Your First Home Scheme Explained: What Is It and How Does It Work?

It’s no secret that one of the biggest hurdles for first-time buyers is saving enough for a deposit.

To help buyers step onto the property ladder, the new Your First Home scheme reduces the minimum deposit required to 2.5% and provides a government equity loan of up to 20% of the purchase price.

The scheme’s equity loan is interest-free for the first 5 years and helps reduce the amount of money needed upfront and the size of the total mortgage required.

However, applicants will still need to meet mortgage affordability requirements, and the government equity loan comes with its own interest charges and repayment obligations.

In this article, we explain how the Your First Home scheme works, who could qualify and what first-time buyers need to know ahead of the scheme’s expected opening for applications in February 2027. Let’s begin.

How Does the Your First Home Scheme Work?

In simple terms, a government equity loan of up to 20% of the property purchase price is used alongside your own deposit to reduce the amount you need to borrow from a mortgage lender.

To show how this could work in practice, let’s take a look at a first-time buyer looking to purchase a new-build property for £250,000 using the Your First Home scheme.

The purchase could be funded as follows:

• Property purchase price: £250,000
• Your deposit (2.5%): £6,250
• Government equity loan (20%): £50,000
• Repayment mortgage (77.5%): £193,750

Together, the buyer’s 2.5% deposit and the government’s 20% equity loan would cover 22.5% of the purchase price, leaving a repayment mortgage with a loan-to-value (LTV) ratio of 77.5%.

In practice, this means that instead of needing to save £12,500 for a standard 5% deposit, a first-time buyer could purchase the property with a deposit of just £6,250.

However, it’s important to understand that the equity loan is not a gifted deposit or a discount on the property.

Although you would own the property after the completion of your purchase, the government equity loan remains a separate financial obligation.

As such, the amount you will be required to repay will depend on the property’s value at the time you redeem the equity loan. If the property’s value has increased, you could end up repaying more than you originally borrowed. Equally, if its value has fallen, you could repay less.

Please Note: The government has confirmed that full eligibility rules will be published before applications open, which is expected to be in February 2027. Further details about participating lenders and developers are expected ahead of the scheme’s launch.

Which Properties Will Qualify for the Scheme?

The Your First Home scheme will only be available for eligible new-build houses and flats in England, purchased from developers participating in the scheme. Properties must also fall within the government’s local purchase price limits.

For first-time buyers, there are a few key factors to consider, including:

• Property type: Both new-build houses and flats can qualify, providing you with the choice to explore different property types depending on your budget and preferences.
• Participating developers: Not every new-build development will qualify. Developers will have to agree to participate in the scheme, which could reduce the number of eligible properties available in your area.
• Location: The scheme is only available in England. First-time buyers looking to purchase properties in Scotland, Wales or Northern Ireland will not be eligible.
• Property price caps: There is a maximum purchase price depending on location. These limits apply to the property’s total purchase price, not the amount you need to borrow.

To show how these maximum property prices can differ across England, the government has published the following examples:

In practice, this would mean that a £250,000 new-build property in Middlesbrough would exceed the local price cap of £220,000. Even if a buyer could afford the property and had a larger deposit available, it would not qualify for the scheme.

As a first-time buyer, it will be important to check and confirm both the participating developments in your area and the local purchase price limits before committing to a property.

Please Note: A full list of local authority price caps and participating developers is expected to be published ahead of the scheme’s launch.

Who Can Apply for the Your First Home Scheme?

A key point to make here is that all applicants will have to be first-time buyers. This means that if you’re planning to buy a property with another person, such as a partner, then they will also have to meet the first-time buyer criteria.

In addition to this, the government has also announced that there will be a household income cap of:

• Outside London: £110,000 or less annually.
• Within London: £140,000 or less annually.

These limits apply to your combined household income. As such, for those hoping to step onto the property ladder with another person, your combined annual earnings must not exceed the household income limit for the area in which you’re buying.

For example, two first-time buyers earning £60,000 and £55,000 annually would have a combined household income of £115,000. This would exceed the scheme’s income limit outside London but fall within the £140,000 limit for London.

Similar to the previous Help to Buy Equity Loan scheme, our in-house specialist expects buyers to undergo a separate affordability assessment for the government’s equity loan. However, the requirements for this assessment have not yet been confirmed.

Alongside meeting the scheme’s eligibility requirements, you would also need to pass the mortgage lender’s affordability assessment. This will usually include an assessment of your income, financial commitments and credit history to determine whether you could reliably afford the mortgage repayments.

How Can I Apply for the Scheme?

Applications for the Your First Home scheme are expected to open in February 2027, with the first property sales through the scheme expected to take place in April 2027.

Buyers will be able to apply through the government’s designated application process or seek assistance from their chosen mortgage broker.

The government has also announced that buyers will be able to pre-register for the scheme before the end of December 2026.

Pre-registration will not commit you to purchasing a property through the scheme. Instead, it will provide further information about your potential eligibility and the property price limits in your area.

How Much Deposit Will First-Time Buyers Need?

For someone purchasing their first home, the difference between saving a 2.5% deposit and the more traditional 5% deposit could be significant.

To put this into perspective, the UK House Price Index reported that first-time buyers in England paid an average of £244,000 for their property in April 2026.

Using this average purchase price, the difference in deposit requirements would be:

• Standard 5% deposit: £12,200
• Your First Home 2.5% deposit: £6,100
• Reduction in deposit required: £6,100

For those struggling to save for a large deposit, this saving can make a significant difference in helping them achieve homeownership.

There is also another potential benefit. By combining the minimum 2.5% deposit with a full 20% government equity loan, buyers would need a mortgage covering 77.5% of the property’s value.

This would lower the loan-to-value (LTV) ratio and could provide access to more competitive mortgage rates than those typically available with a standard 95% mortgage, potentially reducing monthly repayments.

However, it’s important to remember that available rates can vary and will depend on the participating lenders and the mortgage products that are offered.

What Deposit Sources Will Be Accepted Under the Your First Home Scheme?

At the time of writing, the government has not yet confirmed exactly which sources of deposit funds will be accepted under the Your First Home scheme.

However, based on existing mortgage lending practices, our expert mortgage advisers expect that personal savings, gifted deposits from family members and other commonly accepted sources of funds may be permitted.

Most importantly, buyers will still need to satisfy their chosen mortgage lender’s criteria. This can include providing evidence of where their deposit funds have come from.

How Much Can You Borrow on a Mortgage With the Scheme?

The government’s published property price caps allow us to calculate how much a first-time buyer could potentially borrow when purchasing at the maximum permitted price.

Assuming the minimum 2.5% deposit and a full 20% government equity loan, the repayment mortgage would cover the remaining 77.5% of the property’s purchase price. For example:

These figures are based on the maximum published property prices and a full 20% government equity loan.

If a smaller government equity loan is permitted, buyers may be able to make up the difference through additional mortgage borrowing, subject to the lender’s affordability and eligibility requirements.

It’s important to remember that the property’s price cap and the calculated mortgage amount do not necessarily reflect how much you can personally afford to borrow.

Even if a property falls within the government’s price limits, participating lenders will still assess your income, existing debts, financial commitments and credit history before deciding how much you can borrow.

As such, a buyer may qualify for the scheme but still be unable to borrow enough to purchase a property at their area’s maximum price cap.

Which Mortgage Product Terms Are Suitable?

Whether a mortgage product or term is suitable will always depend on your financial circumstances and future goals. Additionally, the availability of different mortgage products will vary between lenders, depending on their individual criteria and product ranges.

With that said, each fixed-rate period has its own considerations:

• Two or three-year fixed rate: A shorter fixed term can provide an opportunity to review your mortgage arrangements sooner. However, you may need to remortgage before the equity loan’s interest-free period ends.
• Five-year fixed rate: This matches the scheme’s five-year interest-free period and could allow buyers to maintain predictable mortgage repayments and review their options before interest becomes payable on the equity loan.
• Ten-year fixed rate: A longer term can provide long-term certainty over mortgage repayments, but buyers may face early repayment charges if they need to refinance during the fixed-rate period to repay the equity loan.

From our experience advising buyers through the previous Help to Buy Equity Loan scheme, one of the most popular approaches was to match their mortgage’s fixed-rate period with the scheme’s five-year interest-free period.

This allowed buyers to explore remortgaging at the end of their fixed-rate deal to repay the government equity loan, potentially avoiding early repayment charges on their existing mortgage and interest becoming payable on the equity loan.

However, it’s important to consider that remortgaging to repay the equity loan may require additional mortgage borrowing. Whether this is possible will depend on the borrower’s affordability, property value and the mortgage products available at the time.

Ultimately, choosing the right mortgage product could make a significant difference to how you manage the equity loan in the future.

Whether you’re deciding between a two-year and five-year fixed-rate mortgage, or want to lock in something longer, a mortgage adviser can help you compare available fixed-rate deals and find a suitable mortgage arrangement based on your financial circumstances and longer-term plans.

How Will Equity Loan Affordability Be Calculated?

Buyers may need to pass two separate affordability assessments: one with their mortgage lender and another for the government’s equity loan.

Think of it like attending a two-stage job interview. Just because you’ve passed the first stage doesn’t automatically mean you’ll pass the second. Each has its own requirements that you’ll need to satisfy.

Having advised first-time buyers through the previous Help to Buy Equity Loan scheme, we know that the government’s equity loan affordability assessment could be stricter than the mortgage lender’s own calculations.

For example, with the Help to Buy Equity Loan scheme, our mortgage advisers encountered cases where lenders were willing to provide the required mortgage, but the buyer was unable to meet the government’s separate equity loan affordability requirements.

This was particularly the case for buyers purchasing with smaller deposits, where the overall borrowing requirements could leave less room within the government’s affordability calculations.

Although the government has not yet confirmed the exact affordability calculation for the Your First Home scheme, our experience gives us a good indication of the factors that could be considered. These include:

• Mortgage borrowing: The size of the repayment mortgage and the proposed mortgage term.
• Mortgage interest rate: The cost of mortgage repayments, including calculations using a higher interest rate to assess affordability.
• Household income: The income available after tax to support ongoing housing costs.
• Financial commitments: Existing debts, regular outgoings and other property-related expenses.
• Future equity loan interest: The interest payments expected to become payable once the initial interest-free period ends.

These factors could be particularly important for first-time buyers hoping to purchase with the minimum 2.5% deposit, as they may have less flexibility when it comes to meeting affordability requirements.

Even if a participating mortgage lender is prepared to offer the amount you need, this doesn’t automatically mean you’ll qualify for the government’s equity loan. Both affordability assessments may need to be passed before you can proceed with your purchase.

What Are the Advantages of the Your First Home Scheme?

The Your First Home scheme could offer several benefits for first-time buyers, particularly those who have struggled to save enough money to purchase their first property. These include:

Lower Deposit Requirements

Saving enough for a deposit continues to be one of the biggest barriers to homeownership. In its July 2025 Financial Stability Report, the Bank of England highlighted this ongoing difficulty for prospective first-time buyers.

By reducing the minimum deposit requirement to 2.5%, the scheme could help buyers enter the property market sooner, rather than spending additional years saving for a larger deposit.

Five Years Without Equity Loan Interest

The government equity loan will be interest-free for the first five years. This means buyers will not have an additional equity loan interest payment alongside their mortgage during this period.

The government has also announced fixed interest rates of 1.5% in year six and 3% from year seven. This gives buyers greater certainty over the interest rates that will apply, helping them plan ahead before additional payments become due.

Access to More Competitive Mortgage Rates

As a general rule, lower LTV mortgages can often attract more competitive interest rates which can lead to reduced monthly mortgage repayments.

With the government equity loan covering up to 20% of the property’s purchase price, buyers could access mortgage products with a lower loan-to-value ratio than a standard 95% mortgage.

However, the mortgage rates available under the scheme will depend on participating lenders and their individual product ranges.

Independent First-Time Buyers

For many first-time buyers, purchasing a property may require additional financial support, such as help from parents or relatives towards their deposit.

By reducing the amount buyers need to contribute towards their deposit, this government scheme could make it possible for some first-time buyers to become homeowners without the need to rely on a gifted deposit, inheritance or other funding.

Government Shares Some Losses if Property Values Fall

One less obvious benefit of the scheme is that the government is actually sharing in changes to the property’s value.

Because the equity loan is linked to a percentage of the property’s value, up to 20%, a fall in house prices would also reduce the amount owed to the government when the loan is repaid.

For example, if your property decreased in value by £20,000 and your equity loan represented 20% of the property, the amount repayable on the government’s equity loan would fall by £4,000.

While it’s important to note this does not remove the financial risk of falling property prices, it does mean the homeowner would not bear the entire reduction in value themselves.

Benefits of Purchasing a New-Build Property

As the scheme is limited to new-build houses and flats, eligible buyers could also benefit from some of the advantages associated with purchasing a newly constructed home.

New builds often have higher Energy Performance Certificate (EPC) ratings than older properties, potentially making them cheaper to heat and more energy-efficient.

Many new-build properties also come with structural warranties, providing protection against certain building defects during the warranty period.

For first-time buyers, these features could help reduce some of the immediate maintenance concerns and running costs associated with purchasing an older property.

What Are the Disadvantages of the Your First Home Scheme?

While the scheme could provide first-time buyers with an opportunity to achieve homeownership, there are also financial considerations worth understanding before committing to a purchase. These include:

Interest Charges After Five Years

Although the government equity loan is interest-free for the first five years, interest payments will begin from year six if the loan remains outstanding.

This means that buyers could face additional monthly costs alongside their mortgage repayments, potentially placing further pressure on their household finances.

It’s also important to understand that paying interest on the equity loan does not reduce the amount owed to the government. When the equity loan is repaid, the outstanding percentage of the property’s value will still need to be paid.

You Could Repay More Than You Borrowed

One of the biggest considerations with an equity loan is that the amount you repay is linked to the property’s value, rather than simply the amount you originally borrowed.

If your property’s value increases, the amount you owe to the government will also increase proportionally.

For example, if you initially received a £60,000 equity loan representing 20% of a £300,000 property, and its value later increased to £350,000, you would owe £70,000 when repaying the loan in full.

That’s £10,000 more than you originally borrowed, excluding any interest charges already paid.

Limited Property and Mortgage Choices

The scheme is restricted to eligible new-build properties sold by participating developers in England.

As such, buyers may find that the number of properties available in their preferred area is more limited than if they were searching the wider property market.

Additionally, the requirement to use a participating mortgage lender could also restrict the mortgage products available, even if another lender outside the scheme offers a more competitive rate.

Potential Difficulties When Remortgaging

Repaying the government equity loan through a remortgage could prove difficult if your financial circumstances have changed since purchasing the property.

For example, if your income has fallen or you have taken on additional financial commitments, a lender may be unwilling to provide the extra borrowing needed to repay the equity loan.

Changes in property value could also affect how much equity you have available and whether increasing your mortgage is possible. In some circumstances, falling property prices could even leave you in negative equity, making it particularly difficult to remortgage.

As such, buyers should not assume that they will automatically be able to remortgage and clear the equity loan before interest becomes payable.

Additional Costs When Repaying the Equity Loan

Repaying an equity loan may involve costs beyond the outstanding loan balance.

For example, the government has already confirmed that an independent property valuation may be required when repaying the equity loan. This would establish the property’s current market value and help determine how much you owe.

Buyers may also face legal fees, remortgage costs or other administrative charges, depending on how and when they choose to repay.

The government has not yet published the complete fee arrangements for the new scheme, so the exact charges and repayment requirements remain to be confirmed.

The Total Cost May Be Higher Than Expected

Although a smaller deposit and potentially lower mortgage repayments may make the scheme attractive initially, buyers need to consider the cost of both borrowing arrangements over time.

Mortgage interest, future equity loan interest and changes in property value could all influence the total amount buyers end up paying over time.

For some buyers, purchasing with a larger deposit or using a standard mortgage could prove more economical over the longer term.

The important thing is to compare the overall financial commitment, rather than focusing exclusively on the amount needed to purchase the property.

How Is the Your First Home Scheme Different from the Help to Buy Scheme?

Although both schemes provide government equity loans to help first-time buyers purchase new-build properties, the Your First Home scheme has brought several changes into play that could influence how buyers qualify and manage their borrowing.

One of the most significant changes is the reduction in the minimum deposit. Buyers could qualify with half the deposit savings required under the previous Help to Buy scheme, potentially making the new scheme much more accessible to those struggling to save.

However, the new household income limits introduce an additional eligibility restriction that wasn’t part of the previous scheme.

Another important difference concerns London buyers. Help to Buy previously offered equity loans of up to 40% of the purchase price in London, whereas Your First Home has announced equity loans of up to 20% across England.

This means that some London buyers may need to borrow a larger proportion of the purchase price through their repayment mortgage, despite having a smaller minimum deposit requirement.

The interest arrangements have also changed. Under the 2021–2023 Help to Buy Equity Loan scheme, interest rates increased annually from year seven using CPI inflation plus 2%, applied as a percentage increase to the existing interest rate.

Your First Home instead has published rates of 1.5% in year six and 3% from year seven. This could make future interest costs easier to anticipate, although the overall cost will still depend on how much is borrowed and when the equity loan is repaid.

Finally, the new scheme introduces participation fees for developers, calculated according to how many eligible homes they sell. These are developer charges rather than a direct fee payable by first-time buyers, although participation could influence which properties become available through the scheme.

Can a Mortgage Broker Help With the Your First Home Scheme?

While the scheme could make purchasing your first home more accessible, it’s important to understand how the government equity loan and your repayment mortgage will work together.

At Boon Brokers, our experienced advisers can help you assess your affordability, explore the mortgage options available and consider whether using the scheme is the right approach for your circumstances.

Having previously helped first-time buyers through the Help to Buy Equity Loan scheme and other government-led mortgage initiatives, we understand the additional considerations involved when purchasing a property with government support.

Our mortgage advice is completely fee-free, and you’ll have a dedicated adviser to support you throughout your mortgage application.

If you’re considering the Your First Home scheme, speak to our mortgage advisers to discuss your options today.