement as their circumstances allow.

Because the government’s entitlement to a share of the sale proceeds is a percentage of the total home value, the amount required by the buyer to reduce the entitlement, and therefore increase their share of the sale proceeds, will be dependent on the total value of the property at the time the buyer wants to increase their future share of the sale proceeds. The buyer will increase their share of the sale proceeds by taking on more mortgage, using their savings or both. The actual amount the buyer needs to do this will increase if the property increases in value and decrease if its value falls

The role of the HomeBuy agent

The Local HomeBuy Agents act on behalf of the government to market and administer the FTBI schemes in their area, as well as to guide the first­time buyer through the process of buying an FTBI home. The role of the Local HomeBuy Agent is to:

• act at a local level on behalf of the government;
• hold information about FTBI schemes for prospective buyers;
• deal with applications, assess eligibility/affordability (percentage affordable mortgage taken by the buyer) and offer guidance to prospective first­time buyers; and
• give approval to an FTBI buyer’s solicitor/conveyancer to proceed with a purchase (exchange of contracts). Following the first FTBI sale, the owner’s details are transferred to a central, National HomeBuy Agent which provides a single point of contact to:
• administer payment of fees by buyers on the government’s entitlement after three years of ownership; and
• recover the government’s entitlement in the sale of FTBI homes as owners sell and move on or reduce the government’s entitlement

What types of homes are available

FTBI homes are only available on designated developments where the government has an agreement with the housebuilder to offer FTBI homes for sale. These will typically be smaller homes (1­2 bedrooms) with larger homes sometimes available on selected schemes.

This scheme is now closed for application, but you can still contact your Local Help to Buy Agent for information on other schemes.

Eligibility

FTBI homes are available for qualifying: social tenants, key workers and other first time buyers who cannot afford to buy in their local market.

The maximum household income for all groups who cannot afford to buy is £60,000 per annum.

Applicants must be buyers looking to own a home for the first time, although those applying to the scheme after a relationship breakdown will also be considered.

Qualifying criteria for all applicants

You must:

• be a qualifying first­time buyer unable to afford a new home. Applicants must not be able to buy a home suitable for their housing needs within a reasonable travelling distance of their work place, without assistance
• be able to demonstrate access to savings or sufficient funds to pay a deposit (which may be 5% or more of the purchase price), legal fees, stamp duty and other costs of moving
• be able to sustain home ownership in the long term. Typically, applicants will be employed on a permanent contract of employment (there are exceptions for key workers). If self­employed, the applicant must be able to provide accounts for the last three years.
• have a good credit history
• take out a first mortgage with a qualifying lender

Non-qualifying criteria for all applicants

If applicants:

• have rent arrears during the last 12 months or are in breach of their current tenancy agreement
• have an adverse credit history, which means they are unlikely to be able to sustain ownership
• already owns a home or is named on a home mortgage (unless the name is in the process of being removed, for example, following a relationship breakdown)
• does not intend to take out a first mortgage on the FTBI property

You cannot already be a homeowner or named on a home mortgage. If an applicant has had their name on a mortgage they will have to provide evidence that it has been (or is in process of being) removed.

Qualifying criteria for key workers

Be employed as one of the following qualifying key worker professions:

• clinical staff employed by the NHS (excluding doctors and dentists)
• teachers, including FE teachers and Early Years/nursery teachers
• police officers and community support officers in specified forces (frontline civilian police staff may also be eligible in some areas)
• prison officers and some Prison Service staff in prisons in specified areas
• probation officers, senior probation officers, Probation Service
• local authority/local education authority/NHS social workers
• local authority therapists (including occupational therapists and speech and language therapists)
• local authority educational psychologists
• local authority/local education authority/NHS nursery nurses
• local authority planners
• local authority clinical staff
• uniformed staff, below principal level, in Fire and Rescue Services
• Connexions personal advisors
• armed forces personnel and some civilian MoD personnel (clinical staff, MoD police officers and uniformed staff in the Fire and Defence Service)
• Highway Agency traffic officer staff, and
• local authority environmental health officers/practitioners

The key worker applicant must also:

• be unable to buy a home suitable for their household needs within a reasonable travel to work area of their employment

• be permanent employees or be temporary employees where all the following conditions are met at the time of application:

• at least six months must be remaining on the contract
• the contract must have been issued at the outset for at least 12 months
• at least three months of the contract have already elapsed
• there is a reasonable prospect of continuing employment as a qualifying key worker sufficient to sustain home ownership in the longer term
• have a household income that does not exceed £60,000 per annum, and
• be first­time buyers.

If the eligibility rules change after purchasing a FTBI home

eligibility status will be judged against the criteria at the time they were given financial help to buy the FTBI home. So if the scheme rules change they will not be affected.

How to buy an FTBI home

The buying process has 5 stages.

Stage 1: Register your interest

1. Prospective buyer/applicant registers their interest with the Local HomeBuy Agent, either direct or via the housebuilder.
2. Buyer completes a HomeBuy Application either online or on a paper copy.
3. Buyer contacts an Independent Financial Advisor to gain confirmation of financial status. Some Local HomeBuy Agents may also require buyers to attend a financial interview before giving eligibility approval.
4. Buyer must ensure they have funds to pay:

• a reservation fee
• 5% exchange deposit (5% deposit, some schemes may require higher or lower deposits at exchange of contracts).
• other fees on completion (for exampe, stamp duty, legal fees).

Stage 2: Eligibility approval

If eligible, the buyer will receive an ‘Approval of Eligibility Letter’ from the Local HomeBuy Agent within eight working days of application. They will also receive details of the level of mortgage the buyer should be seeking (their ‘Prescribed Mortgage Level’).

The Local HomeBuy Agent will also provide details of the applicable FTBI schemes in their area.

Stage 3: Pay reservation fee

If they have not already done so, the buyer makes appointments with sales teams at FTBI development schemes.

The buyer completes a ‘Property Information Form’, returns it to the Local HomeBuy Agent together with details of their solicitor/conveyancer and a copy of the housebuilder’s completed reservation form. The buyer will also pay a reservation fee, usually £500, to the housebuilder.

The buyer should instruct a solicitor to act for them and tell their Financial Advisor so that a full mortgage application can be submitted.

Stage 4: Authority to Proceed with purchase

1. The Local HomeBuy Agent will review the ‘Property Information Form’ ensuring it is consistent with the terms of the buyer’s approval letter. If it is, the Local HomeBuy Agent will issue an ‘Authority to Proceed’ document pack to the buyer and the buyer’s and housebuilder’s solicitors/conveyancers. This pack will include legal documents that will be explained to buyers by their solicitor/conveyancer.
2. The buyer will agree to exchange contracts within a timeframe specified by the builder (usually 21­28 days).
3. The buyer’s solicitor/conveyancer will check that the buyer’s mortgage offer, property price and available funds are consistent with the Authority to Proceed, and will request permission to exchange contracts from the Local HomeBuy Agent.
4. The Local HomeBuy Agent issues approval to the buyer’s solicitor/conveyancer and contracts are exchanged.
5. The buyer will have paid a deposit and now be legally contracted to complete the purchase by an agreed date.

Stage 5: Completion

1. At completion, the buyer’s lender will provide its funds and the government will make funds available to the housebuilder. Once completion has taken place the buyer owns the property and can move in.
2. The buyer’s solicitor will then return confirmation of the sale to the Local HomeBuy Agent who will then register the buyer’s details with the National HomeBuy Agent.
3. A second charge will be placed on the property by the buyer’s solicitor in favour of the government entitling it to a share of the future sale proceeds. This means that the buyer must repay this when they sell the property.

Are there any restrictions on the properties that buyers can purchase?

All FTBI homes are on new build developments where the Homes and Communities Agency has an agreement with the housebuilder. Buyers can only purchase from these designated schemes. To ensure that families have access to the scheme, purchase of a property one bedroom larger than the household’s current need is permitted. This is assessed by the Local HomeBuy Agent as part of the eligibility approval process.

How long the process takes

The Local HomeBuy Agent will seek to assess an applicant’s eligibility (from a fully completed application form together with all the other documents it may require from a buyer,) within eight working days. After receiving confirmation of eligibility it is up to the buyer how soon they can find a property and submit a ‘Property Information Form’ to the Local HomeBuy Agent.

The Local HomeBuy Agent’s ‘Authority to Proceed’ is valid for three months – the time limit for exchange of contracts. Typically, most housebuilders will be seeking buyers to exchange contracts within one month of making a reservation.

Buyers are responsible for securing their mortgage and appointing their solicitor/conveyancer, although the Local HomeBuy Agent and housebuilders will be able to suggest some options.

How long before you can move in

Because FTBI homes are on new developments (and may still be under construction), in common with most new home sales, a buyer will normally be expected to arrange a mortgage and exchange contracts within one month of paying a reservation fee. The moving in date will then depend on the time required to complete construction work and this will vary from scheme to scheme. Some FTBI applicants will be prepared to wait a longer period of time for a home that matches very specific needs whereas others will buy from a development that allows earlier occupation.

If the completion of your FTBI home is delayed

Once an FTBI purchaser has committed to buy a home (at exchange of contracts) the housebuilder will have agreed to build the home and keep the buyer informed of progress. If the buyer is unhappy about any delays in construction they must speak to the housebuilder. A buyer’s solicitor/conveyancer will be able to advise on the housebuilder’s contractual responsibilities before they agree to the sale

What happens to your home if you pass away

This depends on whether one or more persons have bought the property or several people have.

If one person has bought the house/flat and that person dies, the home will be passed on in the normal way under the terms of their will and the payments explained in this guide will be made by their estate in accordance with the scheme. If the buyer has not made a will it will pass under the laws of intestacy. It is recommended that a sole buyer seeks independent legal advice about this.

If the property has been bought by two or more people and one of them dies, what happens afterwards will depend on how the property is owned. If one of the owners dies, their interest in the property will either be transferred to the surviving co­owner(s) or will pass under the terms of their will, or (if there is no will) the laws of intestacy. It is recommended where there are two or more owners, that they seek independent legal advice about this.

Adding or changing names on the FTBI property

Only with permission from the National HomeBuy Agent. This will require a deed of accession and/or a deed of release to be completed by the owner. This is a legal document that permits name changes on the property.

If your partner or friend moves into the property

Any person aged eighteen years old or above must sign a form of consent that they have no interest in the property and have sought independent legal advice in relation to their rights. This will be required before the Local HomeBuy Agent consents to the exchange of contracts.

Your mortgage

The buyer’s FTBI mortgage is designed to be affordable relative to their income. The Local HomeBuy Agent will ensure buyers maximise their mortgage while having regard for the overall affordability of the repayments. Typically, the FTBI mortgage will be based on a multiple ranging from 3 to 4 times the applicant’s household income. The Local HomeBuy Agent will also work to a guideline to ensure that a buyer’s monthly costs (mortgage, service charges and fees) are no more than 45% of their after­tax monthly income.

Buyers cannot choose to take a lower mortgage if their affordable income multiple suggests they can afford and sustain a higher one. This is because the scheme is designed to assist buyers by giving them only just enough help to achieve and sustain home ownership. With only limited resources available, the government is seeking to help as many buyers as possible, so allowing a buyer to reduce their mortgage could stop others from also benefiting from the initiative.

Who provides the contribution for FTBI

This is provided by the Homes and Communities Agency and delivered through Local HomeBuy Agents as part of the government’s HomeBuy programme. The government’s contribution is always provided to the first­time buyer but paid to the housebuilder on the designated FTBI development.

Once a buyer has had their eligibility approved the Local HomeBuy Agent will set the ‘Prescribed Mortgage Level’. This is the level of mortgage that a buyer should be seeking from their lender.

The legal mechanism that ensures the government gets its share of future sale proceeds

This is through a second charge on the property, which means it cannot be sold in the future unless the government’s entitlement is paid. Buyers must agree to this charge before the purchase can be completed. The legal document setting out the charge includes other obligations such as the requirement for owners to insure their property. A buyer’s solicitors/conveyancer will advise them on the legal implications of this document before it is signed.

What happens when you sell your FTBI home

When owners sell their FTBI home, they will repay the government its entitlement to a share of the future sales proceeds. So if a buyer initially purchased with a 70% mortgage and a 5% cash deposit and has made no other repayments, it will repay the government 25% of the value at the time they sell. The National HomeBuy Agent will recover the government’s repayment.

Owners can sell their property at any time and an independent surveyor will decide what it is worth. The property will be sold on the open market at the prevailing market valuation. The government’s entitlement must be paid when a buyer sells the home. The buyer will pay the costs of selling.

Example

This table gives an example of how the payment to the government is calculated assuming a starting FTBI home starting value of £150,000 and a buyer taking on a mortgage for 70% and paying a 5% deposit.

Start year	Total property value assuming forecast future annual increase of 5%	FBTI homeowner entitlement to 75% of property value	Government entitlement to 25% of property value
1	£150,000	£112,500	£37,500
2	£157,500	£118,125	£39,375
3	£165,375	£124,031	£41,344
4	£173,644	£130,233	£43,411
5	£182,326	£136,744	£45,581
6	£191,442	£143,582	£47,861

If a buyer chose to sell their FTBI home at the start of year 6 (after owning the property for five years) and assuming property values increased by 5% every year, the buyer would have to repay £47,861 to the government and use £143,582 to settle any outstanding balance on the mortgage provided by their lender.

Example

In this example, property values are assumed to be static for 3 years followed by annual increases of 2%. The buyer then chooses to sell at the start of year six, after five years of ownership.

Start year	Estimated annual change in property value %	Total property value at start of year assuming forecast annual change in value	FBTI homeowner entitlement to 75% of property value	Government entitlement to 25% of property value
1	0	£150,000	£112,500	£37,500
2	0	£150,000	£112,500	£37,500
3	0	£150,000	£112,500	£37,500
4	2	£150,000	£112,500	£37,500
5	2	£153,000	£114,750	£38,250
6	2	£156,060	£117,045	£39,015

If a buyer chose to sell their FTBI home at the start of year six (after owning the property for five years) and assuming property values increased by 0% annually for the first three years followed by two more years when they rose by 2% annually, the buyer would have to repay £39,015 to the government and use £117,045 to settle any outstanding balance on the mortgage provided by their lender.

Example

In this example, property values are assumed to increase by 5% every year for three years followed by annual decreases of ­5%. The buyer then chooses to sell at the start of year six, after five years of ownership.

Start year	Estimated annual change in property value %	Total property value at start of year assuming forecast annual change in value	FBTI homeowner entitlement to 75% of property value	Government entitlement to 25% of property value
1	5	£150,000	£112,500	£37,500
2	5	£157,500	£118,125	£39,375
3	5	£165,375	£124,031	£41,344
4	-5	£173,644	£130,233	£43,411
5	-5	£164,962	£123,721	£41,240
6	-5	£156,713	£117,535	£39,178

If a buyer chose to sell their FTBI home at the start of year six (after owning the property for five years) and assuming property values increased by 5% annually for the first three years followed by two more years when they fell by 5% annually, the buyer would have to repay £39,178 to the government and use £117,535 to settle any outstanding balance on the mortgage provided by their lender.

Example

In this example, property values are assumed to increase by 2% every year for two years followed by annual increases of 8%. The buyer then chooses to sell at the start of year six, after five years of ownership.

Start year	Estimated annual change in property value %	Total property value at start of year assuming forecast annual change in value	FBTI homeowner entitlement to 75% of property value	Government entitlement to 25% of property value
1	2	£150,000	£112,500	£37,500
2	2	£153,000	£114,750	£38,250
3	8	£156,060	£117,045	£39,015
4	8	£168,545	£126,409	£42,136
5	8	£182,028	£136,521	£45,507
6	8	£196,591	£147,443	£49,148

If a buyer chose to sell their FTBI home at the start of year six (after owning the property for five years) and assuming property values increased by 2% annually for the first two years followed by three more years when they rose by 8% annually, the buyer would have to repay £49,148 to the government and use £147,443 to settle any outstanding balance on the mortgage provided by their lender.

If your property value falls

When an FTBI homeowner sells, the FTBI second charge commits the owner to repay a percentage of the market value equal to the percentage contribution which the government has provided towards the original purchase price. This means if the market value of the property falls below the level at which the home was first purchased, the FTBI homeowner will repay less than the original amount the government contributed to the original purchase.

The FTBI homeowner will need to show that the proposed sale value is at the prevailing market value before going ahead. The National HomeBuy Agent will approve the sale before releasing the second charge.

As long as the FTBI homeowner has complied with all their obligations in the FTBI mortgage deed, the owner will not be required to provide for any ‘shortfall’ if they sell when values have fallen.

If an owner does not comply with the terms of the FTBI mortgage deed, government will seek to recover all the money it is owed.

The buyer’s solicitor will explain the FTBI mortgage deed before the home is purchased.

Staircasing

The FTBI scheme allows owners to reduce all or part of the government’s entitlement to some of the future sale proceeds. A partial reduction in the entitlement is called ‘staircasing’.

Staircasing payments can be made at any time and must be a minimum of 10% (always in 10% tranches - for example: 10, 20, 30, 40 or 50%) of the home’s prevailing market value – whether that value is more or less than when originally purchased. A buyer cannot leave less than 10% outstanding, so if the government’s remaining entitlement is for 15%, the buyer has to repay this entire amount.

An independent RICS surveyor/valuer must provide the valuation and the owner will pay for this. Enquiries about staircasing payments should be made to the National HomeBuy Agent.

If an owner staircases after three years of ownership, then the fees you pay on the government’s entitlement will be reduced because it is smaller. Correspondingly, the owner’s mortgage repayments will probably increase to reflect the fact that they have reduced the government’s entitlement.

Example

In the example, if a buyer chooses to ‘staircase’ by 10% to 85% at the start of year six (after owning the property for five years) and assuming property values increased by 5% every year, the buyer would have to repay £19,144 to the government. If the buyer has any fee arrears at the time of staircasing, the arrears must also be paid at the same time as the staircasing payment is made.

Start year	Total property value assuming annual increase of 5%	FBTI homeowner entitlement to 75% of property value	Cost to FTBI homeowner of ‘staircasing’ by 10%
1	£150,000	£112,500	£15,000
2	£157,500	£118,125	£15,750
3	£165,375	£124,031	£16,538
4	£173,644	£130,233	£17,364
5	£182,326	£136,745	£18,232
6	£191,442	£143,582	£19,144

Restrictions on the mortgage providers

The buyer’s FTBI mortgage must be from a ‘qualifying lending institution’. These include lenders who are authorised under the Financial Services and Markets Act 2000, and who have permission to enter into regulated mortgage contracts. This is likely to include most banks and building societies. The Financial Services Authority keeps a register of authorised persons. The register can be found on Financial Conduct Authority’s website..

The buyer’s solicitor/conveyancer will check that the lender is compliant before a sale can proceed.

Fees and costs

Every month, owners will need to make payments including:

• mortgage repayments to lenders
• fee on the government’s contribution
• service charges, if you buy a house or flat with shared areas that require maintenance
• council tax
• life insurance and payments into investment products if the mortgage is interest only
• buildings insurance
• utility bills and other costs of occupying the property

How the fees are calculated

After three years a fee is payable of 1% on the value of the government’s contribution. This rises to a maximum of 3% after five years of ownership. This is payable to the National HomeBuy Agent.

Before the fee is calculated, the government’s amount of contribution is inflated by 2.4% every year. This is done because it represents an estimate of the long­term real rate of house price inflation and ensures that owners have an incentive to staircase and reduce the government’s entitlement (see above), which will reduce their level of fees.

Example

The example below shows how fees are calculated. The fee payment is waived for the first three years, after this date a monthly fee will be payable and the table below illustrates how this would work on a government contribution of 25% worth £37,500 on the day of purchase.

Start year	Govt contribution value carried forward	Percentage increase in govt contribution value for fee calculation	Total value for fee calculation at end of year	Annual fee payable by FTBI homeowner	Monthly fee payable by FTBI homeowner
1	£37,500	2.4%	£38,400	£ - 0%	£ -
2	£38,400	2.4%	£39,322	£ - 0%	£ -
3	£39,322	2.4%	£40,265	£ - 0%	£ -
4	£40,265	2.4%	£41,232	£403 1%	£34
5	£41,232	2.4%	£42,221	£825 2%	£69
6	£42,221	2.4%	£43,235	£1,267 3%	£106
7	£43,235	2.4%	£44,272	£1,297 3%	£108
8	£44,272	2.4%	£45,335	£1,328 3%	£111
9	£45,335	2.4%	£46,423	£1,360 3%	£113
10	£46,423	2.4%	£47,537	£1,393 3%	£116

At the start of year four, after three years of ownership, the FTBI owner has to pay a monthly fee of £34. At the start of year six, after five years of ownership, the monthly fee will have risen to £106.

This is to encourage buyers to staircase and move to full ownership, so that they reduce the government’s entitlement. The introduction of fees also takes into account that the buyer gets all the benefit of living in a house that has been made possible by the government contributing part of the purchase price until the property is sold.

The full fee of 3% per annum on the amount of government entitlement is not introduced until year six, which means that an owner has a five year period of zero or reduced fees at a time when first­time buyers are usually the most financially stretched.

Because the government’s entitlement is inflated every year, unless an owner staircases, their fees will keep rising year ­on ­year even though the fee remains at a flat 3% annually.

The level of fees is fixed at the time of purchase so a buyer will know exactly how much they will have to pay after three years of ownership.

The payment of fees does not reduce the government’s entitlement to a percentage share in the proceeds of sale. If a buyer staircases or wants to make full repayment of the government’s contribution, any fee arrears must be repaid at the same time.

 Annual percentage rates for FTBI owners

Because a buyer has to pay fees on the government’s contribution during their ownership and may have to pay more than the original contribution back to the government, the effect will be similar to a loan under which a buyer pays credit charges at a rate dependent on the growth in house prices combined with the percentage rates of fees payable.

The previous examples demonstrate separately the effects of house price changes and fees on the costs a buyer would have to pay starting with a £150,000 market value home and a buyer’s affordable mortgage and contribution of 75%. The combined effect of fees and repayments effects the Annual Percentage Rate (APR) which is the buyer’s cost of credit.

Example

After five years of ownership, if the buyer decides to sell and house prices have grown by 5% every year, the buyer will have to repay £47,861 to the government. The owner will have also paid £1,227 in fees on the government’s contribution and is assumed to have paid £1,000 in legal and valuation fees. This means the total amount payable after five years on the government’s original cash contribution of £37,500 is £50,088. This is equal to an APR 6.0% typical. The total amount repaid is £50,088.

Stamp Duty

The Government’s standard rules and procedures for Stamp Duty Land Tax (SDLT) apply to all FTBI home purchases.

SDLT is payable at the time of purchase, on the full purchase price of the home. That is, the amount paid by the buyer (the first mortgage and any cash contribution) plus the value of the Government assistance.

There is no further SDLT to pay on any ‘staircasing’ repayments or repayment when the home is sold. Buyers should budget for SDLT when they purchase an FTBI home.

Using money from other government help, for example your council or benefits

Assistance through government key worker or other programmes cannot be combined with any other publicly funded home ownership scheme such as FTBI.

Because FTBI fees are not classified as rent, FTBI homeowners may not qualify for Housing Benefit. Buyers should make sure they have made arrangements to ensure they can continue to make their FTBI payments if their income falls. Buyers should seek independent financial advice about this before purchasing an FTBI home.

Taking out another loan or increasing your mortgage after purchasing a FTBI home

You cannot do this without permission from the National HomeBuy Agent. Further advances must be approved by the National HomeBuy Agent. Advances to be used for staircasing or repaying the government’s contribution will usually be welcomed. Advances for other purposes will be considered by the National HomeBuy Agent on a case­by­case basis.

Buyers can transfer their mortgage to another lender, which must be a qualifying lending institution with permission from the National HomeBuy Agent. Buyers must ensure their new lender is informed that it is an FTBI property with a second charge entitling the government to a share of the future sale proceeds.

The National HomeBuy Agent may decline permission for further advances or transfer to another lender if it considers the buyer may be putting themselves in an unsustainable financial position.

If 2 key workers buy a FTBI home together

Buyers cannot combine two separate applications for financial assistance. The joint income will be taken into consideration to assess their affordable mortgage.

Sub-letting

FTBI is designed to assist the buyers to get on the housing ladder. If they wish to sub­let, they will first have to immediately repay the government’s entitlement.

Second homes

FTBI is designed to assist buyers to get on the housing ladder. If a buyer wishes to purchase another home they will have to immediately repay the government’s entitlement.

Repairs, ongoing maintenance and alterations

It is the owner’s responsibility to repair and maintain their new home. New homes often come with a guarantee that will cover certain defects for up to 10 years after it was built. This guarantee usually only covers defects in the builder’s workmanship.

Altering or extending your property

Not without permission. Because FTBI is designed to help aspiring buyers into home ownership, they should consider repaying part or all of the government’s contribution before making plans for improvements or alterations. This is because the government is seeking to help future first­time buyers and may use the proceeds of these repayments to make more low cost homes available. Therefore, consent will not usually be granted for significant home improvements. However, the National HomeBuy Agent will review cases of hardship if, for example, property modifications are required for a disability.

When the property is sold in the future, if improvements have been made with the approval of the National HomeBuy Agent, these will be ignored when the property is valued to work out how much should be repaid to government.