For many first-time buyers, saving a deposit remains the biggest obstacle to owning a home. Although the mortgage market now offers more low-deposit products than ever before, rising property prices continue to make buying difficult in many parts of the UK.
The First Homes Scheme was introduced to help address that challenge.
Rather than reducing the size of your deposit or changing the way a mortgage works, the scheme allows eligible first-time buyers to purchase selected new-build homes at a discounted price. By reducing the purchase price, it also reduces the amount you need to borrow and, in many cases, the deposit required.
For the right buyer, it can provide a valuable route onto the property ladder. However, it is only available on eligible properties and comes with conditions that should be understood before making a decision.
What Is The First Homes Scheme?
The First Homes Scheme is a government initiative that enables eligible first-time buyers to purchase selected new-build homes at a discount of at least 30% below the property’s market value.
In some locations, local authorities require an even greater discount.
Unlike many other incentives, the discount is permanent. It remains attached to the property, meaning that when you eventually sell, the home will usually need to be offered to another eligible first-time buyer with the same percentage discount applied.
The aim is to preserve affordability and create a longer-term supply of discounted homes rather than providing a one-off benefit to the first purchaser.
How Does The Discount Work?
The discount is applied before you purchase the property.
If a home has a market value of £400,000 and qualifies for a 30% discount, the purchase price becomes £280,000.
Your mortgage and deposit are then calculated using the discounted purchase price rather than the full market value.
For many buyers, this has two important advantages.
First, the mortgage required is smaller than it would otherwise be.
Second, because your deposit is based on the lower purchase price, the amount you need to save may also be significantly reduced.
The scheme therefore improves affordability without changing the fundamental structure of the mortgage itself.
Who Can Apply?
The scheme is designed specifically for first-time buyers.
To qualify, you will generally need to:
- Be a first-time buyer.
- Be at least 18 years old.
- Purchase the property as your main residence.
- Obtain a mortgage covering at least 50% of the purchase price.
Income limits also apply, and many local authorities introduce additional eligibility requirements based on local housing needs.
Depending on the development, priority may be given to:
- Key workers.
- Local residents.
- Members of the Armed Forces.
- Buyers with a strong connection to the local area.
Eligibility should always be confirmed before you commit to purchasing a property.
Do You Still Need A Deposit?
Yes.
Although the property is purchased at a discounted price, you will still require a mortgage unless you are buying with cash.
The key difference is that your deposit is based on the discounted purchase price rather than the property’s full market value.
For example, if a property is valued at £350,000 but is available through the scheme for £245,000 after a 30% discount, your deposit is calculated using the £245,000 purchase price.
Depending on your circumstances, low-deposit mortgage products may also be available.
Can You Use A Lifetime ISA?
In many cases, yes.
If you have been saving into a Lifetime ISA, you may be able to use those funds towards the purchase, provided both the Lifetime ISA rules and the First Homes Scheme requirements are satisfied.
For many buyers, the Government’s 25% Lifetime ISA bonus provides an additional boost towards their deposit.
What Happens When You Sell?
One of the most important features of the First Homes Scheme is that the original discount usually remains with the property.
When you come to sell, the home is generally sold at the same percentage discount to another eligible first-time buyer.
This differs from buying on the open market, where you are normally free to sell to any purchaser at full market value.
While these restrictions help preserve affordability for future buyers, they should also form part of your long-term decision-making before entering the scheme.
What Are The Advantages?
For eligible buyers, the First Homes Scheme offers several potential benefits.
These include:
- Purchasing below market value.
- Borrowing less than would otherwise be required.
- A smaller deposit in monetary terms.
- Lower monthly mortgage repayments.
- An earlier opportunity to become a homeowner.
For buyers who have struggled to keep pace with rising property prices, these advantages can make home ownership more accessible.
What Should You Consider?
Like every home-buying initiative, the First Homes Scheme is not suitable for everyone.
It is only available on selected properties, eligibility criteria apply, and the ongoing resale conditions mean the property is not bought and sold in the same way as a conventional home.
Availability also varies considerably depending on where you want to live.
For some buyers, these conditions will be a worthwhile trade-off in exchange for purchasing at a substantial discount. Others may prefer the flexibility of buying on the open market.
First Homes or Shared Ownership?
Although both schemes are designed to support first-time buyers, they achieve this in different ways.
Under the First Homes Scheme, you purchase the property outright at a discounted price.
With Shared Ownership, you purchase a share of the property while paying rent on the remaining share, with the opportunity to increase your ownership over time.
Neither option is inherently better.
The right solution depends on your deposit, affordability, long-term plans and the type of property you hope to buy.
Is The First Homes Scheme Right for You?
The availability of a discount does not automatically make the First Homes Scheme the right choice.
Many buyers find that a standard residential mortgage provides greater flexibility. Others may benefit from Shared Ownership, family-assisted mortgages or one of the increasing number of high Loan to Value mortgage products now available.
The most appropriate solution is the one that supports both your immediate goal of buying your first home and your longer-term financial plans.
Understanding All Your Options
The First Homes Scheme has helped many buyers take their first step onto the property ladder, but it should always be considered alongside the wider mortgage market.
At Henry Dannell, we take the time to understand your financial position before recommending the most appropriate route into home ownership. That may be through the First Homes Scheme, a standard residential mortgage, Shared Ownership or another solution entirely.
The objective is not simply to access a particular scheme. It is to ensure the mortgage you choose supports your financial goals both today and in the years ahead.
Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured against it. Mortgage availability and lending criteria are subject to individual circumstances and status.
