There are several first-time buyer schemes offered by the government to help people get on the property ladder.
And several more offered by developers of new-build homes to help you on your way.
Discover the buying schemes available for new-build homes
But if you're a first-time buyer, it can be difficult to know which one is right for you.
We take a look at the main buying schemes available in 2024 and how they could help you overcome different challenges when you're trying to buy a house.
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1. The mortgage guarantee scheme
The problem: “I can’t save a big deposit while paying rent”
The average first-time buyer is now looking at properties costing an average of £244,100.
That’s £2,800 higher than a year ago, according to our research. If you were to put down a 20% deposit, you would need to save an eye-watering £48,820.
That's not easy at the best of times. But with food, energy bills and rental rates rising, a deposit is out of reach for many aspiring first-time buyers.
Enter: the mortgage guarantee scheme.
How does the mortgage guarantee scheme work?
The mortgage guarantee scheme can help you buy a home with a smaller deposit.
The scheme has encouraged more banks and building societies to offer 95% mortgages.
It means you can save just a 5% deposit and then take out a mortgage on the remaining 95% of the property value.
The scheme is backed by a government guarantee. So if you were to fall behind on mortgage payments and your home is repossessed, the government would cover a portion of the lender’s losses.
Are you eligible?
The mortgage guarantee scheme is open to both first-time buyers and home-movers across the UK.
The property you're buying cannot cost more than £600,000 and it must be your only home.
You must also take out a repayment mortgage, not an interest-only one.
Pros
The mortgage guarantee scheme means you can get on the property ladder with a smaller deposit.
For a typical £244,100 first-time buyer property, you would only need to save £12,205.
The mortgage guarantee scheme was extended in Jeremy Hunt's Autumn Statement 2023. It will now run until the end of June, 2025.
Cons
While many big mortgage lenders are part of the scheme, they're not all part of it.
You might be charged a higher interest rate with a 95% mortgage than, say, a 90% mortgage. Typically, the higher the loan-to-value ratio (LTV), the higher the interest rate tends to be.
There is a higher risk of falling into negative equity. This is when the value of your home is worth less than the mortgage secured against it.
Find out more about the mortgage guarantee scheme
2. The First Homes scheme
The problem: “I can’t afford a home in my local area”
House prices where you grew up or where you work are too expensive for you to be able to get on to the property ladder? The First Homes scheme could help.
How does the First Homes scheme work?
First Homes offers first-time buyers discounts of between 30% and 50% on a new-build home or a property previously bought through the scheme.
Say the property is worth £200,000. If you're a first-time buyer, you may be able to buy it with a 30% discount of £60,000. It means the purchase price for you would be £140,000.
Not only does this mean you would need a much smaller mortgage, but you would also have to save less of a deposit.
Are you eligible?
The First Homes scheme is available to local first-time buyers in England.
You must be able to get a mortgage for at least half the price of the home. The home must cost less than £250,000 - or £420,000 if you live in London - after the discount has been applied.
Your household income must be no more than £80,000 a year before tax - or £90,000 if you live in London.
Some councils may prioritise giving First Homes discounts to key workers, people who already live in the area, or those on lower incomes. There are local exemptions for armed forces and their families.
Pros
You won’t have to save for such a big deposit.
You would typically need a smaller mortgage.
The property can be a new home built by a developer or a home bought from someone else who originally purchased it through the scheme.
Cons
When it comes to selling your First Homes property, you must pass the discount onto the buyer. It is based on the home’s market value at the time of sale.
You can normally only sell the property to someone who is eligible for the First Homes scheme.
There is no central portal showing where First Homes are available. Instead, you have to check with local developers if any new properties will be part of the scheme.
Discover more about First Homes
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3. The Shared Ownership scheme
The problem: “I don’t earn enough to buy a home”
You're on a low income. Not only does this make it hard for you to save a deposit, but you think house prices will always be out of your reach.
Let's see if Shared Ownership could help.
How does Shared Ownership work?
Shared Ownership helps people on low incomes in England buy a home through purchasing a stake in a property and renting the rest.
You can start with a stake as little as 10%. You can increase your share when you can afford to, in what is known as ‘staircasing’. You only pay a deposit on the share of the property you're buying.
So, if you want to purchase a 10% stake in a £200,000 home, you'd need a deposit of £1,000 and a mortgage of £19,000.
Are you eligible?
You can buy a home through Shared Ownership if your household income is less than £80,000 a year, rising to £90,000 in London.
There are various other eligibility criteria too. For example, you must be a first-time buyer, a former homeowner who can’t afford to buy a home now, or an existing shared ownership homeowner who wants to move.
Pros
You can buy an initial stake in a property, sometimes of just 10%. It means you would need a smaller deposit and mortgage than you otherwise would.
It can be a good way to build up equity in a property if you can’t afford to buy a home outright.
You can increase your stake when you can afford to.
Cons
Shared ownership homes are typically only provided by housing associations, local councils, and other organisations.
You would normally need to fork out for repairs and maintenance regardless of the stake you own.
When you sell the property, if you do not own 100% of it, the landlord has the right to find a buyer.
Discover more about Shared Ownership
4. The Lifetime ISA
The problem: “I can’t save much each month for a deposit”
With high rents and the cost of living crisis, it can be difficult to set aside money for a deposit.
Putting your money into a Lifetime ISA could be an option.
How do Lifetime ISAs work?
The Lifetime ISA helps first-time buyers save for a deposit by topping up the amount they save each year.
Under the terms of the account, you can save up to £4,000 a year, to which the government adds a 25% bonus.
That means if you save the maximum amount, you will get £1,000 a year for free.
Any interest you earn on the account is also tax free.
Even if you can’t afford to save £4,000 a year, you will still receive a bonus worth 25% of the amount you have set aside.
Are you eligible?
You must be aged between 18 and 39 to open a Lifetime ISA account. You can keep paying into it until you are 50.
It’s designed to help people save for their first home or retirement. So you can take money out of the account for free to buy your first home, if you’re aged 60 or over, or you’re terminally ill.
To use the money for a deposit, you must be a first-time buyer, purchasing a property costing up to £450,000.
Pros
A bonus of 25% is always worth having. If you are able to save the maximum each year, it could significantly shorten the amount of time it takes you to put together a deposit.
If you’re buying with someone else who has a Lifetime ISA, you can pool together your savings and government bonus.
You can hold cash or stocks and shares in your Lifetime ISA - or have a combination of both.
Cons
If you withdraw the money early to use it for something other than a house deposit, you will be charged 25%.
The limit to what you can stash away every year is restricted to £4,000.
There’s a price cap of £450,000 on first-time buyer homes bought using the savings account.
Find out more about the Lifetime ISA
5. Help to Build: Equity Loan
The problem: "I want to self-build but it's too expensive"
Building your own home to your exact specifications is a bit of a pipe dream for many. It can be an expensive and time-consuming way of doing things.
But the Help to Build: Equity Loan could make it more financially viable.
How does the Help to Build: Equity Loan work?
The Help to Build: Equity Loan scheme is a government initiative for people who want to build their own home or convert a commercial property into a home. You can use it to either get onto the property ladder for the first time or build your next home in England.
The scheme works by topping up a buyer's deposit with a loan that is interest-free for five years. The equity loan amount can be between 5% to 20% (up to 40% in London) of the total estimated cost.
You apply for a self-build mortgage from an approved lender first, then you apply for the Help to Build loan.
Once approved, you have three years to complete your home. You'll get parts of the mortgage at various stages of the build to cover the ongoing costs.
Are you eligible?
You can be either a first-time buyer or an existing homeowner, but the property you are planning to build must be your only home.
You must also be able to qualify for a self-build mortgage from a bank or building society that is part of the Help to Build scheme.
The estimated costs of building your home cannot be more than:
£600,000 if you’re buying the plot of land and building your home (the build cannot be more than £400,000)
£400,000 if you’re building on land you already own
Pros
The scheme could make building your own home more achievable, even if you have a small deposit. You could get interest-free borrowing for five years, with the possibility of accessing more competitive mortgage rates after that.
Cons
The loan gets increasingly expensive. After the interest-free five years, interest is charged at a rate of 1.75% for a year. From the seventh year onwards, the amount of interest will then go up in line with the Consumer Price Index rate plus 2%. This leaves some uncertainty as to what you will pay in interest.
Find out more about the Help to Build: Equity Loan
More first-time buyer schemes
There are a few other buying schemes but they tend to have tighter eligibility criteria.
It could be worth checking out:
Right to Buy: If you're a council tenant, you could get a discount of up to £96,000 in England (£127,900 in London) to buy the home you're renting.
Right to Shared Ownership: Have you been a social or affordable housing tenant in England for at least three years? You could buy a share of between 10% and 75% in your home on shared ownership terms.
Home Ownership for People with Long-Term Disabilities (HOLD): If you have a long-term disability, the HOLD scheme in England could help you buy a home on the open market on a shared ownership basis.
Older Persons Shared Ownership (OPSO): Are you aged 55 or over? The scheme could enable you to buy a share of between 10% and 75% in an OPSO home. It’s another form of shared ownership.
Armed Forces Help to Buy: If you're in the Armed Forces, you could get an interest-free 10-year loan to borrow up to 50% of your salary (up to a maximum of £25,000).
Find out more about first-time buyer schemes
Find out more about all the schemes for first-time buyers on the government's dedicated website.
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