Your First Home Explained: The New 20% Equity Loan for First-Time Buyers

The 2026 Budget launched Your First Home, a government equity loan that lends first-time buyers in England up to 20% of the price of a home, with a deposit from just 2.5%. It’s the first scheme of its kind since Help to Buy closed, and pre-registration opens by the end of December 2026. Here’s how it’s set to work, based on what the Treasury has announced so far.

How an equity loan works

With an equity loan, the government lends you part of the purchase price, and the amount you repay is tied to the property’s value rather than being a fixed sum. Under Your First Home:

• You put down a deposit of at least 2.5%, and up to 15%.
• The government lends 20% of the price as an equity loan.
• A normal mortgage covers the rest.
• The equity loan is interest-free for the first five years, with charges rising gradually after that.

For example, on a £300,000 home with a 5% deposit:

• your deposit is £15,000
• the equity loan is £60,000
• your mortgage is £225,000, or 75% of the price

Without the scheme, the same 5% deposit would need a £285,000 mortgage at 95% loan-to-value. A smaller mortgage at a lower loan-to-value usually means a lower interest rate as well as lower repayments, which is how the Treasury says buyers “could save hundreds of pounds per month compared with a standard mortgage”. Our article on the real cost of a 95% mortgage shows how much the rate gap can matter.

Who can use it

• First-time buyers in England. The devolved governments get their own funding to decide on support.
• Household income of up to £110,000 outside London, or £140,000 in London.
• Buyers who “would not otherwise be in a position to purchase”, so the scheme is aimed at people who can’t buy without help. How this will be tested hasn’t been published yet.

Which homes qualify

• Price caps will be based on median house prices in each local authority, so they’ll vary by area.
• In London, the caps are £650,000 in inner London and £500,000 in outer London.
• The scheme is linked to new-build supply. The Treasury expects it to support around 20,000 new homes, and developers pay to sign up. Whether any existing homes qualify hasn’t been confirmed, so assume new builds from participating developers until the full rules are out.

Timeline

• By the end of December 2026: pre-registration opens.
• February 2027: full applications open.
• April 2027: first loans issued.

Funding is capped each year, at £4.7 billion overall and enough for around 70,000 households. Registering early won’t guarantee a place, but it does mean you’ll hear about the full rules as soon as they’re published.

The costs to understand before you sign up

An equity loan isn’t free money, and the costs show up later:

• Because the loan is a share of the property’s value, if your home rises in value, you repay more than you borrowed. A 20% loan on a £300,000 home that’s worth £360,000 when you repay would cost £72,000.
• After the five interest-free years, fees start and then rise. The exact rates haven’t been published yet - check them carefully when they are.
• Paying the loan back usually means remortgaging or selling. Factor this into your plans for when your first fixed rate ends.
• New-build homes often sell at a premium and can lose some value in the first few years, which matters more when part of your home’s value is owed to the government.

How it fits with other help for first-time buyers

• A Lifetime ISA can still be used towards your deposit, as long as you meet its rules. Our article on the Lifetime ISA changes from this Budget explains what’s new.
• Guarantor mortgages and family deposit schemes remain an alternative if family can help.
• First-time buyer Stamp Duty relief applies as normal.

Our step-by-step first-time buyer guide was written before this scheme was announced, and its general advice still applies: Your First Home is an extra option to weigh up, not a replacement for those steps.

The bottom line

Your First Home could bring buying forward by years for first-time buyers with a small deposit and a stretched budget, and the five interest-free years make the early repayments noticeably lower. The trade-off is that you’re sharing your home’s future growth with the government and will need a plan to repay it. If you’re interested, pre-register when it opens, and look carefully at the fees after year five and the price caps for your area once the full rules are published.