Your First Home Scheme: What First-Time Buyers Need to Know

The Government’s Your First Home scheme is intended to help eligible first-time buyers purchase a new-build home in England with a smaller deposit and mortgage. Under the scheme, a buyer will contribute a deposit of at least 2.5%, take out a repayment mortgage with a participating lender and receive a government equity loan equal to 20% of the purchase price. The loan will be interest-free for the first five years.

The scheme is not yet open for applications. The Government expects pre-registration and further guidance by the end of December 2026, customer applications to open in February 2027 and the first property sales to take place from April 2027. These are the current published dates and may be subject to change.

How does the scheme work?

The buyer’s deposit and the government equity loan reduce the amount that needs to be borrowed through a mortgage. For example, a purchase of a £300,000 home could be funded as follows:

Source of funds	Amount
Buyer’s deposit (2.5%)	£7,500
Government equity loan (20%)	£60,000
Repayment mortgage (77.5%)	£232,500
Total	£300,000

The buyer will own the home from completion. The Government will not be a joint owner or landlord. However, the equity loan is linked to the home’s value: if it represented 20% of the purchase price, the buyer will normally repay 20% of the home’s value when the loan is repaid. The amount due can therefore rise or fall with the property’s value.

The equity loan will normally be repaid when the home is sold, although the Government says buyers will be able to repay some or all of it earlier. An independent valuation may be needed to establish the amount due.

Who may be eligible?

The scheme is intended for first-time buyers purchasing an eligible new-build home in England. Buyers will generally need to:

• be a first-time buyer;
• buy a new-build property from a developer participating in the scheme;
• use the property as their main home;
• meet the applicable local property price cap;
• have household income of no more than £110,000 outside London or £140,000 in London; and
• qualify for a repayment mortgage from a participating lender.

Price caps vary by area, and the Government has published a list of local authority caps. The buyer will also need to pass the lender’s usual affordability and credit checks. Meeting the scheme’s headline criteria, or having the minimum deposit available, does not guarantee mortgage approval.

What will the equity loan cost?

The equity loan will be interest-free for the first five years. The published interest rates are 1.5% in year six and 3% from year seven. Interest is payable separately from the mortgage and does not reduce the equity loan itself.

For illustration, on a £60,000 equity loan, interest at 1.5% would be £75 per month, and at 3% would be £150 per month, assuming the loan balance has not been repaid. These figures do not include the buyer’s mortgage or other homeownership costs.

The Government has not yet published all operational details. Further guidance is expected on matters including how interest will be collected, minimum repayment amounts, valuation requirements, fees and the process for repaying the loan when selling or remortgaging. Buyers should check the final terms before committing to a purchase.

Points to consider before applying

The scheme may reduce the deposit and mortgage required at the outset, but buyers should consider the longer-term costs as well. These include:

• mortgage payments and the possibility of higher mortgage rates in future;
• interest payments on the equity loan from year six;
• the amount that may have to be repaid if the property increases in value;
• legal and mortgage fees;
• council tax, insurance and maintenance;
• any service or estate charges; and
• the costs and requirements involved in selling or remortgaging.

The equity loan is linked to the property’s value, so the repayment amount may be higher or lower than the original loan. Buyers should also make sure they understand the legal and practical terms applying to the particular new-build property.

How KTS Legal can help

Buying a home through a government-backed scheme involves more than arranging the deposit and mortgage. Buyers should understand the equity loan terms, the property’s title and any leasehold, service charge or estate charge obligations before they commit.

KTS Legal’s residential property team can advise on the conveyancing process and the legal documents involved in a purchase. We recommend that buyers also obtain independent financial advice on mortgage affordability and the longer-term cost of the equity loan.

This article is for general information only and reflects Government guidance available on 13 November 2026. The scheme is not yet open for applications, and further terms and guidance are expected before launch.