Your First Home Scheme: 2.5% Deposits Explained

The government has unveiled "Your First Home", a new scheme that will let first-time buyers in England purchase a new-build home with a deposit of just 2.5%. Announced by Prime Minister Andy Burnham on 28 September, it pairs that small deposit with a government-backed equity loan worth up to 20% of the property's value, with an initial interest-free period. Full details, including price caps and income limits, are expected in Chancellor John Healey's Budget on 28 October, and pre-registration is due to open by the end of 2026.

For anyone who has watched house prices outpace their savings, this sounds like a breakthrough. It could be. But an equity loan is a legal and financial commitment that lasts for years, and buying a new-build brings its own conveyancing pitfalls. Here's what first-time buyers need to know before signing up.

How the Your First Home Equity Loan Works

On a £250,000 new-build, a 2.5% deposit is £6,250. The government equity loan would cover up to £50,000 (20%), leaving a mortgage of around £193,750, or roughly 77.5% of the price. A lower loan-to-value mortgage usually means access to better interest rates, which is the scheme's main attraction.

The key detail is that an equity loan is not a normal loan. Under the old Help to Buy scheme, which Your First Home is widely seen as replacing, the amount you repaid was a percentage of the property's value at the time of repayment, not the sum originally borrowed. If your home rose in value, so did your debt. Once the interest-free period ended, fees kicked in and rose each year. Ministers have not yet confirmed whether the new scheme will follow the same model, so read the final terms carefully when they are published.

The New-Build Premium and Negative Equity Risk

Industry voices have already raised concerns. Rob Houghton of reallymoving pointed to research showing Help to Buy purchasers paid around 10% more for new-builds than comparable properties. Others warn that a subsidised new-build can lose value once it becomes a second-hand home without a scheme behind it.

With only 2.5% of your own money in the property, even a modest fall in value could leave you in negative equity, owing more than the home is worth. That matters if you need to move, remortgage or sell within a few years. It is worth getting an independent valuation or survey, and comparing prices with nearby resale homes, before you commit.

Conveyancing Checks Every New-Build Buyer Should Make

Buying off-plan or from a developer is a different process from buying an existing home, and your conveyancing solicitor will need to look closely at several things:

The reservation agreement. Developers often ask for a reservation fee and set tight deadlines to exchange contracts. Check whether the fee is refundable if the sale falls through. Completion dates and long-stop dates. New-builds are often sold before they're finished. The contract should include a long-stop date after which you can pull out if the home isn't ready, which is vital if your mortgage offer might expire first.

Tenure and estate charges. Many new-build houses sit on estates with private roads and green spaces maintained by a management company. Those service charges can rise, so your solicitor should explain what you'd be committing to. If the property is leasehold, the lease terms need careful scrutiny.Warranties and snagging. Confirm the home has a recognised structural warranty, such as NHBC, and know how to report defects after you move in.

The equity loan charge. The government's loan will usually be secured as a legal charge on your title at HM Land Registry, alongside your mortgage. That affects when and how you can sell, let or remortgage.

Stamp Duty and Other Costs to Budget For

First-time buyers in England currently pay no Stamp Duty Land Tax on the first £300,000 of a purchase, provided the price is £500,000 or less. Most homes bought through the scheme should fall within that relief, but it's worth checking. You'll still need to budget for legal fees, searches, a survey, mortgage arrangement fees and moving costs, which can add several thousand pounds on top of a 2.5% deposit.

What Should You Do Next?

If you're hoping to use Your First Home when it opens, now is a good time to get organised: check your credit file, speak to a mortgage broker, and line up a conveyancing solicitor who is familiar with new-build purchases and government equity loan schemes. Our first contact team at QualitySolicitors can match you with an experienced property solicitor near you, who can walk you through the contract, the equity loan terms and the developer's paperwork, so you can take that first step onto the ladder with your eyes open.