Buying a 'First Home Scheme' House

Tom_Hendo

Hi

My sister is purchasing a house which is on the 'First Home' scheme (S106) (Initially called the 'Starter Home' scheme I believe).

The First Home scheme discount was initially provided to the current owners at 20% and my understanding is that percentile carried forward for who they sell it to.

Google, government website and some money help websites have been extremely helpful, but some have conflicting information so wanted to reach out here.

DISCOUNT

Who covers the discount? Is this participating banks or the government?

It is quoted as having £0 "rent" and £0 fees for the discount for the first 5 years until 'Service Charges' come into effect. Have I understood this correctly? And is the percentiles they provide for the service charge based on the £££ value of the discount at time of purchase?

VALUATION

The current tenants had to pay for what they called 'an impartial' valuation that came in at £210k. They got 20% discount on their initial purchase, so this makes their ownership £168k which is the value for sale. My understanding is they have to use this valuation and cannot accept offers below?

Could a bank valuation be lower for a mortgage and screw this for my sister who will be using a lower end  percentile carried forward for who they sell it to.

RESTRICTIONS

My brief understanding is that this scheme you 'own' the home so their are no restrictions while owning it just which mortgage providers you can use (some with restricted mortgage options) and just if you want to sell it HAS to be a first time buyer.

FUTURE THINKING

If the government ever remove this scheme, it would suddenly turf out my sister if she can't pay up the 20% discount (through mortgage or other) right? There must be some contract in place?

If anyone has any other thoughts, comments, suggestions or case studies of this please let me know.

Thanks 

Tom

user1977

Think you misunderstand - nobody "covers" the 20%, it's been sold at a compulsorily-discounted price and that continues to apply.

Tom_Hendo

user1977 said:

Think you misunderstand - nobody "covers" the 20%, it's been sold at a compulsorily-discounted price and that continues to apply.

So the housing development that built the house just accept a 20% loss on initial value? I just assumed it would be absorbed by the government or bank somehow 

user1977

Tom_Hendo said:

user1977 said:

Think you misunderstand - nobody "covers" the 20%, it's been sold at a compulsorily-discounted price and that continues to apply.

So the housing development that built the house just accept a 20% loss on initial value?

Yes, it's a normal part of getting planning for mainstream developments that the developer either has to allocate some of the development to affordable housing (whether this sort of scheme or something else), or give cash to the council so they can arrange for affordable housing elsewhere. Obviously it's balanced by the profit the builders make on the "normal" properties they sell.