First Homes Scheme Explained

Buying your first home should feel exciting, but the reality of saving a huge deposit and facing rising prices can quickly put many people off the idea. 

That’s where the government’s First Homes Scheme comes in. It’s a smart initiative designed to put homeownership back within reach for first-time buyers who want to stay in the community where they already live and work.

In our guide, we’ll walk you through exactly what the First Homes Scheme is, how the discount works, the criteria you need to meet, and the straightforward steps you can take to secure your dream home at a fraction of the cost. 

What Is the First Homes Scheme?

The First Homes Scheme is a government-backed affordable housing initiative exclusively available in England. It allows eligible first-time buyers to purchase a brand-new home with a discount of at least 30% off the market value. In areas where housing costs are particularly high, some local councils may increase this discount to 40% or even 50%.

The core idea is to keep houses affordable for local people who might otherwise be priced out of their community. Crucially, the discount is permanent; it stays with the property forever. 

This means that every time the home is sold in the future, it must be sold to another eligible buyer at the same percentage discount off the prevailing market value. It’s a scheme built for generational affordability.

How Does the First Homes Scheme Work?

The scheme is applied to select new-build properties built by registered developers. Here’s a breakdown of the key elements that make the First Homes Scheme unique:

The Discount

The starting discount is 30% off the market value, which is secured by your local authority via a legal agreement (a Section 106 restriction) on the property's title deed. 

For example, if a new-build flat is valued at £280,000 (open market value) and the local council applies a 30% discount, you would purchase it for £196,000. That’s a massive £84,000 saving right away.

Price Caps

There are national caps on the maximum price you can pay after the discount has been applied. This cap is £250,000 across England, rising to £420,000 within Greater London. Local councils have the power to set lower price caps based on local income levels and housing needs, so be sure to check the specific limits in your chosen area.

Mortgage Requirement

You must secure a mortgage for at least 50% of the discounted purchase price. This is a non-negotiable rule; the scheme is designed to help those who need a mortgage, not cash buyers. This also means you must pass the lender’s standard affordability checks based on the discounted price.

Resale Rules

The discount is locked in permanently. If you eventually sell your £280,000 home (bought with a 30% discount for £196,000), and the market value has risen to £350,000, you must sell it for 30% below that new value. So, in this example, you’d sell it for £245,000, retaining the market growth on the discounted share. 

The council then takes the 30% share of the new market value to ensure the discount is passed on to the next eligible first-time buyer.

Who Is Eligible for a First Home?

The scheme is specifically aimed at first-time buyers with a strong connection to their local area. To qualify for a First Home, you must meet all the following national criteria:

• First-time buyer status: All purchasers must be first-time buyers. This means you and anyone you are buying with must have never owned a property or residential land anywhere in the world before.

• Income cap: Your total household income (combined with anyone you’re buying with) must not exceed £80,000 per year before tax, or £90,000 if you’re buying in Greater London.

• Primary residence: The property must be used as your only or main residence. You can’t use the First Homes Scheme to purchase a buy-to-let or a second home.

• Mortgage: You must be able to take out a mortgage for at least 50% of the discounted purchase price.

In addition to these national rules, local councils may introduce specific local eligibility criteria. This often includes a requirement that at least one buyer has a clear "local connection" to the area—meaning they already live or work there—or that they’re a key worker (like a nurse, teacher, or police officer).

Benefits and Drawbacks of the First Homes Scheme

Like all government schemes, the First Homes Scheme offers great opportunities but also comes with certain limitations you should be aware of before you dive in. Here’s the good and the bad. 

How Do You Apply for the First Homes Scheme?

The application process is handled through the property developer and your local council. This is how the journey works:

Step 1: Get Mortgage-Ready and Check Eligibility

Before looking at properties, confirm you meet the income cap, first-time buyer status, and any local connection criteria for the area you want to buy in. You should also speak to a broker (like us!) to get a Mortgage in Principle (MIP) - one you can rely on! This shows developers you’re a serious and viable buyer, ready to meet the minimum 50% mortgage requirement.

Step 2: Find a First Home Property

Search for new-build developments in your target area where the First Homes Scheme is explicitly offered. These homes will be clearly marked by the developer or estate agent. Once you find the right home, you apply directly to the developer, who will then coordinate with the local council for verification.

Step 3: Council and Developer Approval

The local council will check all your documents, ensuring you meet the income limits, the first-time buyer definition, and any local priority criteria. Once you receive the 'Authority to Proceed' from the council, the property is secured (usually with a refundable reservation fee).

Step 4: Finalise Your Mortgage and Completion

With the necessary approvals in place, you can proceed to the formal mortgage application stage and work with your solicitor to complete the conveyancing. Your solicitor will handle the legal paperwork, including registering the necessary restriction on the title deed to ensure the discount applies to all future sales. 

Once all legal checks and funding are in place, you can collect the keys to your brand-new home!

Is It Difficult Getting a Mortgage for the First Homes Scheme?

Since the scheme is government-backed and relatively new, not all lenders are currently participating. While more lenders are joining over time, you may find that the main high-street banks are not yet offering deals.

Lenders that do participate will have dedicated 'First Homes' mortgage products. They are generally comfortable offering up to 95% Loan-to-Value (LTV) on the discounted property price. 

For example, on a £196,000 discounted price, a 95% LTV mortgage is a loan of £186,200, meaning you only need a personal deposit of £9,800.

The biggest hurdle is making sure your personal situation fits the participating lenders’ criteria, especially if your income is complex or your credit history isn't perfect. This is where getting expert advice is essential.

What Are the Alternatives if the Scheme Isn’t Right for You?

The First Homes Scheme is a fantastic option, but it won’t fit every first-time buyer. If you find yourself falling short of the local criteria, or if the available properties aren't quite right, there are other worthy avenues to explore, such as:

• Shared Ownership: This scheme allows you to purchase a share of a property (typically 25% to 75%) and pay rent on the remaining portion. Your deposit is based on the share you buy, making it very accessible.

• Freedom to Buy Scheme: This government-backed program encourages mainstream lenders to offer 95% LTV mortgages to first-time buyers and home movers on properties up to £600,000. It's a great option if you have a small deposit but want to buy an existing home (not just a new-build).

Do I Have to Pay Stamp Duty when Buying a First Home?

As a first-time buyer in England, you already benefit from Stamp Duty relief on the first £425,000 of a property's purchase price, provided the property costs no more than £625,000. Since the First Homes Scheme caps the purchase price (after discount) at £250,000 (or £420,000 in London), it is highly likely that you won't pay any Stamp Duty at all, which is another significant financial saving.

Why Pick Picnic?

First Homes is still a relatively new scheme, with a limited number of lenders currently participating. Finding the right mortgage deal on your own could be a challenging and time-consuming process. Having an experienced mortgage broker on your side - like us! - makes things much easier and more efficient. 

With access to thousands of mortgage products, easy-to-use technology, and 100+ experts, our award-winning service is with you every step of the way. Here’s how we can help:

• Finding you the best mortgage deals: Our mortgage team will already know which lenders are currently participating in the First Homes scheme. They can compare the mortgage deals available to find the one that’s right for your circumstances, including exclusive offers not generally available elsewhere. 

• Your mortgage, made simple from start to finish. Our online portal allows you to track your mortgage application step-by-step, sign and upload documents in seconds, and contact your mortgage team at any time. No back-and-forth emails. No printing. No guesswork. Everything you need, all in one place, so you can stay organised and in control of your mortgage journey. 

• Making mortgages possible, whatever the circumstances: Our team of advisors have a clear understanding of the eligibility criteria used by each lender and will identify the one that's best placed to help. Our sister brand, Haysto, has become the No.1 destination for customers who've been turned away elsewhere. For anyone with a complex income or adverse credit record - we’ve got your back!