Reasons Why You Will Not Meet the First-Time Buyer Definition
While working out am I a first-time buyer seems fairly straightforward, there are many circumstances where it may not be entirely clear. The cases below mean you will normally not be treated as a mortgage applicant for a first-time buyer home.
- Having previously owned a property, even if you have since sold it on, will disqualify you from any first-time buyers scheme.
- Being added to property deeds or inheriting a home means you cannot meet the first-time buyer definition.
- Owning or previously owning a rental or buy-to-let means that you have owned a residential home before, so won't be able to rely on the information in a first-time buyer guide.
- Partial property ownership, even if you paid nothing towards the home and have never had a mortgage, means you can't comply with the first-time buyer definition.
Some of the more complex scenarios can also mean you are not able to use any first-time buyers scheme, such as owning a home in another country or applying for a first-time buyers scheme with a co-applicants or partner who doesn't meet the first-time buyer definition.
Likewise, mortgage applicants who are married or in a civil partnership with somebody who has owned a home before cannot meet the first-time buyer definition because married couples are legally treated as one buyer – regardless of who is paying the deposit or applying for the mortgage.
Why Does it Matter if I Comply With the Legal First-Time Buyer Definition?
It can be very important to know the answer to am I a first-time buyer, partly because mortgage lenders will check the first-time buyer definition before accepting an application to any first-time buyer mortgage offer or the first-time buyer home guarantee scheme.
Purchasing a first-time buyer home can be difficult, with most buyers needing at least a 10% deposit, which can be a huge amount to save, alongside paying rent.
Showing that you meet the first-time buyer definition can be influential. If you want to apply for the mortgage guarantee first-time buyers scheme, that may mean you qualify for products with a participating lender with a minimum 5% deposit.
Next, we'll run through some of the most popular first-time buyers scheme options and initiatives to showcase why your status as a first-time buyer might make a difference.
Stamp Duty First-Time Buyers Scheme
All home buyers pay stamp duty land tax on acquisitions, depending on the value of the property. Most people pay tax on anything over £250,000, but those meeting the first-time buyer definition have a higher tax-free threshold of £300,000.
In effect, that means you can reduce your tax bill by £2,500, simplifying by qualifying for the first-time buyers scheme.
The Lifetime ISA First-Time Buyers Scheme
If you meet the first-time buyer definition, you can save up to £4,000 a year towards a deposit and earn £1,000 in interest – an impressive 25% interest rate that far surpasses any other low-risk savings product.
Provided you're using the cash to pay the deposit on a first-time buyer home or towards your retirement, you can withdraw your lump sum, with the interest included, without incurring a liability.
However, if you are not eligible for the first-time buyer definition, you sacrifice the full 25% earned on withdrawal, effectively meaning you haven’t earned anything at all on your savings.
Shared Ownership First-Time Buyer Guide
The Shared Ownership first-time buyers scheme enables first-time buyers to purchase a share of a property and pay nominal rent on the balance to the relevant housing association.
This first-time buyers scheme can be an excellent opportunity for those without the deposit or finances to buy a whole property outright. It enables buyers to purchase additional chunks of the property over time until they own it all.
To take advantage of Shared Ownership, applicants need to meet the first-time buyer definition, earn under £80,000 a year as a household, or £90,000 in London, and have a deposit of 5% to 10%.
Right to Buy and Rent to Buy
Those who meet the first-time buyer definition can access discounted rent to buy tenancy agreements, with a lower rent to allow them to save up a sufficient amount to use as a deposit to proceed to a mortgage when the tenancy ends.
Right to Buy is another first-time buyers scheme, where tenants can purchase a home from a local authority housing association, provided they have been renting for three years and the property is their primary home.
Discounts and support through each first-time buyers scheme can make a big difference in being able to purchase a property, so clarifying how you meet the first-time buyer definition is important.
Independent Help Determining Whether You Meet the First-Time Buyer Definition
If you’d like more help working out whether you are compliant with the first-time buyer definition or determining which first-time buyers scheme to apply for, please contact Revolution Finance Brokers at any time.
Our experienced, whole-of-market consultants can recommend the right first-time buyers scheme to help you get onto the property ladder or can provide specialist guidance about other aspects of getting the best mortgage for a first-time buyer home.
