Essential Government Schemes for First Time Buyers in 2025

Getting on the property ladder in the UK has never been easy, but the government offers several schemes specifically designed to help first-time buyers bridge the gap between renting and owning. With the Help to Buy equity loan scheme now closed to new applicants, understanding the current alternatives is more important than ever.

In this comprehensive guide, we explain every government scheme currently available to first-time buyers in 2025, how each one works, who is eligible, and how to make the most of them.

Lifetime ISA (LISA)

The Lifetime ISA is one of the most valuable savings tools available to first-time buyers. It offers a generous government bonus that can significantly boost your deposit savings.

How it works:

• You can save up to £4,000 per year into a Lifetime ISA
• The government adds a 25% bonus on your contributions — that is up to £1,000 per year in free money
• You must be aged 18 to 39 to open a Lifetime ISA, but you can continue saving into it until you turn 50
• The bonus is paid monthly, so your money starts growing immediately
• You can hold both a cash Lifetime ISA and a stocks and shares Lifetime ISA, but you can only pay into one each tax year

Using your LISA to buy a home:

• The property must cost £450,000 or less
• You must be a first-time buyer (you must not own and must never have owned a property anywhere in the world)
• You must be purchasing with a mortgage (you cannot use a LISA for a cash purchase)
• You must have held the LISA for at least 12 months before using it
• The funds are paid directly to your solicitor on completion

Important considerations:

• If you withdraw money from a LISA for any purpose other than buying your first home or retirement (after age 60), you will face a 25% withdrawal penalty, which effectively means you lose more than your bonus
• Both members of a couple buying together can each have a LISA, potentially providing up to £2,000 per year in combined bonuses
• You can combine LISA savings with other deposit sources, including gifted deposits and other savings

The Lifetime ISA is particularly effective for first-time buyers who are planning ahead. Even two or three years of maximum contributions can generate £2,000 to £3,000 in government bonuses, significantly boosting your mortgage deposit.

Shared ownership

Shared ownership allows you to buy a share of a property — typically between 25% and 75% — and pay rent on the remaining share. This dramatically reduces the deposit and mortgage amount needed, making homeownership accessible at a much lower income level.

How it works:

• You buy a share of a new-build or resale shared ownership property from a housing association
• You take out a mortgage on the share you are buying
• You pay rent to the housing association on the share you do not own (typically 2.75% of the housing association’s share per year)
• Over time, you can buy additional shares in the property — a process known as staircasing — until you eventually own the property outright

Eligibility:

• Your household income must be £80,000 or less (or £90,000 or less in London)
• You must be a first-time buyer, a previous homeowner who cannot afford to buy now, or an existing shared ownership holder looking to move
• You must not be able to afford to buy a suitable home on the open market in your area
• You must be able to demonstrate that you can afford the mortgage, rent, and other costs of homeownership

Deposit requirements:

• You typically need a deposit of 5% to 10% of the share you are buying, not the full property value
• For example, if a property is worth £250,000 and you buy a 40% share (£100,000), you might only need a deposit of £5,000 to £10,000

Recent improvements:

The government reformed shared ownership in 2021, introducing several improvements:

• A 10-year repair and maintenance period where the housing association covers the cost of essential repairs (for new-build shared ownership homes)
• Staircasing in 1% increments (up to 15% of the property value) for the first 15 years, making it easier to increase your share gradually
• A new model lease providing more consumer protections

Shared ownership is not without its complexities, particularly around staircasing costs, ground rent, and service charges. We cover this in detail in our shared ownership mortgages guide.

First Homes scheme

The First Homes scheme offers newly built homes at a discount of at least 30% (and up to 50% in some areas) compared to their market value. The discount is passed on each time the property is sold, ensuring it benefits future first-time buyers too.

How it works:

• Local councils and developers make a proportion of new homes available under the scheme
• Properties are sold at a minimum 30% discount to their open market value
• The discount is locked to the property permanently through a covenant on the title
• After the discount, the property must cost no more than £250,000 (or £420,000 in London)

Eligibility:

• You must be a first-time buyer
• You must be at least 18 years old
• Your household income must be £80,000 or less (or £90,000 or less in London)
• You must be able to secure a mortgage for at least 50% of the discounted price
• Local councils can add additional eligibility criteria, such as a local connection requirement, priority for key workers, or a lower income cap

Example:

If a new-build home has a market value of £300,000 and the First Homes discount is 30%, you would purchase it for £210,000. When you later sell, the new buyer must also be a first-time buyer, and they would purchase at the same 30% discount to the market value at that time.

Considerations:

• Availability is currently limited, as the scheme depends on local council policies and developer contributions
• The permanent discount means you cannot benefit from the full market value increase when you sell
• You cannot let the property out (it must be your main residence)

Mortgage Guarantee Scheme

The government’s Mortgage Guarantee Scheme encourages lenders to offer 95% loan-to-value (LTV) mortgages by providing a partial government guarantee to the lender. This is not a subsidy to the buyer — instead, it reduces the risk for lenders, making them more willing to offer high LTV products.

How it works:

• The government guarantees a portion of the mortgage to the lender, covering some of the risk if the borrower defaults
• This encourages lenders to offer mortgages with just a 5% deposit
• The scheme is available to all buyers (not just first-time buyers), but it is particularly helpful for first-time buyers who have limited savings

Eligibility:

• The property must be worth £600,000 or less
• The mortgage must be a repayment mortgage on a residential property (not buy-to-let or interest-only)
• Standard lender affordability and credit checks apply

Important notes:

• This scheme runs behind the scenes — you do not apply for it directly. Instead, you simply apply for a 95% LTV mortgage from a participating lender
• The interest rates on 95% LTV mortgages may be slightly higher than those available at lower LTVs, reflecting the higher risk
• Use our mortgage calculator to compare the cost of a 95% mortgage against saving a larger deposit

Stamp duty relief for first-time buyers

While not a government scheme in the traditional sense, the stamp duty relief available to first-time buyers in England and Northern Ireland is a significant financial benefit that effectively operates as a government incentive.

Current rates for first-time buyers:

• 0% on the first £300,000 of the property price
• 5% on the portion between £300,000 and £500,000
• If the property costs more than £500,000, no first-time buyer relief is available — you pay the standard rates

How much this saves:

Property price	FTB stamp duty	Standard stamp duty	Saving
£250,000	£0	£2,500	£2,500
£300,000	£0	£5,000	£5,000
£400,000	£5,000	£10,000	£5,000
£500,000	£10,000	£15,000	£5,000

Use our stamp duty calculator to calculate the exact amount for your purchase price.

Important:

• Both buyers must be first-time buyers to qualify — if one of you has previously owned property, the relief does not apply
• The property must be in England or Northern Ireland (Scotland and Wales have their own systems)
• Make sure your solicitor applies the relief correctly on your SDLT return

Right to Buy and Right to Acquire

If you are a council or housing association tenant, you may be able to purchase your home at a significant discount through the Right to Buy or Right to Acquire schemes.

Right to Buy applies to council tenants who have been tenants for at least three years. Discounts can be substantial — up to £96,000 in England (or £127,900 in London), depending on the property type and how long you have been a tenant. We cover this in full detail in our Right to Buy mortgages guide.

Right to Acquire applies to housing association tenants and offers discounts of between £9,000 and £16,000, depending on the region. Learn more in our Right to Acquire mortgages guide.

Both schemes can be combined with a mortgage, and the discount effectively serves as a deposit, often allowing you to borrow with a very low or zero personal deposit.

Schemes that have closed

It is worth noting which schemes are no longer available, as they are still frequently mentioned online and can cause confusion.

Help to Buy: Equity Loan — this scheme, which provided a government equity loan of up to 20% (40% in London) towards a new-build property, closed to new applicants in October 2022 and to completions in March 2023. If you have an existing Help to Buy equity loan, you will need to manage the repayment or refinance. Read our guide to Help to Buy in 2025 for advice on managing existing loans.

Help to Buy: ISA — this was replaced by the Lifetime ISA. If you opened a Help to Buy ISA before the closure date, you can continue to save into it, but new accounts are no longer available.

How to combine schemes for maximum benefit

Smart first-time buyers can combine multiple schemes and strategies to maximise their buying power:

1. Save into a Lifetime ISA to build your deposit with the 25% government bonus
2. Combine with gifted deposit funds from family if available
3. Claim stamp duty relief to reduce your upfront costs
4. Consider shared ownership if full market purchase is out of reach
5. Apply for a 95% LTV mortgage through a lender participating in the Mortgage Guarantee Scheme if you have a 5% deposit
6. Look into First Homes availability in your target area for potential discounts

The right combination depends on your personal circumstances, savings, income, and the local property market. At Option Finance, we help first-time buyers navigate all of these options and find the most effective route onto the property ladder.

Use our affordability calculator to understand your borrowing potential, and our repayment calculator to model different mortgage scenarios.

Get expert help navigating your options

The number of schemes and options available to first-time buyers can feel overwhelming, but you do not have to figure it all out alone. At Option Finance, our experienced mortgage advisers understand every scheme in detail and can help you determine which options are available to you and how to make the most of them.

Whether you are just starting to save, ready to make an offer, or unsure which direction to take, we are here to help. We also assist buyers with more complex situations, including adverse credit and those looking to move home after their initial purchase.

Apply now to speak with one of our specialist first-time buyer mortgage advisers and take the next step towards owning your home.