What Is the First Homes Scheme?
First Homes is a government-backed affordable homeownership programme introduced in England in June 2021 by the Department for Levelling Up, Housing and Communities (DLUHC). The scheme requires developers of qualifying new build developments to sell a proportion of their homes to eligible first-time buyers at a discount of at least 30% off the full market value. Some local authorities set the discount higher, at 40% or even 50%, depending on local housing affordability conditions.
The scheme was introduced through changes to the National Planning Policy Framework (NPPF) and associated planning guidance. Under these rules, a minimum of 25% of all affordable housing units delivered through Section 106 planning agreements must be First Homes (in most cases). This means that on any significant new build development where the local planning authority requires affordable housing contributions, a portion of those affordable homes will be designated as First Homes.
The Key Innovation: A Perpetual Discount
What makes First Homes genuinely unique among homeownership schemes is the perpetual nature of the discount. When you buy a First Home, the percentage discount (e.g., 30%) is registered as a restriction on the property's title at HM Land Registry. This restriction is permanent — it cannot be removed, modified, or reduced by any future owner. When you eventually sell the property, you must sell it to another eligible first-time buyer at the same percentage discount off the then-current market value.
For example, if you buy a First Home with a 30% discount in 2025 for £175,000 (full market value £250,000), and by 2035 the full market value has risen to £350,000, you would sell it for £245,000 (30% off £350,000). The discount is proportional and permanent, ensuring that First Homes remain affordable for future generations of first-time buyers.
This perpetual discount is fundamentally different from schemes like Help to Buy (which was a temporary loan) or Shared Ownership (which allows you to "staircase" to full ownership). With First Homes, the discount is forever — which has significant implications for your equity growth that we will examine in detail later.
How First Homes Fits into the Affordable Housing Landscape
First Homes sits alongside other affordable homeownership products including:
- Shared Ownership: Where you buy a share of the property (25-75%) and pay rent on the remainder
- Rent to Buy: Where you rent at a subsidised rate while saving for a deposit
- Discounted Market Sale: Other forms of discounted sale properties (which First Homes largely replaces)
- Social and Affordable Rent: Rental housing at below-market rates for those who cannot afford to buy
The government's intention with First Homes is to prioritise homeownership for first-time buyers who can afford mortgage payments but struggle with high deposit requirements and elevated new build prices. By mandating that a significant portion of affordable housing delivery takes the form of discounted-sale homes, the government aims to create a substantial and growing stock of permanently affordable homes for purchase.
How Does the First Homes Discount Work?
Understanding the mechanics of the discount is essential for evaluating whether First Homes represents good value. Here is a detailed explanation:
Setting the Discount Level
The minimum discount under the First Homes scheme is 30% off the full market value. However, local authorities have the power to set a higher discount — 40% or 50% — if they determine that a larger discount is needed to ensure affordability in their area. The discount level is set through the local plan or through specific Section 106 agreements on individual developments.
The discount level is fixed at the point of first sale and remains at that same percentage for all future sales. So if a local authority mandates a 40% discount, that 40% discount applies to the original buyer, the second buyer, the third buyer, and so on in perpetuity.
Determining the Market Value
The full market value of a First Home is determined by an independent RICS-qualified valuation (Royal Institution of Chartered Surveyors). This valuation establishes what the property would be worth on the open market without any discount. The discount is then applied to this independently assessed value, not to any price set by the developer.
This independent valuation is a critical safeguard. It prevents developers from inflating the "market value" to make the discount less meaningful. If the surveyor determines that the market value is lower than the developer's asking price, the discount is applied to the lower, independently assessed figure.
Price Cap After Discount
In addition to the percentage discount, First Homes are subject to a maximum price after the discount has been applied:
- Outside London: The price after discount must not exceed £250,000
- Within London: The price after discount must not exceed £420,000
These caps limit the type and size of properties that can qualify as First Homes. In areas with very high property values, the caps may mean that only smaller homes (one or two-bedroom apartments, for example) can be offered as First Homes, because larger properties would still exceed the cap even after a 30-50% discount.
Local authorities can set lower price caps than the national maximums if they determine that lower caps are appropriate for local conditions. Some areas have set caps as low as £150,000 after discount, which further restricts the range of eligible properties.
Worked Examples of the Discount at Different Levels
| Scenario | Full Market Value | Discount Level | Purchase Price | Saving |
|---|---|---|---|---|
| 2-bed apartment (outside London) | £250,000 | 30% | £175,000 | £75,000 |
| 2-bed apartment (outside London) | £250,000 | 40% | £150,000 | £100,000 |
| 2-bed apartment (outside London) | £250,000 | 50% | £125,000 | £125,000 |
| 3-bed house (outside London) | £350,000 | 30% | £245,000 | £105,000 |
| 2-bed apartment (London) | £500,000 | 30% | £350,000 | £150,000 |
| 2-bed apartment (London) | £600,000 | 30% | £420,000 | £180,000 |
| 1-bed apartment (North England) | £160,000 | 50% | £80,000 | £80,000 |
The savings are substantial — ranging from £75,000 to £180,000 in these examples. At first glance, this appears to be an extraordinary deal. However, as we will explore, the discount comes with significant restrictions that affect its real-world value.
Eligibility Criteria: Who Can Buy a First Home?
First Homes have strict eligibility criteria that every buyer must meet. These criteria apply to the initial purchase and to every subsequent purchase when the property is resold. Here is a comprehensive overview:
Core Eligibility Requirements
- First-time buyer: You must be a genuine first-time buyer who has never owned a property before — either in the UK or abroad. This includes freehold properties, leasehold properties, and any interest in a property. If you have previously owned a shared ownership property or inherited a property, you are generally not eligible.
- Household income cap: Your total household income must not exceed £80,000 per year (or £90,000 per year in London). For joint purchasers, this is the combined gross annual income of all buyers. Local authorities can set lower income caps if they choose.
- Owner-occupier: You must intend to live in the First Home as your only or main residence. You cannot buy a First Home as an investment property or to rent out.
- Mortgage requirement: You must fund the purchase with a mortgage of at least 50% of the discounted purchase price. Cash purchases or purchases with less than 50% mortgage financing are not permitted. This requirement is designed to ensure that First Homes go to genuine buyers who need mortgage support, rather than cash-rich individuals taking advantage of a discount.
- Age requirement: You must be aged 18 or over at the time of purchase.
Local Connection Criteria
In addition to the core national eligibility criteria, local authorities can impose local connection criteria that give priority to certain buyers. These typically include:
- Living in the local area: Priority for people who currently live in the local authority area or have lived there for a specified period (e.g., the last three years)
- Working in the local area: Priority for people who work in the local authority area or have a job offer in the area
- Family connections: Priority for people with immediate family members living in the area
- Key workers: Some local authorities give priority to key workers such as NHS staff, teachers, police officers, firefighters, and armed forces personnel. This is particularly common in areas with high living costs where key workers struggle to afford housing.
- Connection to the specific development: In some cases, priority may be given to people with a connection to the specific neighbourhood or parish where the development is located
Local connection criteria apply for the first three months that First Homes are marketed. After this initial period, if the homes have not been sold to locally-connected buyers, the local connection criteria are relaxed and the homes are offered to any eligible first-time buyer nationally. The core eligibility criteria (first-time buyer, income cap, mortgage requirement) always apply regardless of local connection.
Armed Forces Priority
Members of the armed forces, veterans (within the first year of leaving), and bereaved spouses or civil partners of armed forces personnel are exempt from local connection criteria. They can apply for First Homes in any location without needing to demonstrate a local connection, reflecting the government's commitment to supporting the armed forces community.
Who Is NOT Eligible
- Anyone who currently owns or has previously owned a property (anywhere in the world)
- Households with income above the cap (£80,000 / £90,000 London)
- Buy-to-let investors or anyone not intending to live in the property
- Cash buyers or buyers with less than 50% mortgage financing
- Companies, trusts, or other non-individual entities
How to Find and Apply for First Homes
The application process for First Homes involves several steps and multiple parties. Here is a comprehensive walkthrough:
Step 1: Finding First Homes Developments
First Homes are delivered through the planning system, which means they are built as part of larger new build developments. You can find them through:
- Developer websites: Major housebuilders advertising First Homes availability on specific developments
- Local authority websites: Many councils maintain registers of affordable housing opportunities including First Homes
- Housing associations: Some housing associations manage the sales process for First Homes on behalf of developers
- Property portals: First Homes may be listed on mainstream property search websites, though they may not always be clearly flagged as such
- Local estate agents: Some agents specialise in affordable housing products including First Homes
Finding First Homes can require more active searching than standard new build properties, as availability is limited and homes can sell quickly. Setting up alerts with your local council and checking developer websites regularly is recommended.
Step 2: Register Your Interest and Verify Eligibility
When you find a First Homes development, you will typically need to register your interest with the developer, housing association, or managing agent responsible for sales. You will then need to provide evidence of your eligibility, including:
- First-time buyer status: A declaration that you have never owned property, supported by evidence (lenders can verify this through Land Registry and credit checks)
- Income evidence: Payslips, P60s, or SA302s demonstrating your household income is within the cap
- Local connection evidence (if applicable): Proof of residence, employment, or family connections in the local area
- Mortgage agreement in principle: Evidence that you can obtain a mortgage for the discounted price
The eligibility verification process is usually managed by the developer's sales team or a specialist affordable housing agent, with oversight from the local authority. They will assess your documentation and confirm whether you meet the criteria.
Step 3: Priority Assessment and Allocation
If there are more eligible applicants than available First Homes (which is common in high-demand areas), the allocation follows a priority hierarchy:
- Armed forces personnel, veterans, and bereaved spouses — given first priority nationwide
- Buyers meeting local connection criteria — prioritised during the first three months of marketing
- Other eligible first-time buyers — considered after the initial local priority period or if no locally-connected buyers come forward
Within each priority group, allocation is typically on a first-come, first-served basis, although some schemes may use a ballot or other fair allocation method.
Step 4: Independent Valuation
Once you are allocated a First Home, an independent RICS valuation is conducted to establish the property's full market value. The discount is then applied to this valuation figure. This valuation must be no more than three months old at the time of sale, so it may need to be refreshed if the purchase process is protracted.
Step 5: Mortgage Application
You apply for a mortgage based on the discounted purchase price, not the full market value. This means you need to borrow less, and your deposit is calculated as a percentage of the discounted price. For example, if the discounted price is £175,000 and you have a 10% deposit, you need £17,500 in savings and a mortgage of £157,500.
Not all lenders offer mortgages on First Homes, as the title restriction (perpetual discount) is an unusual feature that some lenders are unfamiliar or uncomfortable with. However, the number of lenders willing to lend on First Homes has grown since the scheme's introduction, and your broker should be able to identify suitable options.
Step 6: Legal Process and Title Restriction
Your solicitor will handle the standard conveyancing process, with the additional step of ensuring that the First Homes restriction is properly registered on the title at HM Land Registry. This restriction is a legal covenant that binds all current and future owners. Your solicitor should explain the implications of this restriction in detail and ensure you fully understand what it means for you.
The restriction specifies:
- The percentage discount that applies to all future sales
- That the property can only be sold to eligible first-time buyers
- That the property must be used as the buyer's main residence
- That the discount cannot be removed or modified
Step 7: Completion and Moving In
Once all legal work is complete and your mortgage is in place, you complete the purchase in the standard way, receive your keys, and move in. You are now the owner of a First Home — with all the rights and responsibilities that entails, including the restrictions we discuss in detail below.
What Happens When You Sell a First Home?
Understanding the resale process is crucial, as it is fundamentally different from selling a standard property and has significant financial implications.
The Discount Passes On
When you sell your First Home, you must sell it at the same percentage discount off the current market value. A fresh independent RICS valuation is conducted at the time of sale to establish the property's current market value, and the original discount percentage is applied to that figure.
Here is a worked example:
| Detail | At Purchase (2025) | At Sale (2035) |
|---|---|---|
| Full Market Value | £250,000 | £350,000 |
| Discount | 30% | 30% |
| Transaction Price | £175,000 | £245,000 |
| Equity Growth (price) | — | £70,000 |
In this example, the full market value has increased by £100,000, but because of the 30% discount, you only benefit from 70% of that growth. Your sale price is £70,000 more than you paid — but on a standard property, you would have gained the full £100,000.
The 3-Month Marketing Period
When you decide to sell, the property must first be marketed to eligible first-time buyers for a period of three months. During this time, local connection criteria may apply (depending on the local authority's requirements for the specific First Home). If no eligible buyer is found within three months, the local authority may agree to relax the criteria or, in exceptional circumstances, allow the property to be sold on the open market — but the discount restriction is not removed, so even an open-market buyer would face the same title restriction for any future sale.
In practice, First Homes at a 30-50% discount tend to attract strong demand from eligible buyers, so selling within the three-month period is usually achievable in most areas. However, the restricted buyer pool and the need for eligibility verification can make the sales process slower than a standard property transaction.
What If You Cannot Sell to an Eligible Buyer?
In rare cases where no eligible buyer can be found, the local authority may consider allowing the property to be sold to a housing association or other registered provider at the discounted price. The specific provisions for unsold First Homes are set out in the Section 106 agreement for the development and may vary by local authority.
It is worth noting that this scenario is unlikely in most areas — the demand for affordable homeownership significantly exceeds supply, and a First Home at a substantial discount will typically attract multiple interested buyers.
Restrictions on First Homes: What You Cannot Do
The First Homes scheme comes with significant restrictions that you must understand and accept before purchasing. These restrictions are legally enforceable through the title restriction and any associated Section 106 obligations.
You Cannot Rent Out the Property
First Homes must be your only or main residence. You cannot let the property out to tenants, whether on a long-term assured shorthold tenancy or a short-term holiday let. Sub-letting any part of the property is also prohibited. This restriction means that if your circumstances change — for example, if you need to relocate for work — you cannot retain the First Home as a rental investment. You would need to sell it.
There may be very limited exceptions in exceptional circumstances (such as a temporary work relocation with a clear return date), but these would need to be agreed with the local authority on a case-by-case basis and should not be assumed.
You Cannot Remove or Reduce the Discount
The percentage discount is permanent and irrevocable. You cannot pay a premium to remove the restriction, "buy out" the discount, or convert the First Home into a standard market property. This is fundamentally different from Shared Ownership, where you can "staircase" (buy additional shares) up to 100% ownership.
The permanence of the discount is central to the scheme's purpose — creating a perpetual supply of affordable homes — but it means you will always be selling at a discount, regardless of how long you own the property or how much equity you build.
You Must Sell to an Eligible Buyer
When you sell, the buyer must meet the First Homes eligibility criteria — they must be a first-time buyer, meet the income cap, obtain a mortgage for at least 50% of the price, and intend to live in the property. This restricts your pool of potential buyers and can affect the speed and ease of the sale process.
Price Cap Applies on Resale
The price cap after discount (£250,000 outside London, £420,000 in London) applies on every subsequent sale, not just the initial purchase. This means that if property values in your area have grown significantly, the price cap could prevent you from selling at the full discounted market value. For example, if the full market value has risen to £400,000 and the discount is 30%, the discounted price would be £280,000 — but the £250,000 cap (outside London) would mean you can only sell for £250,000, losing £30,000 of potential equity.
This is a significant risk in areas with strong property price growth and is one of the most important factors to consider before buying a First Home.
Restrictions on Home Improvements
While you can carry out home improvements and maintenance as any homeowner would, you should be aware that the value of any improvements will be subject to the discount on resale. If you spend £30,000 extending a kitchen, the full market value may increase by £30,000, but you will only realise 70% of that increase (with a 30% discount) when you sell. This means home improvements provide a lower return on investment in a First Home compared to a standard property.
Mortgage Restrictions
Because of the title restriction, your mortgage options may be more limited than for a standard property. Not all lenders are set up to lend on First Homes, and those that do may impose specific conditions. Your broker should identify lenders experienced with First Homes to ensure a smooth process.
Impact on Property Value and Equity: The Real Financial Picture
The financial implications of the First Homes discount are perhaps the most important consideration for potential buyers. While the upfront saving is substantial, the long-term impact on equity building is more nuanced.
How Equity Growth Works in a First Home
With a standard property, you benefit from 100% of any increase in the property's value (minus selling costs). With a First Home at a 30% discount, you effectively benefit from only 70% of the property's value growth. At a 40% discount, you benefit from 60%. At 50%, just 50%.
Here is a detailed comparison of equity growth over 10 years, assuming 3% annual property price growth:
| Factor | Standard Property (£250,000) | First Home — 30% Discount (£175,000) | First Home — 50% Discount (£125,000) |
|---|---|---|---|
| Purchase Price | £250,000 | £175,000 | £125,000 |
| Deposit (10%) | £25,000 | £17,500 | £12,500 |
| Mortgage | £225,000 | £157,500 | £112,500 |
| Market Value After 10 Years (3% pa) | £335,979 | £335,979 (full) / £235,185 (discounted) | £335,979 (full) / £167,990 (discounted) |
| Your Sale Price | £335,979 | £235,185 | £167,990 |
| Capital Growth (sale price minus purchase price) | £85,979 | £60,185 | £42,990 |
| Approximate Mortgage Balance After 10 Years | £183,000 | £128,000 | £91,500 |
| Approximate Equity at Sale | £152,979 | £107,185 | £76,490 |
This table reveals an important reality: while First Homes provide a significant upfront saving, the reduced equity growth over time means you build wealth more slowly than a standard homeowner. After 10 years, the standard property owner has approximately £153,000 in equity, while the First Home buyer (30% discount) has about £107,000. That is £46,000 less equity, which could significantly affect your ability to step up to a larger or standard-market property in the future.
The question is whether you can accept this reduced long-term equity in exchange for the lower upfront cost and more affordable monthly payments that the discount provides.
The Price Cap Ceiling Problem
There is an additional concern: the £250,000 price cap after discount creates a ceiling on your sale price. If property values in your area grow strongly, you may reach a point where the capped price is below the discounted market value. At that point, you are effectively losing equity that you should have been entitled to under the discount formula.
For example, using a £250,000 market value property with a 30% discount in an area experiencing 5% annual growth:
| Year | Full Market Value | Discounted Price (30% off) | Capped at £250,000? | Actual Sale Price |
|---|---|---|---|---|
| Year 0 | £250,000 | £175,000 | No | £175,000 |
| Year 5 | £319,070 | £223,349 | No | £223,349 |
| Year 10 | £407,224 | £285,057 | Yes — capped | £250,000 |
| Year 15 | £519,732 | £363,812 | Yes — capped | £250,000 |
In this scenario, by year 10, the price cap is costing you £35,057 in lost equity. By year 15, the loss has grown to £113,812. This is a significant financial penalty that worsens over time in areas with strong price growth.
This price cap issue is one of the most serious criticisms of the First Homes scheme and is particularly relevant for buyers in areas where house prices are expected to grow above the national average.
First Homes vs. Shared Ownership: A Detailed Comparison
The most commonly asked question about First Homes is how it compares to Shared Ownership — the other major affordable homeownership product available in England. Both schemes aim to help buyers who cannot afford to purchase on the open market, but they work very differently. Here is a comprehensive comparison:
| Feature | First Homes | Shared Ownership |
|---|---|---|
| What you own | 100% of the property (at discounted price) | A share (25-75% initially), rent the remainder |
| Discount/subsidy | 30-50% discount off market value | No discount — you buy at full market value but only a share of it |
| Monthly costs | Mortgage payments only (plus service charges if applicable) | Mortgage payments + rent on unowned share + service charges |
| Can you increase your ownership? | No — discount is permanent, you always own 100% at discounted price | Yes — "staircasing" allows you to buy additional shares up to 100% |
| Can you own outright? | You own 100% from day one (but discount restriction remains) | Yes, if you staircase to 100% (on newer properties) |
| Selling restrictions | Must sell to eligible first-time buyer at same discount | Housing association has nomination rights; can sell on open market if staircased to 100% |
| Equity growth | Benefit from 70% (30% discount) to 50% (50% discount) of value growth | Benefit from growth on your owned share; 100% if staircased to full |
| Rental costs | None — you own 100% | Rent on unowned share (typically 2.75% of share value per year, can increase) |
| Eligibility | First-time buyers only; income cap £80K/£90K London | First-time buyers priority; income cap £80K/£90K London |
| Stamp duty | Paid on discounted price (first-time buyer relief may apply) | Can defer stamp duty until staircasing above 80% |
| Can you rent it out? | No | Generally no (some housing associations may allow sub-letting in exceptional circumstances) |
| Perpetual restriction? | Yes — discount is permanent on all future sales | No — once staircased to 100%, you own it outright with no restrictions (on newer properties) |
Worked Financial Comparison: First Homes vs. Shared Ownership
Let us compare the two schemes on a property with a full market value of £250,000:
First Homes (30% Discount)
| Detail | Amount |
|---|---|
| Purchase price | £175,000 |
| Deposit (10%) | £17,500 |
| Mortgage (90% LTV) | £157,500 |
| Mortgage rate (5-year fix) | 4.79% |
| Monthly mortgage payment | £901 |
| Monthly rent payment | £0 |
| Total monthly housing cost | £901 |
Shared Ownership (25% Share)
| Detail | Amount |
|---|---|
| Full property value | £250,000 |
| Your share (25%) | £62,500 |
| Deposit (10% of share) | £6,250 |
| Mortgage (90% of share) | £56,250 |
| Mortgage rate (5-year fix) | 5.09% |
| Monthly mortgage payment | £331 |
| Monthly rent (2.75% of £187,500 / 12) | £430 |
| Total monthly housing cost | £761 |
On a monthly cost basis, Shared Ownership at 25% is initially cheaper by £140 per month. However, the key difference is that the First Homes buyer is building equity on a £175,000 asset with no rent to pay, while the Shared Ownership buyer is paying £430/month in rent that builds no equity. Over time, as the Shared Ownership rent increases (typically by CPI + 1% per year), the cost advantage narrows and may reverse.
The biggest distinction, though, is in long-term flexibility. The Shared Ownership buyer can staircase to 100%, eventually owning the property outright with no restrictions. The First Homes buyer can never remove the discount restriction, which permanently affects resale value and buyer pool.
For a detailed comparison of all affordable homeownership options, see our guide: Help to Buy vs. Shared Ownership for New Builds.
First Homes vs. Standard Purchase with Developer Incentives
Another important comparison is between buying a First Home and purchasing a standard new build with the help of developer incentives (such as stamp duty contributions, deposit matching, or the Own New Rate subsidised mortgage).
Comparison on a £250,000 Market Value Property
| Factor | First Home (30% Discount) | Standard Purchase with Incentives |
|---|---|---|
| Purchase price | £175,000 | £250,000 |
| Developer incentives | None (discount is the incentive) | e.g., £5,000 stamp duty + Own New Rate (£5,000 over 2 years) |
| Effective cost | £175,000 | £240,000 (after accounting for incentive values) |
| Deposit needed (10%) | £17,500 | £25,000 |
| Mortgage needed | £157,500 | £225,000 |
| Monthly payment (approx.) | £901 | £1,289 |
| Selling restrictions | Must sell to eligible FTB at discount | None — sell to anyone at market price |
| Equity growth | 70% of market growth | 100% of market growth |
| Can rent out? | No | Yes (with mortgage lender consent) |
| Property choice | Limited to designated First Homes plots | Any property on any development |
The First Home provides dramatically lower monthly costs and a smaller deposit requirement, but at the cost of permanent restrictions on how you use and sell the property, and reduced long-term equity growth. The standard purchase costs more upfront and monthly but provides complete flexibility and full participation in property value appreciation.
The right choice depends on your priorities: if affordability is your primary concern and you are comfortable with the restrictions, First Homes offers genuinely affordable entry to homeownership. If you value flexibility and long-term wealth building, a standard purchase (even with a stretched budget) may serve you better over time.
Advantages of the First Homes Scheme
- Substantial upfront discount: A 30-50% discount off market value is a genuinely significant saving — potentially £75,000 to £200,000+ depending on the property and location. This is the largest discount available through any current homeownership scheme.
- Lower monthly payments: Because you are borrowing less (the mortgage is based on the discounted price), your monthly mortgage payments are significantly lower than they would be for a standard purchase, making homeownership genuinely affordable.
- Smaller deposit needed: Your deposit is calculated on the discounted price, not the full market value. A 10% deposit on a £175,000 First Home is £17,500, compared to £25,000 on the same property at full market value (£250,000).
- 100% ownership from day one: Unlike Shared Ownership, you own the entire property. There is no rent to pay on an unowned share, no housing association to deal with, and no staircasing process to navigate.
- No equity loan to repay: Unlike Help to Buy, there is no government loan hanging over you. The discount is a permanent feature of the property, not a debt.
- Stamp duty savings: Because stamp duty is calculated on the discounted price, you pay less (or no) stamp duty. First-time buyers purchasing a First Home at £175,000 would pay zero stamp duty under the current first-time buyer relief thresholds.
- Supports getting on the ladder: For many first-time buyers in expensive areas, First Homes may be the only realistic route to homeownership. The discount bridges the affordability gap that prevents many people from buying.
- Protected from market volatility: The lower purchase price provides a larger buffer against negative equity if property values fall.
Disadvantages of the First Homes Scheme
- Reduced equity growth: You only benefit from 50-70% of property value growth (depending on your discount level). Over the long term, this can mean tens of thousands of pounds less equity compared to a standard homeowner.
- Perpetual discount restriction: The discount cannot be removed — ever. You will always sell at a discount, always to an eligible buyer, and always subject to the scheme's rules. This is a permanent limitation on your property rights.
- Price cap ceiling: The £250,000/£420,000 price cap after discount can become a binding constraint in areas with strong price growth, effectively stealing your equity above the cap.
- Cannot rent out: You cannot let the property, which removes a valuable safety net if your circumstances change (e.g., job relocation, relationship breakdown).
- Restricted buyer pool on resale: You can only sell to eligible first-time buyers, which narrows your potential market and could make selling slower or more difficult.
- Limited property choice: First Homes are available only on developments where they have been required through the planning process. You cannot choose any new build property and apply the discount — it must be a designated First Home.
- Home improvements provide lower returns: Any value added through improvements is subject to the discount on resale, meaning you get back less of your investment than a standard homeowner.
- Limited lender options: Not all mortgage lenders are willing to lend on First Homes, which can restrict your choice and potentially lead to less competitive rates.
- Complexity on relationship breakdown: If you buy a First Home jointly and the relationship breaks down, the property must still be sold to an eligible first-time buyer or one party must buy the other out — both of which can be complicated by the scheme's restrictions.
- May hinder future moves: Because your equity growth is constrained, you may find it harder to step up to a larger or unrestricted property when your needs change (e.g., growing family).
Real Examples: First Homes at Different Price Points
To give you a concrete sense of what First Homes look like in practice, here are examples across different regions and price points:
Example 1: 2-Bed Apartment in Manchester Suburb
| Detail | Value |
|---|---|
| Full market value | £200,000 |
| Discount | 30% |
| Purchase price | £140,000 |
| Deposit (10%) | £14,000 |
| Mortgage | £126,000 |
| Monthly payment (4.79%, 25 years) | £721 |
| Comparable market rent | £900-£1,050/month |
| Monthly saving vs. renting | £179-£329/month |
In this scenario, the First Home buyer pays significantly less per month than they would in rent for a comparable property, while building equity. This is a strong example of where First Homes provides genuine value for a first-time buyer.
Example 2: 3-Bed Semi-Detached in West Midlands
| Detail | Value |
|---|---|
| Full market value | £310,000 |
| Discount | 30% |
| Purchase price | £217,000 |
| Deposit (10%) | £21,700 |
| Mortgage | £195,300 |
| Monthly payment (4.79%, 25 years) | £1,118 |
| Stamp duty payable | £0 (first-time buyer relief on £217,000) |
Example 3: 1-Bed Apartment in Outer London Borough
| Detail | Value |
|---|---|
| Full market value | £400,000 |
| Discount | 30% |
| Purchase price | £280,000 |
| Deposit (10%) | £28,000 |
| Mortgage | £252,000 |
| Monthly payment (4.79%, 30 years) | £1,321 |
| Comparable market rent for 1-bed | £1,400-£1,800/month |
In London, even with the 30% discount, First Homes remain expensive in absolute terms. However, they are still significantly more affordable than buying at full market value, and monthly payments are comparable to or cheaper than renting equivalent accommodation. The London price cap of £420,000 provides more headroom than the £250,000 cap elsewhere, allowing larger properties to qualify.
Example 4: 2-Bed Terraced House in North East with 50% Discount
| Detail | Value |
|---|---|
| Full market value | £180,000 |
| Discount | 50% |
| Purchase price | £90,000 |
| Deposit (10%) | £9,000 |
| Mortgage | £81,000 |
| Monthly payment (4.79%, 25 years) | £464 |
| Comparable market rent | £600-£750/month |
With a 50% discount in a lower-value area, First Homes become extraordinarily affordable. Monthly payments of under £500 for a two-bedroom house are well below rental costs and genuinely transformative for buyers on modest incomes. However, the 50% discount also means you benefit from only half of any future property value growth, which could significantly limit your ability to move to a larger or unrestricted property in the future.
Frequently Asked Questions About First Homes
Can I buy a First Home with my partner if only one of us is a first-time buyer?
No. All purchasers must be first-time buyers. If one partner has previously owned property (even partially, through a previous relationship or inheritance), neither of you can buy a First Home together. The non-first-time buyer cannot be on the title or the mortgage application.
What if my income rises above the cap after I have bought?
The income cap applies at the point of purchase only. Once you have bought a First Home, there is no ongoing income assessment. If your income subsequently rises above £80,000 (or £90,000 in London), this does not affect your ownership or require you to sell.
Can I make home improvements to my First Home?
Yes, you can renovate, extend (subject to planning permission), and improve your First Home as you would any property you own. However, be aware that the value added by improvements will be subject to the discount when you sell — meaning you will recover only 50-70% of the value they add.
What happens if I get married or have children after buying?
Your personal circumstances after purchase do not affect the First Homes restrictions. The property remains subject to the scheme's rules regardless of changes in your household composition. If you need a larger home, you would need to sell the First Home (to an eligible buyer at the discounted price) and purchase a different property.
Can I remortgage a First Home?
Yes, you can remortgage, but you will need to use a lender that is willing to lend on a property with the First Homes title restriction. The pool of available lenders may be smaller than for a standard property, but options do exist and are growing as the scheme becomes more established.
What if I inherit another property while owning a First Home?
If you inherit another property, you are not required to sell your First Home. However, you must continue to use the First Home as your main residence. You cannot keep the First Home and live elsewhere — if you choose to live in the inherited property, you would need to sell the First Home.
Are there any ongoing fees or charges specific to First Homes?
There are no ongoing fees or charges specific to the First Homes scheme itself. You pay your mortgage, council tax, insurance, and any service charges (if applicable) just like any other homeowner. The discount does not carry any recurring cost.
Can I pass a First Home to my children in my will?
This is a complex area. The First Homes restriction is registered on the title and applies to all transfers, including inheritance. The person inheriting the property may need to meet the eligibility criteria or sell it to an eligible buyer. The specific rules around inheritance are still evolving, and you should seek specialist legal advice on this point.
What happens if no eligible buyer can be found when I sell?
The property is marketed to eligible buyers for a minimum of three months. If no buyer is found, the local authority may agree to relax the criteria or allow the sale to a housing association. In extreme cases, there may be provisions to sell on the open market, but the title restriction remains in place. The specific fallback provisions are set out in the Section 106 agreement for your development.
Is First Homes available in Scotland, Wales, or Northern Ireland?
No. First Homes is an England-only scheme. Scotland, Wales, and Northern Ireland have their own devolved housing policies and affordable homeownership programmes. In Scotland, for example, there is the Low-cost Initiative for First Time Buyers (LIFT) scheme, while Wales has Help to Buy Wales.
Is First Homes Actually Worth It? A Frank Assessment
After examining every aspect of the First Homes scheme, the question remains: is it actually worth it? The answer, as with most financial decisions, is "it depends" — but here is our frank assessment of when it is a good deal and when it is not.
First Homes Is Likely Worth It If...
- You cannot afford to buy any other way: If the First Homes discount is the difference between being able to buy and remaining a renter indefinitely, the scheme is almost certainly worth it. Building equity (even at a reduced rate) is better than building no equity at all through renting.
- Monthly payments are significantly below local rents: If your First Homes mortgage payment is substantially less than renting a comparable property, you are effectively saving money every month while also building equity. This dual benefit makes the scheme compelling.
- You are in an area with modest price growth: If property prices in your area are growing slowly (1-2% per year), the reduced equity growth is less of a concern, and the price cap is less likely to become a constraint. The upfront discount provides a solid foundation of affordability.
- You plan to stay long-term: If you intend to live in the First Home for many years (10+), the benefits of stable, affordable housing accumulate over time, and the restrictions on selling are less relevant to your day-to-day life.
- You value stability and low costs: If your priority is stable, affordable housing rather than maximising financial returns, First Homes delivers exactly that. Not everyone needs or wants to treat their home as an investment.
First Homes May Not Be Worth It If...
- You could afford a standard purchase with a stretch: If you can just about afford a standard new build (perhaps with the help of developer incentives, a Lifetime ISA, or family support), the long-term financial benefits of unrestricted ownership may outweigh the short-term affordability gains of First Homes.
- You are in a high-growth area: If property prices in your area are growing strongly (4%+ per year), the reduced equity growth and price cap ceiling could cost you tens of thousands of pounds over time.
- You may need to move within 5-7 years: If your circumstances are likely to change (career progression, growing family, potential relocation), the restrictions on selling to eligible buyers and the reduced equity could make it harder to move up the property ladder.
- You might want to rent it out in future: If there is any chance you might need to let the property (e.g., job relocation), the prohibition on renting removes a valuable safety net.
- Shared Ownership offers a better path: If Shared Ownership with staircasing potential would allow you to eventually own a property outright with no restrictions, it may be a better long-term investment despite the short-term rent costs.
The Bottom Line
First Homes is a genuinely affordable entry point to homeownership that can work brilliantly for the right buyer in the right circumstances. The discount is real, the monthly savings are significant, and the 100% ownership (albeit with restrictions) is preferable to the complexity of Shared Ownership for many people. But the perpetual discount restriction is a serious long-term constraint that every buyer must fully understand and accept. You are not just buying a home at a discount — you are buying into a permanently restricted asset class that will affect your financial flexibility for as long as you own the property.
Our advice: if First Homes is the only realistic way for you to become a homeowner, it is almost certainly better than continuing to rent. But if you have other options available, take the time to run the numbers, consider your long-term plans, and make a fully informed decision. The right choice depends entirely on your individual circumstances, priorities, and financial goals.
How to Get Started with First Homes
If you have decided that First Homes could be right for you, here are the practical next steps:
- Check your eligibility: Confirm you are a first-time buyer with a household income below £80,000 (£90,000 in London). If you are unsure about any aspect of your eligibility, consult a mortgage broker.
- Research your local area: Contact your local authority to find out whether First Homes developments are planned or available in your area. Ask about the discount level (30%, 40%, or 50%) and any local connection criteria.
- Get mortgage advice: Speak to a mortgage broker experienced with First Homes. They can confirm what you can borrow, which lenders offer First Homes mortgages, and what your monthly payments would be.
- Register with developers: Sign up for updates from housebuilders active in your target area. Many developers have mailing lists that notify you when new developments (including First Homes plots) become available.
- Save your deposit: While First Homes require a smaller deposit than a standard purchase, you still need at least 5-10% of the discounted price. Use a Lifetime ISA to boost your savings with the government's 25% bonus.
- Understand the restrictions: Make sure you fully understand and accept the restrictions that come with First Homes before you commit. Read this guide thoroughly, speak to a solicitor, and ask questions until you are confident you understand the implications.
For further reading on related topics, explore our comprehensive guides: