A 2.5% house deposit? How the new Your First Home scheme works
The 30-second summary
The government's Your First Home scheme is expected to accept applications from February 2027 in England. Eligible first-time buyers could use a minimum 2.5% deposit, a 20% government equity loan initially interest-free for five years and a repayment mortgage. Applications are not yet open and full eligibility details are still to be published.
- England only, for eligible new-build homes and first-time buyers.
- The 20% government equity loan is repayable, not a grant.
- Applications are expected in February 2027, not open today.
Applies to: England only; qualifying new-build homes and participating lenders and developers.
Check original government sources
Example in numbers
Example: a £300,000 eligible new-build home
- Buyer deposit: 2.5%
- £7,500
- Government equity loan: 20%
- £60,000
- Repayment mortgage: 77.5%
- £232,500
Illustration from official scheme guidance. The equity loan is repayable. Legal, tax and other purchase costs are additional.
What would a £300,000 home cost upfront?
The government's own example uses a £300,000 eligible home: a £7,500 deposit (2.5%), a £60,000 government equity loan (20%) and a £232,500 repayment mortgage (77.5%). Stamp Duty and buying costs, where applicable, are additional.
This does not mean the government pays for 20% of the property without repayment. An equity loan is a debt arrangement with terms and future repayment obligations; full scheme conditions matter.
Can you apply right now?
No. The official guidance published on 28 October 2026 says applications are expected to open in February 2027. Further details of eligible homes, developers, lenders and how to apply are due before opening.
Is this the same as a normal 95% mortgage?
No. A conventional 95% loan-to-value mortgage commonly needs a 5% deposit and finances the remaining 95% with a mortgage. Your First Home combines a smaller buyer deposit with a government equity loan and a smaller first mortgage, introducing separate equity-loan obligations.
Who is eligible, and what happens after five years?
The government expects first-time buyers to have annual household income of no more than £110,000 outside London or £140,000 in London. The home must be a participating new-build within a local price cap and used as a main residence. Example price caps include £375,000 for Reading, £500,000 for outer London and £650,000 for inner London. Full rules and a local-authority list will follow.
The government equity loan is interest-free for years 1 to 5. Official guidance sets an illustrative 1.5% rate in year 6, rising to 3% from year 7, with interest payments separate from the repayment mortgage and not reducing the equity loan owed. This is a major difference from a normal 95% mortgage.
What to do while waiting
Check affordability and the full cost of buying rather than treating the deposit alone as the budget. Compare mortgage payments, future equity-loan obligations, legal fees and moving costs. Do not pay an intermediary claiming to guarantee scheme access.
Frequently asked questions
Is Your First Home available across the UK?
No. The published scheme guidance applies to England.
When can I apply for the 2.5% deposit scheme?
Applications are expected to open in February 2027, according to guidance published on 28 October 2026.
Is the 20% government equity loan free?
It is described as interest-free for the first five years, not a grant. Repayment obligations and other terms still matter.
Official sources and fact-checks
Information has been checked against the following original publications. Announcements may change before legislation is enacted.
- GOV.UK: Your First Home official scheme guidance(28 October 2026)
- HM Treasury: Budget 2026(28 October 2026)
What can you do next?
Explore a relevant MMG guide or calculator. Calculator assumptions may need updating when new rules take effect.