If you’re trying to buy your first home and somebody offers you a property at 30% below market value, your first reaction might understandably be:
“What’s the catch?”
That’s essentially what the Government’s First Homes scheme offers eligible first-time buyers in England.
A property worth £300,000 could, for example, potentially be sold for £210,000 with a 30% First Homes discount.
That sounds incredibly attractive.
And for the right buyer, it can be.
But there are important rules attached to the scheme, particularly around who can buy, how much you can earn, the mortgage you need, and what happens when you eventually sell the property.
As a mortgage adviser, this is the bit I think matters most.
Don’t just ask:
“How big is the discount?”
Ask:
“What am I actually buying, what restrictions come with it, and does the mortgage work for me?”
Let’s go through it properly.
What Is the First Homes Scheme?
First Homes is a Government-backed affordable homeownership scheme available in England.
Eligible first-time buyers can purchase qualifying properties at a discount of at least 30% below their market value.
In some areas, the discount can be increased to 40% or 50% where the local authority has identified a need for a larger discount.
The important thing to understand is that this isn’t a temporary discount that you have to repay later.
You buy the property at the discounted price.
However, the discount remains attached to the property when you eventually sell it.
That means future eligible first-time buyers should benefit too.
Is First Homes the Same as Shared Ownership?
No.
This is one of the most important distinctions.
With Shared Ownership, you normally buy a percentage of the property and pay rent on the part you don’t own.
With First Homes, you purchase the property itself at a discounted price.
There isn’t a Government-owned percentage sitting alongside yours that you pay rent on.
So if a qualifying property has a market value of £300,000 and receives a 30% First Homes discount:
Market value: £300,000
30% discount: £90,000
Purchase price: £210,000
You would purchase the home for £210,000.
There’s no rent payable on the £90,000 discount.
That difference is significant.
Who Can Qualify for the First Homes Scheme?
There are national eligibility rules.
You must generally:
- Be aged 18 or over.
- Be a first-time buyer.
- Buy the property as your only or main home.
- Have household income of no more than £80,000 before tax, or £90,000 if the property is in London.
- Be able to obtain a mortgage covering at least 50% of the discounted purchase price.
If you’re buying with somebody else, all purchasers must be first-time buyers.
Your combined household income must also remain within the relevant income limit.
The income assessment is based on income from the previous tax year.
What Counts as a First-Time Buyer?
This is another area where people sometimes make assumptions.
Generally, if you have previously owned a residential property, including one abroad, you’re unlikely to meet the first-time buyer definition simply because you don’t currently own one.
For example, selling a property five years ago and renting ever since doesn’t usually make you a first-time buyer again.
If you’re buying jointly, all of the people purchasing the First Home need to meet the first-time buyer requirement.
So if one partner has never owned property but the other previously has, that could prevent the purchase qualifying under the scheme.
Do Local Councils Have Their Own Rules?
They can.
This is where the scheme becomes more interesting.
A local authority may prioritise First Homes for people who:
- Already live locally.
- Work in the area.
- Have particular local connections.
- Are considered key workers locally.
- Meet a lower local income limit.
This means being eligible under the national rules doesn’t automatically mean you’ll qualify for every First Home you see advertised.
However, some of those local buyer restrictions generally fall away if the property hasn’t been sold during its first three months of marketing.
The national eligibility requirements still apply.
This is one reason why I’d check the rules applying to the specific property, rather than simply deciding that you either “qualify for First Homes” or you don’t.
How Much Can a First Home Cost?
For the initial sale, the discounted purchase price must generally be no more than:
£250,000 outside London
or
£420,000 in London
Local authorities can set lower limits where appropriate for their area.
These figures apply after the First Homes discount has been deducted.
For example, imagine a property outside London has a market value of £350,000.
A 30% discount would reduce the price to:
£245,000
That would fall below the national £250,000 initial-sale price cap.
However, local rules could potentially impose a lower cap.
Again, checking the specific scheme attached to the development matters.
Do I Still Need a Deposit?
Yes.
This is where I sometimes think the word discount can create the wrong impression.
A First Home might be significantly cheaper than its open-market value, but you still need to fund the discounted purchase price.
That usually means combining:
- Your deposit.
- Your mortgage.
- Any other acceptable funds.
You must also obtain a mortgage covering at least 50% of the discounted purchase price.
Exactly how much deposit you need will depend on the mortgage products available, lender criteria and your circumstances.
So a 30% First Homes discount does not mean you automatically have a 30% mortgage deposit.
Those are two different things.
Does the Discount Help My Mortgage Loan-to-Value?
This is where the mortgage side can become more technical.
A lender offering mortgages on First Homes needs to understand both the property’s market value and the restricted discounted purchase price.
Lender criteria and available loan-to-value options can differ.
That’s why I wouldn’t take a normal mortgage calculator, type in the unrestricted market value and assume the answer applies to a First Homes purchase.
The property comes with legal restrictions that the lender needs to accept.
So before paying reservation fees or becoming emotionally attached to the property, I’d want to establish that there are suitable mortgage options for your circumstances.
Can Every Mortgage Lender Finance a First Home?
No.
Not every lender approaches affordable homeownership schemes in exactly the same way.
Some lenders participate in First Homes lending and others may not.
Those that do can still have their own criteria around:
- Deposit size.
- Affordability.
- Property type.
- Employment.
- Credit history.
- Mortgage term.
- And other circumstances.
This is where first-time buyers sometimes make the mistake of thinking:
“The council says I qualify, therefore the mortgage is sorted.”
They’re two separate hurdles.
You need to qualify for the scheme and obtain a suitable mortgage.
Neither automatically guarantees the other.
How Does the First Homes Discount Work When I Sell?
This is probably the most important part of the scheme to understand before buying.
You don’t get to keep the original discount when you sell.
The same percentage discount normally has to be passed to the next eligible buyer.
Imagine you bought a property with a 30% discount.
Years later, an independent valuation says the property is worth £400,000.
The maximum First Homes selling price would normally be:
Market value: £400,000
30% discount: £120,000
First Homes sale price: £280,000
You haven’t lost the benefit of any growth altogether.
Your discounted property has increased from £210,000 in our earlier example to £280,000.
But you cannot normally sell it to an ordinary open-market buyer for £400,000 and simply keep the full difference.
The discount is designed to remain with the property for future eligible buyers.
What If I Make Improvements to the House?
You can normally decorate and improve your First Home, subject to the usual planning, building, leasehold and mortgage restrictions.
But this is something I’d think carefully about before spending very large sums.
Imagine you build an extension that substantially increases the property’s market value.
When you eventually sell, the First Homes discount still applies to the property’s market value at that point.
So while improvements can make your home better to live in and may increase its value, you need to understand that the same percentage discount normally remains attached when you sell.
If you’re contemplating major works, it’s sensible to understand the implications first.
Can I Rent Out a First Home?
First Homes are intended to be owner-occupied.
The property must normally be your only or main residence.
Under the current scheme rules, you can usually let the whole property for no more than two years in total during your ownership.
You need to inform the local council and also check the terms of your mortgage.
Longer periods may be permitted in certain exceptional circumstances, but council permission would normally be required and the mortgage lender may also need to agree.
You can generally have a lodger for longer, provided the property remains your own main home and you continue living there.
So if your long-term intention is:
“I’ll buy it cheaply and turn it into a Buy-to-Let in a couple of years”
First Homes probably isn’t the scheme to approach with that assumption.
What Happens If My Income Goes Up Later?
This is a useful feature of the scheme.
Suppose you qualified when you bought your First Home and your salary then increases substantially.
You don’t normally have to sell simply because your income subsequently exceeds the eligibility limit.
Likewise, if you originally qualified because you were a particular type of key worker and later change career, that doesn’t normally mean you lose your home.
Eligibility is assessed when you purchase.
How Do I Find a First Homes Property?
You won’t usually find a giant national catalogue containing every First Home available.
Properties can be advertised by:
- New-build developers.
- Estate agents.
- Local authorities.
- Existing First Homes owners selling their property.
And this is another misconception worth clearing up.
First Homes aren’t necessarily always brand-new forever.
A property originally sold as a First Home remains within the scheme when it is subsequently sold, so resale First Homes can also become available through estate agents.
Availability varies considerably from area to area.
There may be plenty of new development locally but very few First Homes.
That scarcity is one of the scheme’s limitations.
How Do I Apply?
The process usually begins with the developer or estate agent marketing the First Home.
They’ll normally help establish whether you appear to meet the eligibility criteria and submit the relevant application to the local council.
The council then checks your eligibility.
You’ll also need a conveyancer familiar with the transaction and, of course, appropriate mortgage finance.
If the council confirms that you’re eligible, you can progress through the mortgage and conveyancing process.
You should not treat council eligibility as a mortgage offer.
Your lender still needs to assess:
- You.
- Your income and expenditure.
- Your credit history.
- The property.
- And the mortgage application.
Can I Use a Lifetime ISA With First Homes?
Potentially, yes, provided you meet the relevant Lifetime ISA rules.
For somebody saving towards their first home, that can make First Homes particularly interesting.
However, Lifetime ISAs have their own rules and withdrawal conditions.
I’d make sure your conveyancer and mortgage adviser know from the beginning that you intend to use Lifetime ISA funds so the purchase can be planned properly.
What About Stamp Duty?
Stamp Duty Land Tax is calculated using the amount you actually pay for the First Home after the discount has been applied.
As a first-time buyer, you may also qualify for first-time buyer Stamp Duty relief, depending on the purchase price and the rules applying at the time of your transaction.
Tax rules can change, so I’d check your position with your conveyancer rather than assuming no Stamp Duty will be payable.
What Are the Biggest Advantages of First Homes?
For an eligible first-time buyer, the obvious benefit is the discount.
Buying at 30%, 40% or 50% below open-market value could make a property accessible that otherwise wouldn’t be.
Other potential advantages include:
- Owning the property rather than purchasing only a percentage through Shared Ownership.
- No rent being payable on the discounted portion.
- Lower purchase price potentially reducing the mortgage required.
- The discount continuing to benefit future first-time buyers.
But that doesn’t automatically mean a First Home is better than buying normally.
The restrictions matter too.
What Are the Downsides?
This is the bit I think buyers need to hear just as clearly as the benefits.
You can’t normally sell at full market value
The percentage discount continues when you sell.
Your future buyer pool is restricted
You generally need to sell to another qualifying First Homes buyer.
That could potentially affect how quickly the property sells.
Letting is restricted
It’s designed primarily as your home, not as an investment property.
Availability is limited
Finding a suitable First Home in the location you actually want may be difficult.
Mortgage choice may be narrower
Not every lender necessarily participates or has suitable products for your circumstances.
Local rules vary
Qualifying for one First Homes development doesn’t necessarily mean you’ll qualify for another.
None of those automatically makes the scheme unattractive.
They’re simply part of what you’re agreeing to.
The Mistake I’d Avoid as a First-Time Buyer
Don’t become so excited by:
“30% discount!”
that you stop looking at the property itself.
I’d still ask exactly the same questions I’d ask if you were buying normally.
Is this the right location?
Is the property suitable for you?
Can you comfortably afford the mortgage?
What are the service charges if it’s a flat?
What other monthly costs will you have?
Is the mortgage sustainable?
Do you have emergency savings left after buying?
And:
Would you still want this property if there wasn’t a large word saying DISCOUNT next to it?
A discount only represents good value if the underlying property and your finances make sense.
An Example of How First Homes Could Work
Let’s keep it simple.
Imagine a qualifying property has been independently valued at:
£300,000
The First Homes discount is:
30%
That gives a discounted purchase price of:
£210,000
Suppose you have:
£21,000 deposit
You would therefore need approximately:
£189,000 mortgage
subject to lender affordability, valuation and eligibility.
Years later, suppose the property has a market value of:
£350,000
The same 30% discount would normally apply:
£350,000 minus 30% = £245,000
So you could normally sell the property for up to £245,000 to an eligible First Homes buyer.
That example shows both sides of the scheme.
You benefit from the discount when buying.
But you also pass that percentage discount on when selling.
Is First Homes Worth It?
For the right first-time buyer, it can be a very useful route into homeownership.
But I wouldn’t automatically recommend it simply because the purchase price is discounted.
I’d want to compare:
Buying through First Homes
with
Buying a normal property on the open market
and potentially other affordable-homeownership options available to you.
Then look at:
- Deposit required.
- Mortgage payment.
- Mortgage availability.
- Property location.
- Future flexibility.
- Resale restrictions.
- Service charges where applicable.
- Your likely future plans.
That’s a more useful comparison than simply asking which option gives the biggest discount today.
Frequently Asked Questions
How much discount do you get with the First Homes scheme?
First Homes are sold with a discount of at least 30% from market value. In some areas, local authorities can require discounts of 40% or 50%.
Is First Homes only for new builds?
No. The scheme includes qualifying new-build properties, but existing First Homes can later be resold to another eligible buyer.
What is the maximum income for First Homes?
The national household income limit is £80,000 before tax, or £90,000 in London, based on income from the previous tax year. Local authorities can impose lower limits in some circumstances.
Can couples use First Homes?
Yes, potentially, but everybody purchasing the property must qualify as a first-time buyer and your combined household income must remain within the relevant limit.
Do I need a mortgage?
Yes. You normally need a mortgage covering at least 50% of the discounted purchase price.
Do I own 100% of a First Home?
You purchase the property rather than a percentage in the way you would with Shared Ownership. However, the property remains subject to the First Homes restrictions, including the continuing resale discount.
Do I pay rent on the First Homes discount?
No. You don’t normally pay rent on the discounted portion of the property’s value.
Can I sell a First Home for full market value?
Normally, you must sell to an eligible buyer using the same percentage discount you received. There are limited circumstances where a council may permit an open-market sale, but the value of the discount would then need to be dealt with under the scheme rules.
Can I rent my First Home out?
It’s intended to remain your only or main residence. Whole-property letting is normally limited to two years in total during your ownership, subject to council notification and your lender’s requirements. Different rules can apply in exceptional circumstances.
Is the First Homes scheme available throughout the UK?
No. First Homes is an England-only scheme. Scotland, Wales and Northern Ireland have their own housing policies and homeownership schemes.
Final Thoughts
So, what is the First Homes scheme?
At its simplest:
It’s a way for eligible first-time buyers in England to purchase certain homes at least 30% below their market value.
But I think describing it purely as a discount misses half the story.
You need to understand:
Who qualifies.
Which properties qualify.
Whether you can get the mortgage.
What restrictions apply while you own it.
And what happens when you eventually sell.
I’ve found that first-time buyers often arrive at these schemes thinking the hardest question is:
“Am I eligible?”
It’s not always.
Sometimes the more important question is:
“Does this actually suit the life I’m planning to have?”
If you intend to stay in the property, can comfortably afford the mortgage and understand the resale restrictions, First Homes could potentially provide a valuable route onto the property ladder.
But eligibility alone doesn’t make any mortgage or property right for you.
If you’re considering a First Homes property and would like to understand the mortgage options available based on your own circumstances, you can book an appointment here:
https://veganmortgageadviser.co.uk/appointment
Your home may be repossessed if you do not keep up repayments on your mortgage.
Eligibility for the First Homes scheme, mortgage availability and the amount you may be able to borrow depend on your individual circumstances, the property, local authority requirements and lender criteria. Scheme rules and tax rules may change. This article provides general information and does not constitute a personal recommendation.