Your First Home Scheme Mortgages: All You Need to Know

First-time buyers facing steep property prices and high deposit hurdles received a major policy announcement as Prime Minister Andy Burnham and Chancellor John Healey unveiled "Your First Home". The new equity loan scheme, which has similarities to the former Help to Buy scheme,  is designed to help buyers acquire a new-build property with a deposit of just 2.5%, supported by a 20% government-backed equity loan.

While the scheme won't launch until spring 2027, we'll run through everything that's been confirmed, what it means for your mortgage options, and what's still to come.

Please note: The scheme is not yet open for applications. Some details, including price caps outside London and the interest charged after year five, are still to be published. We'll keep this page updated as more information is released.

What is the Your First Home Scheme?

Your First Home is designed for first-time buyers who don't have large savings or help from the Bank of Mum and Dad. Instead of needing a 5% or 10% deposit, you can put down as little as 2.5%. The government then lends you 20% of the property price through an equity loan, and a mortgage lender provides the rest.

The scheme is backed by £4.7 billion of government lending, which is capped each year, so demand will be monitored with developers and lenders. Developers who join the scheme also pay a contribution towards its running costs, set on a sliding scale so smaller developers aren't priced out. Alongside helping buyers, the government expects the scheme to support the building of around 20,000 new homes.

The Key facts:

• Launch date: The scheme will launch in spring 2027
• Interest-free period: The equity loan will be interest-free for the first five years, with interest then increasing gradually
• Income caps: Household income must be under £110,000, or £140,000 in London
• Price caps: These will be set locally, based on median house prices in each local authority. In London, the cap is £650,000 for inner London and £500,000 for outer London
• Deposit range: You'll need a deposit of at least 2.5% and no more than 15%

How It Works

With the minimum 2.5% deposit and a 20% equity loan, your mortgage only needs to cover 77.5% of the property price. Lenders typically offer better rates at a lower loan-to-value (LTV), so a 77.5% mortgage could be cheaper than the 95% mortgages many first-time buyers rely on. The government says buyers using the scheme could save hundreds of pounds a month compared with a standard mortgage.

If you've saved more, you can put down a bigger deposit, up to a maximum of 15%. This reduces the size of your mortgage further, but the equity loan stays at 20%.

Financial Example

Figures are illustrative only.

Repaying the Equity Loan

The equity loan isn't a fixed debt. It's a 20% share of your home's value, so what you repay rises or falls with the property market. If your £240,000 home is worth £300,000 when you sell, you'd repay £60,000. If it's worth £200,000, you'd repay £40,000.

The loan is interest-free for the first five years. After that, interest is charged and increases gradually over time, so it's worth planning ahead. Under Help to Buy, many buyers chose to remortgage and repay some or all of the loan before interest kicked in, and the same approach is likely to make sense here. The exact rate after year five, and the full repayment terms, haven't been published yet.

Eligibility 

Explore your mortgage options

The scheme opens in spring 2027, but there's no need to wait to find out where you stand. One of our advisers can check what you could borrow now and talk you through all your first-time buyer options. 

Getting a Mortgage with Your First Home

You'll still need a mortgage from a participating lender for the rest of the purchase price, and that mortgage will need to pass the lender's usual affordability checks. Because you're only borrowing 65% to 77.5% of the price, the amount you need is smaller than with a 95% mortgage, which can make it easier to pass affordability and could open up more competitive rates.

The list of participating lenders and their criteria hasn't been published yet. As the scheme gets closer to launch, a broker will be able to tell you which lenders are taking part and which deal suits you best. It's also worth budgeting for the other costs of buying, such as legal fees, surveys and any mortgage arrangement fees, on top of your deposit.

Your First Home vs. Alternative First-Time Buyer Schemes

Below you will find a quick comparison of the proposed new scheme with alternatives such as Freedom to Buy, Shared Ownership and Skipton Building Society's 100% LTV products.

Pros & Cons of the Your First Home Scheme

Pros

• Smaller deposit: You only need to save 2.5% of the purchase price, compared with 5% or more for most first-time buyer mortgages.
• Lower LTV mortgage: Borrowing 77.5% or less could give you access to cheaper rates than a 95% mortgage.
• Five years interest-free: You won't pay anything on the equity loan for the first five years, giving you time to build up equity and plan your next step.
• Generous income caps: At £110,000, or £140,000 in London, the caps are high enough to include many couples and higher earners.
• Brand new home: New builds usually come with a warranty and tend to be more energy-efficient than older properties.

Cons

• Not open yet: You'll have to wait until spring 2027 to use the scheme.
• New builds only: You can't use it to buy an existing home, which limits your choice of location and property.
• You share any growth: The government keeps a 20% share of your home's value, so if prices rise, you'll repay more than you borrowed.
• Interest after year five: Interest rises gradually after the interest-free period, and the rate hasn't been confirmed yet.
• Limited funding: The £4.7 billion is capped each year, so places may be limited once demand picks up.
• Price caps still unknown outside London: Until local caps are published, you won't know exactly what you can buy in your area.

Expert Broker Verdict

How to Prepare for the Launch 

1. Check you're eligible: Make sure your household income is under £110,000, or £140,000 in London, and that you're all first-time buyers
2. Save for your deposit and buying costs: Aim for at least 2.5% of the price you're looking at, plus legal fees, surveys and moving costs
3. Keep your credit record clean: Pay bills on time and avoid taking on new credit in the months before you apply
4. Research new-build developments near you: Look out for developers who confirm they're signing up to the scheme, and watch for your local price cap being published
5. Speak to a broker before launch: Get an affordability assessment now so you know what you can borrow and are ready to move as soon as the scheme opens

Want to find out more about your mortgage options as a first-time buyer? Get started here to book a free, no-obligation chat with a broker who can run through them with you and help you decide whether to wait for Your First Home to go live or proceed with one of the alternatives.