Key Workers Scheme
Everything you need to know about the Key Workers Scheme.
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What Is The First Homes Key Workers Scheme?
The Government First Homes Key Workers Scheme has been designed primarily for First Time Buyers. However during the first lockdown in 2020 the Prime Minister stated it will be for Key Workers such as Nurses or Teachers as well.
The Government First Homes Key Workers scheme will offer a minimum 30% discount on eligible New Build properties. The discount may be higher, and will vary slightly depending on location.
The other thing you should know is this scheme is still a work in progress. The Scheme hasn’t had a release date announced yet.
What Is The Maximum Price Of A First Homes Property?
The maximum price will be £250,000 across England and £420,000 in London for First Homes properties after the discount has been applied. However depending on how much discount is being offered the full price of the property will vary.
What Is The Maximum Income For The First Homes Key Workers Scheme?
The maximum household income to be eligible for the scheme will be the same as the current Shared Ownership Scheme. Therefore it will be £80,000 (£90,000 in London)
This is so that the people that most need the scheme will have access to it. As if you have a larger income you likely would be able to purchase without using the scheme.
Who Can Buy A Property Using The First Homes Key Workers Scheme?
The First Homes Key Worker Scheme is being set up with local people in mind. It will likely have a period at the beginning of 3 months where you need a local connection to use the scheme. More people will have the opportunity to purchase the property if it has not sold in this time. This is so that primarily local people will benefit over people wanting to move to the area.
The government initially said this scheme would be open to First Time Buyers and Key Workers, they are yet to clarify this. The scheme currently seems to be geared towards the First Time Buyers.
Mortgages And The First Homes Key Worker Scheme
You will have to have a key worker mortgage to use the scheme. It sounds obvious, however cash buyers are out there. As we’ve mentioned a few times, the government really wants the people that need this scheme the most to benefit from it. You’ll be required to have at least a 50% mortgage on the discounted price.
Renting Out A First Homes Key Worker Scheme Property
You would expect not to be able to rent out these properties. However there are sometimes circumstances where you need to rent out your home. For example if you need to move temporarily for work and intend to return to your home. Basically this means when your intention is to rent out for a short period of time you can be allowed. However you have to ask permission from the Local Authority. You can rent the First Homes property out for two years at a time and notify the local planning authority.
If you wanted to rent out your property for longer than the two years, you still may be able too. You would need to get express permission from the Local Planning Authority. They would also ask for it to be for a specific requirement, such as Redundancy, or Caring for a relative.
Armed Forces And The First Homes Key Worker Scheme
For the Armed Forces the requirement to have local connections won’t apply. This is in recognition of their service. They will also waiver the local connections rule for veterans for five years after they leave the military. The government will also waive the local connections rules for Bereaved spouses and civil partners whose partners have died during their service.
First Homes Key Worker Scheme And Bad Credit
Unfortunately at the moment we do not know how Bad Credit history may affect the scheme. If it is similar to other schemes such as the Government Help To Buy Scheme or Shared Ownership the problem will come from lenders, and not the scheme itself.
Lenders do not all usually opt into a scheme. Different lenders view Bad Credit differently, so depending on what type of bad credit you have, different lenders will be available. This therefore means that likely some forms of bad credit may make it difficult to get on the First Homes Key Worker Scheme.
If you have Bad Credit your first step should be to check your credit report. For this we recommend CheckMyFile. This is due to them showing you your credit history with the three main credit referencing agencies. Once you have your report you should speak to your Bank or a specialist Mortgage advisor to discuss your options. Your Bank may be able to help you, however a Specialist Mortgage Advisor will have access to far more products generally.
What happens when I sell my First Homes Key Worker property?
The First Homes property will have a covenant. This therefore means that whatever discount you get when you buy the property, you will then pass on when you sell the property. Hopefully over the course of time your home will increase in value. Therefore if you buy a property worth £200,000, and get a 30% discount you will pay £140,000. If your property has then increased in value to £300,000 and you choose to sell, you will sell for £210,000. This is because the discount applies to the value of the property at the time.
What other schemes are available?
You have a couple of different Key Worker Schemes available.
Government Help to Buy Scheme
The Government Help To Buy Scheme is a 20% equity loan that allows you to put down a 5% deposit and get a 75% mortgage. This usually results in getting a better rate of interest as your mortgage is smaller compared to the value of the property.
Shared Ownership Scheme
The Shared Ownership Scheme allows you to part buy and part rent your home. This means you need a smaller deposit. This scheme is perfect if you have a smaller deposit or lower income.