Saving a deposit is one of the biggest challenges facing people who want to buy their first home.
Even where monthly mortgage payments may be affordable, building a deposit of 5%, 10% or more can take years. Rising rents and household costs can make saving even more difficult.
The government’s new Your First Home scheme is designed to reduce that initial barrier. Under the scheme, eligible first-time buyers may be able to purchase a qualifying new-build home with a deposit of 2.5%, supported by a government equity loan worth up to 20% of the purchase price.
The scheme is expected to open for applications in February 2027, with the first loans expected to be issued from April 2027. However, buyers should not assume that every new-build property or lender will be eligible.
How does the Your First Home scheme work?
The scheme is intended to combine three sources of funding:
- A deposit of at least 2.5% from the buyer
- A government equity loan of up to 20%
- A repayment mortgage from a participating lender
For example, on a qualifying new-build home priced at £300,000:
- Buyer’s deposit at 2.5%: £7,500
- Government equity loan at 20%: £60,000
- Repayment mortgage: £232,500
Without the equity loan, a buyer using a standard 95% mortgage would typically need a £15,000 deposit and a £285,000 mortgage.
Is the government loan free?
The government equity loan is expected to be interest-free for the first five years. That does not mean it is a grant or that the money does not have to be repaid.
The loan represents a share of the value of the property. When the buyer repays the loan, the amount will normally be linked to the property’s value at that time.
For example, if the equity loan represented 20% of a £300,000 purchase, 20% of a later £320,000 valuation would be £64,000. If the property fell in value to £280,000, the equivalent share would be £56,000.
The scheme’s detailed repayment terms after the initial interest-free period should be checked carefully before applying.
Who could be eligible?
The scheme is aimed at first-time buyers who would otherwise struggle to purchase a home. The confirmed guidance indicates that applicants will need to meet requirements relating to first-time buyer status, household income, property location and price, mortgage type, and the participating developer and lender.
Income caps are expected to be £110,000 for households outside London and £140,000 for households in London. Property price caps will also apply and are expected to reflect local authority median prices, so final limits may differ between areas.
Can the scheme be used on any property?
No. The scheme is designed for qualifying new-build homes purchased from developers participating in the scheme. It is not a general-purpose deposit scheme for any property on the open market.
Buyers will need to check whether the developer, individual property and mortgage lender are participating, and whether the home falls within the relevant local price limit.
Should first-time buyers wait for the scheme?
That depends on the buyer’s personal circumstances. Waiting may be sensible for someone who is likely to qualify, wants a new-build home and is comfortable with the government retaining an equity share.
However, waiting may not be right for everyone. A buyer could find a suitable home before the scheme opens, or may prefer an existing property. Mortgage rates, prices and availability may also change.
The scheme should be treated as one possible route into home ownership, not a guarantee that buying will be cheaper or easier in every situation.
What should first-time buyers do now?
- Check your finances: review income, spending, debts and regular commitments.
- Keep saving: remember that legal fees, surveys, mortgage fees and moving costs are separate from the deposit.
- Check your credit file: correct inaccurate information and avoid unnecessary borrowing.
- Research new-build developments: compare prices, service charges, estate charges and transport links.
- Understand the equity loan: a smaller mortgage may help with affordability, but the government’s share may affect the amount repaid when you sell or refinance.
What happens next?
The government has said that further information will be published on participating lenders, developers, local price limits, income eligibility, application procedures and repayment arrangements.
Until that information is available, buyers should be cautious about relying on estimates or third-party claims.
Final thoughts
The Your First Home scheme could provide a new route into home ownership for some first-time buyers, particularly those who can afford mortgage payments but struggle to build a larger deposit.
Its main attraction is the combination of a 2.5% deposit, a 20% government equity loan and a smaller repayment mortgage. However, buyers will need to understand the restrictions and the implications of the government retaining an equity share.
For now, the most useful steps are to keep saving, improve your financial position and wait for the final application guidance before making a decision.
Related Emoov guides
Stamp Duty for First-Time Buyers
This article is based on government guidance available in November 2026. Scheme rules, price caps, participating lenders and application dates should be checked again immediately before publication. This is general information and not mortgage or financial advice.
