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Your First Home: how England's 2.5% deposit scheme will work
England's Your First Home scheme explained: 2.5% deposits, council price caps, equity loan costs and the planned February 2027 application launch.
At a glance
A smaller deposit could bring a first home within reach. But it is only one part of the bill.
Your First Home is an announced scheme for England only, combining a buyer's deposit with a 20% government equity loan and a mortgage. The Budget sets a minimum deposit of 2.5% and a maximum of 15%. Full applications are planned for February 2027. [1]
As checked on 5 November 2026, applications are not open. Full terms are pending. This guide explains the published plans, rather than offering an eligibility decision or mortgage quote.
Key figures
- 2.5%Minimum buyer deposit. England only; full terms pendingAnnounced scheme; checked 5 November 2026 · Announced / subject to legislation · Source [1]
- 20%Government equity loan. Of purchase price; repayable, not a giftAnnounced scheme; checked 5 November 2026 · Announced / subject to legislation · Source [4]
- £6,250Your deposit in this example. On a £250,000 purchasePayCalc UK illustration, not a quote · PayCalc calculation · Source [4]
- £50,000Equity loan in this example. On a £250,000 purchase; separate from the mortgagePayCalc UK illustration, not a quote · PayCalc calculation · Source [4]
When can you apply?
The government's planned timetable is below. These are launch plans, not a promise that an individual buyer will complete in April. Annual funding is capped. [1]
| Stage | Planned timing |
|---|---|
| Customer pre-registration | By the end of December 2026 |
| Full applications | From February 2027 |
| First loans | From April 2027 |
Who is it for?
The published eligibility outline covers first-time buyers purchasing a qualifying new-build in England as their main home. Household income must be no more than £110,000 outside London or £140,000 in London. Buyers need a mortgage from a participating lender, and the property must meet the local price cap. Full eligibility rules are still to follow. [2] [4]
A household income limit is not a borrowing allowance. Earning below it does not establish that a lender will approve the mortgage you need.
Your First Home is different from the existing First Homes scheme, which offers qualifying homes at a discount. Similar names do not mean interchangeable rules. [2]
What would a 2.5% deposit look like?
Here is a PayCalc UK illustration for a qualifying £250,000 home, using the minimum deposit and the announced 20% equity loan.
| Funding | Your First Home illustration | Conventional 95% mortgage comparison |
|---|---|---|
| Your deposit | £6,250 | £12,500 |
| Government equity loan | £50,000 | £0 |
| Repayment mortgage | £193,750 | £237,500 |
| Purchase price | £250,000 | £250,000 |
The arithmetic is straightforward: £250,000 multiplied by 2.5% gives the deposit, and £250,000 multiplied by 20% gives the equity loan. The mortgage covers the remainder.
PayCalc UK illustration. Bars start at zero and show only the cash deposit, not total debt or buying costs. Scheme applications are not open.
That reduces the cash deposit by £6,250 and the mortgage by £43,750 in this comparison. But total borrowing at purchase is £243,750 under the scheme, versus £237,500 with the conventional mortgage. Part of the borrowing has moved to a separate loan.
The property price has not fallen. Nor is the £50,000 a gift.
What is the price cap in your area?
The government published its local-authority table on 3 November 2026. Selected examples are below; the deposit column is our calculation at 2.5% of each cap. [3]
| Local authority | Maximum property price | 2.5% deposit at that price |
|---|---|---|
| County Durham | £220,000 | £5,500 |
| Birmingham | £315,000 | £7,875 |
| Bristol, City of | £325,000 | £8,125 |
| Barnet | £500,000 | £12,500 |
| Cambridge | £505,000 | £12,625 |
| Camden | £650,000 | £16,250 |
Check the full official council price-cap table.
Use the local authority for the property, rather than a nearby city with a familiar name. The cap is a scheme ceiling, not a valuation or a recommendation to spend that amount.
What happens to monthly payments?
The published equity-loan interest schedule is 0% for years 1 to 5, 1.5% in year 6 and 3% from year 7. Interest does not repay the loan itself. [4]
For our £250,000 example, assume a 30-year repayment mortgage at a constant 5%, with no fees added and no equity-loan repayments. Rounded monthly calculations are:
| Period | Mortgage | Equity-loan interest | Combined payment |
|---|---|---|---|
| Years 1 to 5 | £1,040 | £0 | £1,040 |
| Year 6 | £1,040 | £63 | £1,103 |
| From year 7 | £1,040 | £125 | £1,165 |
The comparable £237,500 mortgage would cost approximately £1,275 a month, using the same rate and term.
Illustration only: £250,000 home, constant 5% repayment mortgage over 30 years, no fees or equity repayments. Bars start at zero. Equity-loan interest does not reduce the equity debt.
These are PayCalc UK calculations, not lender offers. We use standard monthly mortgage amortisation; equity interest is £50,000 multiplied by the annual rate, divided by 12. The year-six interest is £62.50 before rounding. Combined totals are calculated before rounding, not by adding rounded components.
Holding the mortgage rate constant helps isolate the difference. An actual mortgage deal could change before year six, and different products may have different rates.
How much will you repay to the government?
The equity loan normally tracks the home's value. With an unreduced 20% loan, repayment normally equals 20% of its independently assessed value at repayment. It can rise or fall. Repayment is usually on sale, with earlier partial or full repayment also possible. [4]
For example, 20% of a later £300,000 valuation is £60,000; 20% of £225,000 is £45,000. These are illustrations, separate from mortgage debt and selling costs.
Interest payments do not buy down that percentage. Paying the monthly bills and clearing the equity loan are different tasks.
Detailed rules on minimum repayments, valuations, fees and remortgaging are still due. [4]
A small deposit is not the whole savings target
Stamp duty follows its own rules. Under current first-time buyer relief, eligible buyers pay nothing on the first £300,000 and 5% on the portion up to £500,000. Above £500,000, that relief is unavailable. [5]
For a £400,000 purchase, a 2.5% deposit is £10,000. Current SDLT would add £5,000 for buyers qualifying for the relief, assuming no surcharge. That is £15,000 before legal fees, moving costs and other expenses.
A local scheme cap above £500,000 does not extend the tax-relief ceiling. Use the full purchase price when estimating SDLT, not just the mortgage amount. Confirm the rules applicable at completion with your conveyancer.
What this means for you
Use our mortgage calculator to explore conventional mortgage repayment costs at different rates and terms. It does not currently model Your First Home: its deposit field represents your own funds, not a government equity loan. The scheme illustration above keeps those amounts separate.
Use our first-time buyer stamp duty calculator for a current-rules purchase-tax estimate. It does not decide Your First Home eligibility.
Plan the numbers with PayCalc UK, keeping the separate equity loan in mind.
Neither calculation is an application or a guarantee of affordability. Keep a separate budget for council tax, insurance, maintenance and any service or estate charges.
Before committing, check the final scheme terms, participating lenders and developers, and the repayment arrangements. Those details are still to be published. [4]
Information checked on 5 November 2026. General information, not personalised financial or legal advice.
Sources and method
Checked 5 November 2026 against Budget 2026, MHCLG guidance and council caps updated 3 November, MoneyHelper and HMRC. Scheme terms are announced, not a live offer. Applications are not open; full terms, lenders and developers are pending.
PayCalc UK uses an independent 250,000-pound example, not the government's 300,000-pound example. Deposit is price x 2.5%; equity loan is price x 20%; mortgage is the remainder. The comparison uses 5% cash and a 95% repayment mortgage. No fees are financed.
Monthly repayment = P x r / (1 - (1 + r)^(-n)), where r = 5% / 12 and n = 30 x 12. Equity interest = original 50,000-pound loan x annual rate / 12, assuming no equity repayments. Each displayed monthly amount, including the combined total, is independently rounded from the unrounded calculation to the nearest pound. This is not a lender quote or a forecast of mortgage rates.
Each council deposit is 2.5% of its announced cap. Equity repayment examples assume the original 20% share is unreduced and apply it to the later independent valuation; they exclude mortgage debt and selling costs.
The 400,000-pound buying-cost example uses current first-time buyer SDLT relief, no surcharge, and the announced minimum deposit. Confirm tax rules at completion. Neither existing calculator models Your First Home; no calculator formulas or eligibility rules have changed.
- HM Treasury, Budget 2026 ↗, Section 6.1: deposit limits, capped funding and planned launch timetable. Published 28 October 2026. Accessed 5 November 2026.
- MoneyHelper, Government schemes for first-time home buyers and existing homeowners ↗, Your First Home and First Homes sections. Accessed 5 November 2026.
- MHCLG, Your First Home: local authority property price caps ↗, Local authority table updated 3 November 2026. Accessed 5 November 2026.
- MHCLG, Your First Home ↗, Guidance updated 3 November 2026: eligibility, interest, repayments and applications. Accessed 5 November 2026.
- HMRC, Stamp Duty Land Tax: residential property rates ↗, If you are buying your first home. Accessed 5 November 2026.
This article is general information, not financial advice. Check your own position before you act.