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Published: 13 November 2019

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When the government announced plans to help first-time buyers get a foot onto the property ladder, many people were absolutely delighted. That was until they saw the criteria you needed to meet in order to be classified as a first-time buyer.

It might seem obvious as to who would qualify as a first-time buyer, but you would be wrong. In this article we will run through exactly what a first-time buyer is and the criteria you need to meet in order to benefit from some of the government’s initiatives.

The definition

If you’re wondering if you’re a first-time buyer, then it is worth checking out HMRC's definition. It states that a ’first-time buyer’ is "A person who has not acquired a freehold or leasehold interest in residential property in the UK (except a lease with less than 21 years to run) or an equivalent interest anywhere in the world."

What this means

So, while on the face of it, being a first-time buyer might just appear to be someone who has never bought a property before, in actual fact, it means that anyone who has owned a property before is ineligible to be considered a first-time buyer.

To be more precise you cannot be a first time buy if:

• You’ve previously owned a property and sold it
• You’ve previously owned a buy-to-let property
• You’ve owned an overseas residential property
• You’ve previously inherited a property
• You’ve previously part-owned a property
• Your co-owner or spouse has previously owned a residential property

You will qualify for the benefits of being a first-time buyer if:

• You and anyone else you are buying a residential property with have never previously owned a residential property
• You’ve only ever owned commercial property

While it may seem unfair given the use of the term “buyer”, for now at least, they are the criteria you need to fulfil in order to qualify as a first-time buyer.

What are the advantages of being a first-time buyer?

There are several advantages in being a first-time buyer when it comes to the government’s Help to Buy schemes. One of the biggest advantages is that you will have access to the government’s Help to Buy ISA scheme, which sees the government top up your ISA savings by 25% up to the value of £3,000. Meaning if you’ve saved £12,000 for a deposit, the government will top that up to £15,000, provided the value of the property you are purchasing is less than £250,000, or £450,000 in London.

Beware though, that your initial deposit can only go up to £1,200 and every monthly deposit cannot exceed £200, meaning you can’t just open a Help to Buy ISA, pay in £12,000 and instantly walk away with £15,000 for a deposit.

You also need to be aware that with the Help to Buy ISA, you will only receive the £3000 bonus from the government on properties up to the value of £250,000, or £450,000 for those looking to buy in London.

Another of the benefits is that, with the new rules regarding Stamp Duty, if you’re a first-time buyer and the property you are buying is under £300,000, you won’t need to pay a single penny in Stamp Duty. If you’re buying a property that is over £300,000, then you’ll need to pay 5% on every pound over that threshold.

You do need to be aware though that if you’re buying a property that has a value in excess of £500,000, then you lose any benefit from being a first-time buyer and have to pay the full amount of Stamp Duty, which on a property worth £500,001 is £15,0000.

If you’re looking to explore your options, in particular, mortgage advice, please contact us.