Navigating the ladder: A deep dive into first-time buyer schemes

While we've detailed homeownership schemes before, below is a breakdown of every active and announced government-backed path onto the property ladder, along with their pros and cons according to our Mojo experts.

1. The Newest Entrant: "Your First Home" Scheme (2.5% Deposit)

Announced as a modern successor to Help to Buy, this national scheme offers a government-backed 20% equity loan on new-build properties, allowing buyers to secure a home with a 2.5% cash deposit.

The Pros:

• Ultra-Low Deposit Barrier: Cutting the deposit requirement in half from the traditional 5% to 2.5% directly targets buyers saving without family financial backing.

• Lower Initial Mortgage Rates: The 20% government equity loan brings your main mortgage borrowing down to 77.5% Loan-To-Value (LTV), granting access to cheaper interest rate bands than a standard 95% mortgage.

• Interest-Free Period: The equity loan portion comes with an initial interest-free period (expected to be 5 years), keeping initial monthly payments manageable.

The Cons:

• Strict Income Exclusions: Household earning caps (£90k regional / £110k London) exclude high-earning individual or joint applicants who may still lack deposit capital.

• New Build & Price Cap Limits: Restricted to participating new-build properties with regional price limits.

• Proportional Equity Repayment: You repay 20% of the property’s future value when selling or remortgaging, meaning the repayment amount grows if the property appreciates.

Mojo Commentary: Highly beneficial for solo buyers or single-earner households, but joint applicants near major employment hubs should carefully check whether their combined salary breaches the eligibility ceiling.

2. The Savings Booster: Lifetime ISA (LISA)

The LISA allows first-time buyers under 40 to save up to £4,000 per tax year, receiving a 25% government bonus (up to £1,000 free every year).

The Pros:

• Guaranteed 25% Return: Delivers a guaranteed top-up that outperforms standard savings accounts, with monthly payouts compounding your savings faster.

• Dual Power for Couples: Two first-time buyers purchasing together can each use a LISA, combining their accounts for up to £2,000 in free government money per year.

• Choice of Account Type: Available as either a Cash LISA for guaranteed capital or a Stocks & Shares LISA for long-term growth.

The Cons:

• The £450,000 Cap: The purchase price threshold remains capped at £450,000 nationwide, which severely limits options in London and the South East.

• 25% Penalty Charge: Withdrawing funds for any purpose other than a qualifying first home (under £450k) or retirement triggers a 25% penalty, resulting in a net loss of ~6.25% of your original deposits.

Mojo Commentary: An essential savings engine for buyers looking below £450,000. If you are shopping near the limit, avoid over-funding the account to protect yourself from penalty charges.

3. The Price Cut: First Homes Scheme

Designed to keep local buyers and key workers from being priced out, this scheme offers brand-new properties at a 30% to 50% discount off full market value.

The Pros:

• Upfront Price Reduction: The 30%–50% discount directly lowers both your required deposit amount and monthly mortgage commitments.

• 100% Legal Title Ownership: Unlike shared ownership, you hold full legal title ownership of the property from day one.

• Local Prioritisation: Focuses on helping local residents, NHS workers, and essential public sector staff remain in their communities.

The Cons:

• Scarce Availability: Participation depends entirely on local council housing allocations, leading to tight stock across most regions.

• Discount Passed On at Resale: When you sell, the same 30%–50% discount must be passed to the next eligible first-time buyer, capping your long-term capital gain.

Mojo Commentary: Ideal for local key workers prioritising long-term living stability over speculative property gains.

4. The Low-Deposit Mainstay: Mortgage Guarantee Scheme & 95% LTVs

Under this scheme, the government offers a commercial guarantee to mortgage lenders, encouraging high-street banks to offer 95% LTV loans across the broader market.

The Pros:

• Open Market Freedom: Applies to standard resale properties and existing homes across the open market, rather than restricting buyers to new builds.

• Accelerated Timeline: Lowering the savings hurdle to 5% allows buyers to move faster rather than trying to outpace property price inflation.

The Cons:

• Higher Interest Rates: 95% LTV mortgage products carry higher interest rates than 80% or 90% LTV loans.

• Rigorous Affordability Testing: Lenders scrutinise spending habits, existing debts, and credit histories more intensely due to the lower deposit buffer.

Mojo Commentary: Think of a 95% mortgage as an entry tool. The standard goal is to secure the property, build equity over your initial fixed period, and remortgage into a lower LTV rate bracket later.

5. The Stepping Stone: Shared Ownership

Shared Ownership allows buyers to purchase a stake in a home (typically between 10% and 75%) from a housing association while paying rent on the remaining share, with the option to buy further shares over time ("staircasing").

The Pros:

• Minimal Deposit Outlay: The 5% or 10% deposit is calculated against the share purchased, not the total house value (e.g., a 5% deposit on a 25% share of a £250,000 home is just £3,125).

• Access to High-Value Locations: Allows single earners or lower-income households to access properties in desirable urban areas.

The Cons:

• 100% Maintenance & Service Charges: You pay 100% of service charges and maintenance costs regardless of the percentage share you own.

• Leasehold & Staircasing Costs: Rent on the unowned portion increases annually, and buying additional shares incurs legal and valuation fees.

Mojo Commentary: A practical option for solo buyers or those with lower deposit totals. Always build total monthly outgoings (mortgage, rent, and service charges) into your initial budget.

First-Time Buyer Schemes Compared

Evaluating your options? Whether you are just starting your deposit savings journey or trying to work out which scheme fits your joint income, speak with an expert mortgage broker for free today - get started.