Your First Home: who is eligible? Experts share what first-time buyers need to know

Can you buy a new-build home with just a 2.5% deposit? Experts tell Newspage what first-time buyers need to know about the government’s Your First Home scheme – and the costs that could catch them out.

The Your First Home scheme is due to open in February 2027, helping eligible first-time buyers purchase new-build homes in England with deposits as low as 2.5% through a repayment mortgage and a 20% government equity loan, interest-free for five years. 

The scheme will target buyers with annual household incomes of up to £110,000 outside London and £140,000 in London, with local property price caps and eligibility criteria applying. 

Furthermore, the government has allocated £4.7 billion in funding over five years, with further details set to be published before applications open.

Will the income caps exclude many first-time buyers?

The income limits may leave most first-time buyers eligible, but passing a lender’s affordability checks remains a separate hurdle. Couples with two incomes could find it easier to qualify than single buyers, even with a smaller deposit.

Matt Coulson, Founder at Rickmansworth-based Heron Financial, commented: “The income caps are the real surprise. At £110,000 outside London and £140,000 inside, measured across the household, they rule out very few first-time buyers. Almost nobody earns near that, so this doesn’t exclude people on income. What decides it is the mortgage on the other 77.5%. 

"A 2.5% deposit is genuinely low, but you still have to borrow the rest, and that tilts towards two incomes over one. A couple clears the affordability test far more easily than a single buyer on an average salary, who can still be shut out in the dearer areas even with the deposit solved. Credit where it’s due, the regional price caps are the right call. 

"One national number never fits a country with these gaps, and tying eligibility to local prices is what the old scheme lacked. My one caution is year six, when the equity loan stops being free and starts to cost. People forgot that with Help to Buy. Go in with a plan to deal with it before it bites. On the whole, a serious and well-aimed scheme.”

Should the scheme be extended to existing homes?

Limiting support to new builds could leave buyers of existing homes without help and make it harder for current owners to sell. Differences between the scheme’s property limits and the Lifetime ISA cap could also complicate buyers’ plans.

Extending support to existing properties could help buyers further along housing chains move too. The question is whether the scheme should focus on new-build sales or support activity across the wider market.

Paula Higgins , Founder & CEO at HomeOwners Alliance, commented: “Your First Home will help some buyers, but many will miss out – including those buying an existing home, households above the income limits and people unable to meet lenders’ affordability checks. Our Your First Home eligibility calculator helps buyers understand whether they could qualify. Existing leaseholders struggling to sell their flats will find little to celebrate either.

"Restricting support to new builds risks steering first-time buyers away from their properties, making it even harder for them to move on. We welcome the increased household income caps of £110,000 outside London and £140,000 in London. But it is ironic that the Lifetime ISA and its First Time Buyer ISA replacement remain stubbornly capped at £450,000, while government has indicated that Your First Home will allow purchases up to £500k (outer London)/£650k (inner London).”

Toby Quanstrom, Director at Eastbourne-based Quanstrom Financial, commented: “Your First Home is the right idea, and a welcome replacement for the Help to Buy Equity Loan. A 2.5% deposit and a 20% equity loan could stretch first-time buyers’ budgets and help those who need bigger deposits to meet lender criteria, such as visa holders or people with past credit problems.

"But it only covers new builds, and around nine in ten first-time buyers buy second-hand. Rightmove says homes for sale are at their highest for the time of year since 2014. The market isn’t short of homes. It’s short of buyers, and every mover needs one. Opening the scheme to existing homes could unlock chains, not just new builds, allowing the housing market to flow.”

Will buyers find suitable homes within the price caps?

Qualifying for the scheme does not guarantee buyers will find a suitable property within the local price limit. Choice could be particularly restricted for those seeking family-sized new-build homes in expensive areas.

Stephen Perkins, Mortgage Broker and Managing Director at Norwich-based Yellow Brick Mortgages, commented: “The scheme could be very useful for the right buyer, but the income and property caps create some awkward edges. In London especially, buyers may need a very strong household income to afford a home near the scheme limit, yet earn too much and they are excluded altogether. 

"The other issue is what those price caps actually buy. In many parts of London, particularly for family-sized new-build homes, the cap may leave very limited choice. So the real test is not simply how many people are technically eligible, but how many can find a suitable home within the rules.”

Does a smaller deposit make buying affordable?

A smaller deposit lowers the upfront savings needed, but buyers still face mortgage repayments and the equity loan’s future costs. There are also concerns that greater purchasing power could feed into higher new-build prices.

Nouran Moustafa, Practice Principal & IFA at Roxton Wealth, commented: “I welcome helping first-time buyers, but let's stop pretending a 2.5% deposit automatically makes homeownership affordable. 

"On a £400,000 property, buyers need just £10,000 upfront, but they're also taking on an £80,000 equity loan alongside a £310,000 mortgage. And that equity loan isn't free money. Interest starts in year six, and repayments are linked to the property's future value. The income caps of £110,000 and £140,000 will exclude some households, while price caps and new-build restrictions limit their choices.

"My biggest concern is that developers could increase prices because buyers suddenly have greater purchasing power. Helping people buy with less money upfront is positive. Helping them understand what they'll owe ten years later is equally important. The government must ensure this becomes a genuine homeownership scheme, not simply another way of supporting new-build sales.”

Could eligible buyers miss out because funding runs out?

Eligibility may not guarantee access if demand exceeds the available funding. Buyers will also need clarity on the detailed rules, including how different types of income will be assessed.

Harvey Dhillon, Founder & CEO at Zmartly, commented: “It leaves a lot of people out, and the rules are only part of the reason. The money is rationed to around 70,000 households over five years and capped each year, so a buyer who ticks every box may still miss out once that year's funding has gone. 

"On the rules, it's for first-time buyers of a new-build home in England as their main home, within the local price cap and household income cap, with a repayment mortgage from a lender in the scheme. 

"The limit that's easy to miss is in the Budget: the deposit can't be more than 15 per cent, in a scheme meant for people who couldn't buy without help. It's a positive move, but a modest one: real help for the buyers who get a place and none at all for the rest. 

"One detail that matters is still missing: how director and self-employed income will count hasn't been published. Pre-registration opens before the end of the year and won't commit anyone to buying, so it's worth signing up even if you can't yet be sure you qualify.”

Will buyers understand the equity loan's long-term cost?

The equity loan helps reduce the deposit barrier, but it creates a longer-term financial commitment. Buyers will need to understand the interest charges after five years and how changes in their home’s value affect the amount repayable.

Samuel Mather-Holgate, Managing Director & IFA at Swindon-based Mather and Murray Financial, commented: "Your First Home tackles one of the biggest barriers to homeownership: finding a deposit while paying increasingly expensive rent. 

"A 2.5% deposit, backed by a 20% government equity loan, could open the door for buyers who can afford monthly mortgage payments but struggle to save a substantial lump sum. The income and property-price caps will exclude some households, particularly in expensive areas, while mortgage affordability checks will remain a hurdle. 

"This isn’t a free pass onto the property ladder. The real attraction is choice. Buyers could access homes that would otherwise be beyond their deposit savings, without immediately taking on a 95% mortgage. 

"However, the equity loan is not free money. Interest begins after five years, and the government retains a stake in the property’s value. Buyers must understand the longer-term cost before signing up."