In the market for a new home? Buying with someone who’s a first-time buyer? Here’s all you need to know if you’ve owned a property before but your partner hasn’t.
Who is classed as a first-time buyer?
First things first, let’s get one thing straight: what exactly counts as a first-time buyer?
Well, according to GOV.UK, ‘A first time buyer is defined as an individual or individuals who have never owned an interest in a residential property in the United Kingdom or anywhere else in the world and who intends to occupy the property as their main residence.’
Don’t worry, it’s not as complicated as it sounds!
Basically, to be classed as a first-time buyer, you need to have never owned a home before. In the government’s eyes, you also need to be buying a home to live in rather than a property to rent out. Simple!
So, why is it so good to be a first-time buyer?
Well, as a first-time buyer in the UK, you’ll get lots of benefits as the government is trying to make it easier for people to get on the property ladder. But a lot of them can’t be accessed if you’re buying a home with someone who’s not a first-time buyer. Urgh.
Do I have to pay Stamp Duty if my partner is a first-time buyer but I’m not?
Yes. We hate to break it to you but unless everyone buying the property is a first-time buyer, you’ll have to pay Stamp Duty. Sorry! The only exception is if the property you’re buying is under £125,000 in which case, you won’t have to pay any Stamp Duty no matter if you’re a first-time buyer or not.
Wondering what we’re talking about?
Stamp Duty Land Tax is a tax that’s charged when you buy a property. However, first-time buyers don’t have to pay it as long as they’re buying a property that costs less than £500,000, thanks to a scheme called Stamp Duty relief.
Sadly, if you’re in a couple and your partner is a first-time buyer but you’re not, between you, you’ll still need to pay the full Stamp Duty tax.
The only way that you could get away without paying it is to make your partner the sole owner of the property. However, there are a couple of problems with this.
First, it will only work if you’re not married or in a civil partnership. If you are, we hate to break it to you, but you’ll legally count as one buyer. So, even if your partner has never bought a property before, the law will act as if they have.
Second, buying the property in just your partner’s name probably isn’t the best idea. You wouldn’t have any legal ownership of the property which could be problematic if there are any disputes later down the line. Plus, only your partner’s salary would be taken into account when you came to apply for the mortgage. So, you wouldn’t be able to borrow as much money as you would if you were both applying together.
Ultimately, it’s probably going to be easiest to just bite the bullet and pay the tax.
Do I qualify for any financial help if my partner is a first-time buyer but I’m not?
Most of the time, no. There’s not much help available for a first-time buyer who’s buying with someone who’s owned a property before. That said, there are a few different schemes out there and they all have different eligibility criteria. Here are the main ones and who qualifies for them.
1. Help to Buy Equity Loan
The Help to Buy Equity Loan is a government scheme that helps you buy a new-build property by loaning you a maximum of 20% of your property’s purchase price (or up to 40% in London).
Sounds great right?! But bad news: it’s only available if both you and your partner are first-time buyers. So, sadly, you can’t access the help if one of you has owned a property before.
Not only that, but if you’re married or in a civil partnership, you have to make a joint application. So, unless you’re unmarried, even if your partner wanted to buy a property using the scheme on their own, they wouldn’t be able to.
2. Shared Ownership
Shared Ownership is a scheme that lets you buy a share of a home if you can’t afford to buy the whole thing. You basically pay rent on the part you don’t own until you can afford to buy the rest.
Sound appealing? Good! Because this scheme is open to first-time buyers and people who have owned homes before. Hooray!
However, to qualify you’ll need to show that you can’t afford to buy a home without help. Between you, you’ll also have to earn less than £80,000 per year (or less than £90,000 per year in London).
But be very careful with this scheme. In fact, we’d advise to stay well away. You’ll never own the property outright and you’ll be liable for a vast range of hidden fees through a regular service charge you can’t escape from. As far as we’re concerned, it’s just not worth the stress!
3. Help-to-Buy ISA
A Help-to-Buy ISA is pretty much our favourite kind of bank account. Why? Well, when you use it to save for your first home, the government will give you a bonus of 25%.
Confused? Say you’ve saved £6,000 in a Help-to-Buy ISA. When the time comes to use that money to buy your first home, the government will give you £1,500 towards it (25% of £6,000!). Not bad, eh?
The only problem is that the scheme isn’t open to new applicants. Sorry!
If your partner already has a Help-to-Buy ISA, give them a pat on the back. They’ll be able to continue saving with it until 2029! Better still, as a first-time buyer, they can use their Help-to-Buy ISA even though you’ve owned a home before. Happy days!
If they don’t already have one, however, a lifetime ISA is probably your best bet. Which brings us onto...
4. Lifetime ISA
A Lifetime ISA is probably our second favourite kind of bank account, and our favourite that can be accessed by new applicants.
So, what exactly is it?
Well, it’s a savings account that helps you save to either buy your first home, or to tide you over later in life. You can pay up to £4,000 into it each year and the government will give you a 25% bonus on the money you put in there, just like it does with a Help-to-Buy ISA.
Just bear in mind that you need to make your first payment into the account before you’re 40. Plus, you can’t add into it anymore after you’ve turned 50. You can also only use it to buy your first home if the property costs less than £450,000.
The great thing about a Lifetime ISA is that as a first-time buyer, your partner will be able to use it even though you’ve owned a property before. In fact, if you have a Lifetime ISA of your own, you can use yours towards the home too. However, you’ll have to pay a hefty 25% withdrawal charge to do so, which means you’ll technically lose more than the bonus you get – so it’s not really worth it.
Can you lie about being a first-time buyer?
No, you can’t lie about being a first-time buyer. At least, we wouldn’t.
Most government schemes will need you to sign a declaration to confirm you’re a first-time buyer. If you lie on this and it later turns out you weren’t telling the truth, you could lose your property. Worse still, you could be committing a criminal offence, which is pretty serious!
There are lots of ways that someone could check whether you’ve owned a property before, such as searching the Land Registry for your name, checking to see whether there’s a previous mortgage on your credit history or looking at your HMRC records to see whether you’ve paid Stamp Duty previously. Ultimately, even if you are inclined to break the law, we’d say it’s just not worth the risk!
Ready to get a joint mortgage together?
Ready to team up with your partner to buy the property of your dreams?
Whether you qualify for government help or not, just get in touch with a ‘whole of market’ mortgage broker (also known as a mortgage advisor) who can compare all the different deals from lots of different lenders. Not only can they advise you on the most cost-effective way to buy a property together, but they’ll even sort your whole application out for you (there’s a reason we call them lifesavers!).
You’ll be sipping champagne in your brand new pad before you know it.