Your First Home scheme explained
The Your First Home scheme is the government’s new way to help first-time buyers onto the property ladder. Saving for a deposit is one of the biggest hurdles buyers face, and with mortgage rates still high, many people find home ownership feels further away than ever.
The scheme aims to change that. It will let eligible first-time buyers purchase a new-build home in England with a deposit of just 2.5%, supported by a government equity loan.
In this guide, Versus Law Solicitors explains what the Your First Home scheme is, who can use it, how it is expected to work and the pros and cons to weigh up before you apply
What is the Your First Home scheme?
Your First Home is a government-backed equity loan scheme for first-time buyers purchasing a new-build home in England. It is designed to cut the amount you need to save upfront and reduce your monthly mortgage payments in the early years.
Under the scheme, you buy your home using three sources of funding:
- A deposit of at least 2.5% of the purchase price
- A government equity loan of 20% of the purchase price, interest-free for the first five years
- A repayment mortgage from a participating lender for the rest
Importantly, you own your home outright from the day you complete. The government does not become a joint owner or your landlord.
The government has set aside £4.7 billion for the scheme over five years, so funding is limited and demand will be kept under review.
Who can use the Your First Home scheme?
The scheme is aimed at first-time buyers who would struggle to buy without help. To qualify, you will normally need to:
- Be a first-time buyer
- Buy a new-build home in England, within the local price cap
- Live in the property as your main home
- Have a total household income of £110,000 or less outside London, or £140,000 or less in London
- Be able to get a mortgage from a participating lender
Lenders will still carry out their usual affordability and credit checks. Full eligibility rules are due to be published before applications open.
What homes can you buy with the Your First Home scheme?
You can only use the scheme to buy an eligible new-build home from a developer that has signed up to take part. Existing, second-hand homes are not included.
To keep the focus on modest homes, the government will set a maximum property price for each local authority area, with separate caps for inner and outer London. Some examples announced so far are:
| Location | Property price cap |
|---|---|
| Manchester | £355,000 |
| Reading | £375,000 |
| North Devon | £320,000 |
| Middlesbrough | £220,000 |
| Inner London | £650,000 |
| Outer London | £500,000 |
A full list of price caps for every area, along with the participating developers, will be published before the scheme launches.
How does the Your First Home scheme work?
Example: buying a £300,000 new-build home
Here is how a £300,000 purchase could be funded under the scheme:
| Source of funding | Amount |
|---|---|
| Your deposit (2.5%) | £7,500 |
| Government equity loan (20%) | £60,000 |
| Repayment mortgage (77.5%) | £232,500 |
| Total purchase price | £300,000 |
Buying the same home with a standard 95% mortgage would usually mean saving a £15,000 deposit and borrowing £285,000. Under the scheme, you need half the deposit and a much smaller mortgage.
Interest on the equity loan
The equity loan is interest-free for the first five years. After that, interest is charged as follows:
| Period | Interest rate |
|---|---|
| Years 1 to 5 | 0% |
| Year 6 | 1.5% |
| Year 7 onwards | 3% |
These interest payments are separate from your mortgage. They do not reduce the amount of the equity loan you owe.
What it could cost each month
The government’s example assumes a £300,000 home, a 30-year repayment mortgage at 5% and no repayment of the equity loan:
| Period | Standard 95% mortgage | Your First Home (mortgage + loan interest) |
|---|---|---|
| Years 1 to 5 | £1,530 | £1,248 |
| Year 6 | £1,530 | £1,323 |
| Year 7 onwards | £1,530 | £1,398 |
This is an illustration only and not a mortgage quote. Your actual costs will depend on the home, your mortgage rate and your circumstances, and it does not include costs such as mortgage fees, insurance, council tax or service charges.
How is the equity loan repaid?
The equity loan is linked to the value of your home, not the amount you borrowed. If the loan was 20% of the purchase price, you will normally repay 20% of your home’s value at the time you repay, based on an independent valuation.
This means the government shares in both rises and falls in your home’s value:
- If your home goes up in value: a £300,000 home later valued at £320,000 means you repay £64,000, which is £4,000 more than you borrowed
- If your home goes down in value: a £300,000 home later valued at £280,000 means you repay £56,000, which is £4,000 less than you borrowed
You will normally repay the loan when you sell your home, but you can also repay some or all of it earlier, for example when you remortgage. Full repayment rules, including minimum amounts, valuation requirements and any fees, are due to be published before the scheme opens.
Is Your First Home scheme the same as Help to Buy?
If this sounds familiar, that is because it works in a similar way to the Help to Buy equity loan scheme, which ran in England from 2013 to 2023.
The final version of Help to Buy let first-time buyers purchase a new-build home with a 5% deposit and a government equity loan of up to 20%, or up to 40% in London. The loan was interest-free for the first five years.
The key differences with Your First Home are a lower minimum deposit of 2.5%, a 20% equity loan across England including London, and household income caps to target support at those who need it most.
Pros and cons of the Your First Home scheme
Pros
- Smaller deposit: you need just 2.5%, half the 5% many lenders ask for
- Lower monthly payments: a smaller mortgage and five interest-free years on the equity loan can save you hundreds of pounds a month in the early years
- Full ownership: you own your home from day one, with no shared ownership or rent to pay
- Brand-new home: new builds are often energy efficient and come with a warranty, keeping early repair bills down
Cons
- New builds only: you cannot use the scheme to buy an older home
- Rising costs after year five: interest on the equity loan starts at 1.5% in year six and rises to 3% from year seven, without reducing what you owe
- You share any growth: if your home rises in value, the amount you repay rises too
- Limited choice: only homes from participating developers, within local price caps, qualify
- New-build premium: new builds can lose value in the first few years, which could make it harder to remortgage or move
- Limited funding: the scheme has a fixed budget, so it may not be available to everyone who wants it
When can you apply for the Your First Home scheme?
Applications are not open yet. The scheme is expected to open in February 2027, with customer pre-registration starting before the end of 2026. Pre-registering will not commit you to buying through the scheme, but it will tell you more about your eligibility and the price cap in your area.
Full guidance, terms and conditions, and details of participating developers and lenders will be published before applications open.
What to consider before you apply
Before committing, think carefully about:
- Whether you can afford your mortgage payments now, and if rates rise in future
- The interest you will pay on the equity loan from year six
- Legal fees, mortgage fees and moving costs
- Council tax, insurance, maintenance, and any service or estate charges
- The costs of selling or remortgaging later, including repaying the equity loan
It is wise to get independent financial and legal advice before you buy.
You don’t have to wait
If you are ready to buy now, existing options such as Shared Ownership, First Homes and low-deposit mortgages may already help you get onto the ladder.
Buying your first home? Get a free conveyancing quote
Whether you plan to use the Your First Home scheme or buy your first home another way, an experienced conveyancing solicitor makes the process smoother. At Versus Law Solicitors, our conveyancing team helps first-time buyers across England and Wales with new-build and existing homes, explaining every step in plain English.
Ready to take your first step onto the property ladder? Get your free conveyancing quote today and find out how our conveyancing team can help.
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