First Homes scheme: how it works and who can apply

To qualify for First Homes you'll need to apply for a mortgage, though the discount you get means you shouldn't need to borrow as much – so hopefully your chance of mortgage acceptance is greater.

However, only a limited number of lenders are taking part in First Homes, so that means your choice of mortgage deal will be limited and you might not be able to get as good rates as people not using the scheme (though the property discount should outweigh a worse rate).

Some lenders taking part also cap the maximum loan-to-value (LTV, how much you're borrowing compared to the value of the property) – for example, at 90% – so you might have even less choice of mortgage deal if you've only got a small deposit. Having said that, there are some 90% and 95% mortgages available through First Homes.

Despite this, the discount you get off the property value could see the size of your deposit increases in relative terms. For example, a £50,000 deposit on a £250,000 property is equivalent to 20% (making your LTV 80%). Yet if you use First Homes scheme and the discount means you can buy the same property for £200,000, your £50,000 deposit is equivalent to 25% (or 75% LTV), where you'll likely get a better slightly better mortgage rate.

Not only does having a smaller LTV mean you can access cheaper mortgage deals more generally, it also means you're more likely to be accepted by a lender as you'll be seen as less of a risk. See our How much can I borrow? guide for more on the importance of LTV.

Different home-buying schemes exist to help if you're a want-to-be homeowner but feel priced out of the market or are struggling to get a deposit together.

It can be challenging to work out which scheme is best for you – or even if you'd qualify in the first place – so below is an overview of what's currently available so you can compare to First Homes...

Mortgage guarantee scheme (95% mortgages)

This might help if you've only got a 5% deposit (or up to a 9% deposit) and want to get onto the property ladder now. The scheme is actually a guarantee from the government to lenders, not to you, but from your perspective it basically means there are more 95% mortgages available.

The property you're buying can't be a new-build and must not cost more than £600,000. If you later sell the property, you can sell on the open market (unlike First Homes, where there are restrictions on selling).

We've got a whole guide on the Mortgage guarantee scheme.

Shared ownership (own part of a property)

There are far more shared ownership properties available than First Homes, as this scheme has been around for much longer.

With shared ownership, you can buy as little as a 10 or 25% share of a property, meaning you don't have to put down as big a deposit and your monthly mortgage repayments will be smaller than they might otherwise be. Remember though, you won't own all of the property – you'll only own a share. Furthermore, you'll pay rent on the share of the property you don't own (to a housing association), so your overall monthly repayments (mortgage, rent, service charge) can still add up.

If you decide to buy an additional share of your home later on (known as 'staircasing'), the share may cost you more than now if property prices have increased.

Similar to First Homes, selling a shared ownership property can be complicated as there are normally restrictions involved.

For more, see our guide on Shared ownership.

Right to Buy (get a discount on your council home)

Launched in 1980, you might be able to take advantage of the Right to Buy scheme if you live in a council home (house or flat). 

If you're eligible to take part, you'll be able to get a discount off the price of your council home if you want to buy it, though exactly how much depends on how long you've lived there for. The discount is worth up to £102,400 across England or £136,400 in London – likely a bigger discount than what you could get using First Homes..

While you can sell a Right to Buy home on the open market, you'll have to repay part or all of the discount you got if you sell within five years.

For more, see our guide on Right to Buy.

Lifetime ISAs (LISAs)

A Lifetime ISA (LISA) is a way of boosting your deposit for free. You can use it to save up to £4,000 a year, towards either a first home (costing up to £450,000) or for retirement, and the state adds a bonus of up to £1,000 on top each year. Anybody aged between 18 and 39 can open a LISA.

You can use a LISA even if you're thinking of applying for First Homes, mortgage guarantee scheme, shared ownership or Right to Buy – so if you're considering buying a home it's worth opening a LISA as soon as possible.

For more, see our guide on Lifetime ISAs.