What Is the Your First Home Scheme?

If you’re a first-time buyer struggling to save a deposit, the Government’s new Your First Home scheme is likely to get your attention.

And understandably so.

The headline is powerful:

A deposit of just 2.5%.

For somebody trying to save while also paying rent, cutting the deposit requirement in half compared with a typical 95% mortgage could bring homeownership considerably closer.

But there is more to Your First Home than the 2.5% figure.

The Government is also providing a 20% equity loan, which means you’re potentially taking on two forms of borrowing:

Your normal mortgage

and

the Government equity loan.

That second part matters.

So let’s look at how Your First Home is expected to work, who it’s designed for and what first-time buyers need to understand before deciding whether it could be right for them.

What Is Your First Home?

Your First Home is a new Government equity-loan scheme for first-time buyers purchasing eligible new-build homes in England.

Under the current scheme design, an eligible purchase would be funded using:

A deposit of at least 2.5%.
A repayment mortgage from a participating lender.
A Government equity loan worth 20% of the purchase price.

The scheme is expected to open for applications in February 2027, with the first property sales expected from April 2027. Pre-registration is due to begin before the end of December 2026.

This is therefore a scheme you can start planning for, but you cannot currently submit a full application.

How Would a 2.5% Deposit Work?

Let’s use a £300,000 property as an example.

Your 2.5% deposit would be:

£7,500

The Government equity loan at 20% would be:

£60,000

That leaves:

£232,500

to be funded through a repayment mortgage.

So the purchase would look like this:

Property price: £300,000

Your deposit: £7,500

Government equity loan: £60,000

Repayment mortgage: £232,500

Compare that with a standard 95% mortgage.

You would typically need a £15,000 deposit and borrow £285,000.

That’s why the scheme could be particularly useful for someone whose biggest obstacle isn’t necessarily the monthly mortgage payment.

It’s the time required to save the deposit.

Is the Government Giving Me 20% of the House?

No.

This is probably the most important thing to understand.

The Government’s 20% contribution is an equity loan.

It’s borrowing.

It will eventually need to be repaid.

And the amount you repay is linked to the future value of your home.

This isn’t:

“The Government gives me £60,000.”

It’s closer to:

“The Government funds 20% of the purchase and I repay an equivalent percentage of the property’s value later.”

That distinction could become very important if your property increases significantly in value.

How Does the Equity Loan Work?

Suppose you buy a property for:

£300,000

Your 20% Government equity loan is:

£60,000

Years later, the property is independently valued at:

£320,000

If you still owe the full 20% equity share, the amount repayable would be:

£64,000

because 20% of £320,000 is £64,000.

So even though you originally borrowed £60,000, you would repay £64,000.

But it also works the other way.

If the property’s value fell to:

£280,000

then 20% would be:

£56,000

The Government therefore shares in both increases and decreases in the property’s value.

Does the Government Own 20% of My Home?

No.

You will own the property.

The Government isn’t your landlord and doesn’t become a joint owner living quietly in the spare bedroom.

But it does have a financial interest through the equity loan.

That’s why you need to think about the equity loan as part of your overall borrowing rather than treating it as a discount.

Is the Equity Loan Interest-Free?

Initially, yes.

Under the current scheme design, the equity loan will be:

Interest-free for the first five years.

The published interest structure is then:

Years 1 to 5: 0%

Year 6: 1.5%

From Year 7: 3%

These interest payments are separate from your mortgage payments and do not reduce the amount of the equity loan you owe.

This matters enormously.

You could potentially have a very manageable housing cost during the first five years and then see your overall monthly expenditure increase from year six.

That needs to be considered from the beginning.

An Example of the Monthly Cost

The Government’s own illustration uses a £300,000 property with:

A £7,500 deposit.
A £60,000 equity loan.
A £232,500 repayment mortgage.
A 30-year mortgage term.
A 5% mortgage interest rate.

On those assumptions, the mortgage payment would be around:

£1,248 per month

during the first five years.

There would initially be no equity-loan interest.

In year six, the example adds approximately:

£75 per month

of equity-loan interest.

From year seven, it becomes approximately:

£150 per month

assuming the equity loan hasn’t been repaid.

These figures are only illustrations.

Your actual mortgage payment would depend on the lender, mortgage rate, mortgage term, property and your circumstances.

Who Can Use Your First Home?

Based on the current Government guidance, you’ll normally need to:

Be a first-time buyer.
Purchase a qualifying new-build property in England.
Live in the property as your main home.
Buy within the relevant local property-price cap.
Meet the household income requirements.
Obtain a mortgage from a participating lender.

The current household income limits are:

£110,000 or less outside London

and

£140,000 or less in London.

Full eligibility rules are still due to be published before applications open.

So while we now know considerably more than we did when the scheme was first announced, I’d still avoid assuming you definitely qualify until the final application guidance is available.

Will There Be a Maximum Property Price?

Yes.

Property-price caps will apply.

But rather than setting one national price limit for the whole of England, the Government is using local price caps.

That makes sense because £300,000 buys a very different property depending on whether you’re in Middlesbrough, Manchester, Reading or London.

Examples already published include:

Middlesbrough: £220,000

North Devon: £320,000

Manchester: £355,000

Reading: £375,000

London has separate limits:

Outer London: £500,000

Inner London: £650,000

A full list of local authority caps is expected before launch.

Can I Buy Any House With a 2.5% Deposit?

No.

Your First Home is currently designed for eligible new-build properties from developers participating in the scheme.

So you won’t be able to find a £250,000 Victorian terrace on Rightmove and simply ask the Government to provide a 20% equity loan.

The property itself has to qualify.

Participating developers will also need to sign up to the scheme.

Details of eligible homes and participating developers are expected to become clearer ahead of the February 2027 launch.

Do I Need to Be Buying Alone?

Not necessarily.

The scheme can potentially be used by households buying together, provided the relevant eligibility requirements are met.

Household income will matter because the £110,000 and £140,000 limits apply to total household income.

The final detailed rules for joint applicants are due before applications open, so this is something I’d check carefully when the full guidance is available.

Is There a Maximum Deposit?

Interestingly, yes.

The Budget confirmed that the minimum deposit will be:

2.5%

with a maximum deposit of:

15%.

So Your First Home isn’t simply a scheme where somebody with a huge deposit can take advantage of a subsidised 20% equity loan.

It’s intended to help first-time buyers who would otherwise struggle to purchase.

Do I Still Need to Pass Mortgage Affordability?

Absolutely.

The 2.5% deposit headline does not mean:

“If I have 2.5%, I can buy a house.”

You still need to obtain a mortgage from a participating lender.

The lender will carry out its normal assessment, including things such as:

Your income.
Financial commitments.
Credit history.
Employment.
Affordability.
Mortgage term.
The property itself.

So imagine you’re buying that £300,000 property.

Even though your personal deposit is only £7,500, you still need to qualify for the £232,500 mortgage.

If your income doesn’t support that borrowing, the Government equity loan doesn’t override the lender’s affordability assessment.

The Scheme Helps With Two Different Problems

This is where I think Your First Home could become particularly useful.

First-time buyers generally face one or both of these problems:

“I can afford the mortgage, but saving the deposit is taking forever.”

or:

“I’ve saved the deposit, but I can’t borrow enough.”

Your First Home potentially helps with both.

The 2.5% deposit reduces the amount you need to save.

And because the Government equity loan covers 20% of the purchase price, the conventional mortgage is smaller too.

But it doesn’t remove affordability limits altogether.

There still needs to be a sustainable mortgage behind the purchase.

Can I Repay the Equity Loan Early?

Yes.

Under the current guidance, you’ll be able to repay some or all of the equity loan before selling the property.

An independent valuation may be required to establish what the property is worth at the time and therefore how much needs to be repaid.

The detailed rules covering:

Minimum repayments.
Valuations.
Administration fees.
Remortgaging.
Partial repayment.

are still due to be published before the scheme launches.

This could become an important part of financial planning for buyers using Your First Home.

Do I Have to Repay the Equity Loan When I Sell?

Normally, yes.

If you still have an outstanding equity loan when you sell the property, it would normally be repaid from the sale proceeds.

Remember, you’re not necessarily repaying the original cash amount.

You’re generally repaying the Government’s percentage of the home’s value at that time.

So if the property has increased in value, the amount you repay can increase too.

That’s why I think first-time buyers need to see the equity loan as genuine borrowing.

What Happens When I Remortgage?

This is another important question.

Perhaps your initial mortgage deal ends after five years.

You want to remortgage.

But you also have the Government equity loan.

You may potentially want to:

Keep the equity loan.
Repay part of it.
Repay all of it.

The detailed remortgage process hasn’t yet been fully published.

What matters is that you shouldn’t assume remortgaging will be identical to somebody who owns their property without an equity loan attached.

The equity loan needs to form part of your longer-term mortgage planning.

Is Your First Home the Same as First Homes?

No.

And yes, the names are unnecessarily confusing.

First Homes is an existing scheme where qualifying first-time buyers purchase certain properties at a discount of at least 30% below market value.

That percentage discount remains attached to the property when it’s eventually resold.

Your First Home works differently.

You’re buying the property using:

Your deposit

plus

a normal mortgage

plus

a 20% Government equity loan.

You eventually repay the equity loan.

They are two completely separate schemes.

Is It the Same as the Old Help to Buy Scheme?

It has similarities.

The previous Help to Buy Equity Loan scheme also combined:

A buyer’s deposit.
A normal mortgage.
A Government equity loan.

But Your First Home has its own rules.

So I wouldn’t rely on an old Help to Buy article when trying to understand this scheme.

The deposit requirement, interest structure, income limits, property-price limits and administration are specific to Your First Home.

Can I Use a Lifetime ISA?

This is one area where I’d wait for the final detailed application guidance before making assumptions about exactly how every first-time buyer scheme will interact.

Lifetime ISA funds can currently be used towards qualifying first-home purchases where the relevant rules are met.

But if you’re planning to combine a Lifetime ISA with Your First Home, I’d want that checked as part of the purchase process once the final scheme rules and lender requirements are available.

Don’t base your deposit strategy on assuming every form of first-time buyer assistance can automatically be combined.

What About Stamp Duty?

Your First Home doesn’t automatically remove Stamp Duty Land Tax.

If you’re a qualifying first-time buyer purchasing in England, you may separately qualify for First-Time Buyers’ Stamp Duty Relief under the rules applying at the time.

That is a different benefit.

Your conveyancer should confirm the actual Stamp Duty position on your individual purchase.

Does a 2.5% Deposit Mean I Only Need a Few Thousand Pounds?

Not necessarily.

This is another important distinction.

The scheme may allow you to contribute only 2.5% towards the property price.

But buying a house involves more than the deposit.

You may also need money for:

Solicitor or conveyancing fees.
Surveys.
Mortgage fees.
Moving costs.
Insurance.
Furniture.
Initial repairs or improvements.
Stamp Duty where applicable.
Service charges or estate charges.

So if you’re buying a £300,000 property:

2.5% deposit = £7,500

doesn’t necessarily mean:

£7,500 is all the money you need.

I’d want you to understand the entire cost of purchasing before making an offer.

New Builds Can Come With Additional Costs

Because Your First Home applies to new-build properties, I’d pay particular attention to ongoing property charges too.

Depending on the development, these could include:

Service charges.
Estate management charges.
Leasehold costs where applicable.

A mortgage can be affordable while the total housing cost isn’t.

So when I assess affordability with a first-time buyer, I don’t want to stop at the mortgage payment.

I want to know what living there actually costs.

Could the Scheme Make Buying Cheaper Than Renting?

Potentially.

But I wouldn’t make that assumption from the Government illustration alone.

Buying and renting are fundamentally different arrangements.

A homeowner may have:

Mortgage payments.
Equity-loan interest later.
Maintenance.
Insurance.
Service charges.
Selling costs.

Renting has its own costs and limitations.

The appropriate comparison depends on your individual circumstances and how long you intend to stay in the property.

The fact that a monthly mortgage payment is lower than your current rent doesn’t automatically mean buying is affordable.

The Five-Year Point Is Going to Matter

If I were advising a client using Your First Home, one date I’d be particularly interested in is the end of year five.

That’s when the equity loan stops being interest-free.

It’s also around the length of many fixed mortgage periods.

So somebody could potentially face:

Their mortgage deal ending

and

equity-loan interest starting

around a similar period.

That doesn’t automatically create a problem.

But it’s something I’d want to plan for rather than discover in five years.

I Wouldn’t Stop Saving at 2.5%

This might sound strange.

The entire attraction of the scheme is a 2.5% minimum deposit.

But if you’re hoping to use Your First Home, I’d still encourage you to keep saving if you can.

Why?

Because those extra savings might help with:

Purchase costs.
Emergency savings.
Furniture.
Moving costs.
Future equity-loan repayments.
General financial resilience.

Buying your first home with £20 left in your current account isn’t a victory I’d want to engineer.

The purpose of a low-deposit scheme should be to make homeownership achievable.

Not to make your finances fragile.

Who Might Your First Home Be Particularly Useful For?

I think the scheme could be especially interesting for first-time buyers who:

Have a stable income.
Can potentially afford the ongoing costs of homeownership.
Are struggling to save a conventional deposit while paying rent.
Want an eligible new-build property.
Fall within the income and local property-price limits.

It may be less relevant for somebody who:

Wants an older property.
Already has a substantial deposit.
Exceeds the income limit.
Doesn’t want a new build.
Doesn’t meet mortgage affordability.

A Government scheme doesn’t need to suit everybody to be useful.

Should I Wait for Your First Home Before Buying?

Not automatically.

This is something I’d assess individually.

If you’re already in a strong position to buy a suitable property using a conventional mortgage, waiting for Your First Home may or may not make sense.

During that time:

Mortgage rates can change.
Property prices can change.
Your circumstances can change.
The property you want could sell.

On the other hand, if you’re currently several thousand pounds short of the deposit needed for a conventional purchase and you’re interested in a qualifying new build, Your First Home could potentially be worth considering.

The scheme should be another option.

Not an automatic instruction to stop buying homes until February.

When Can I Apply?

Full applications are expected to open in:

February 2027.

Customer pre-registration is expected before the end of:

December 2026.

The first property sales using the scheme are expected from:

April 2027.

Further guidance, participating lenders, developers and detailed application rules are due to be published ahead of launch.

Frequently Asked Questions

Your First Home is a new Government equity-loan scheme designed to help eligible first-time buyers purchase qualifying new-build homes in England using a smaller deposit and mortgage.

How much deposit do I need?

The minimum deposit under the current scheme design is 2.5% of the purchase price.

How much will the Government lend?

The Government equity loan will cover 20% of the purchase price.

How much mortgage will I need?

If you use the minimum 2.5% deposit and full 20% equity loan, the remaining 77.5% would normally be funded through a repayment mortgage.

Is the equity loan interest-free?

It is interest-free for the first five years. Under the current published structure, interest is 1.5% in year six and 3% from year seven.

Does paying interest reduce the equity loan?

No. Interest payments are separate from the amount of equity loan you owe.

Do I repay the original amount borrowed?

Not necessarily. The equity loan is linked to the value of your home. If you still owe 20%, you would normally repay 20% of the property’s independently assessed value when repayment takes place.

Is there an income limit?

Yes. The current household limits are £110,000 outside London and £140,000 in London.

Can I buy any property?

No. Your First Home is intended for qualifying new-build homes from participating developers in England and local property-price caps apply.

Is the scheme open now?

No. Full applications are expected to begin in February 2027, with pre-registration due before the end of December 2026.

Will every mortgage lender offer it?

No. Buyers will need to use a participating mortgage lender. Details of participating lenders are expected before launch.

Is Your First Home the same as First Homes?

No. First Homes provides qualifying buyers with a percentage discount on eligible properties. Your First Home uses a deposit, repayment mortgage and Government equity loan.

Final Thoughts

Your First Home has the potential to solve a very real problem.

I’ve spoken to plenty of first-time buyers where affordability isn’t necessarily the biggest obstacle.

It’s the deposit.

They’re already paying significant rent every month.

They’re saving.

But getting from:

£7,500

to:

£15,000

or:

£20,000

can add years to their plans.

A 2.5% deposit could genuinely change that.

But I don’t think first-time buyers should see:

“2.5% deposit”

and stop reading.

The Government is also providing a 20% equity loan.

That loan eventually needs repaying.

Its value moves with the value of the property.

And interest starts after five years.

So when I’m looking at Your First Home with a client, I wouldn’t only ask:

“Can this get you into the property?”

I’d also ask:

“What does this look like in five years?”

“What happens when the mortgage deal ends?”

“How might you repay the equity loan?”

“What happens if the property’s value increases?”

“And can you comfortably afford everything that comes with owning the home?”

That’s where good mortgage advice becomes useful.

Getting the keys matters.

Making sure the financial structure still makes sense once you’ve got them matters just as much.

If you’re a first-time buyer and would like to understand whether Your First Home could be relevant to you, or what mortgage options may be available before the scheme launches, 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.

Your First Home is expected to open for applications in February 2027. Further detailed eligibility, lender, developer and application guidance is due to be published before launch and scheme rules may change.

The Government equity loan is borrowing and must be repaid in accordance with the scheme terms. The amount repayable can rise or fall with the value of your property. Mortgage availability and suitability depend on your individual circumstances, the property and lender criteria. This article provides general information only and does not constitute a personal mortgage, tax, legal or financial recommendation.