The Scottish Government has announced that applications for the First Homes Fund will open by the end of June. It will offer a shared equity option for first time buyers, with up to £10,000 contributed by the Government. In England, the First Homes Scheme already exists, also offering financial help for first time buyers but in the form of a government-funded discount, which will be passed on to the next owner when the time comes.
The two initiatives could provide much-needed support for those looking to purchase a first home, but they are quite different. Here, we’ll break down how each works, their key benefits, and how they could help you take a first step onto the property ladder with a new build home.
Government first time buyer schemes at a glance
- The First Homes Fund is available in Scotland and will provide an equity contribution of up to £10,000 to buy a home with a value of up to £300,000.
- The equity contribution is repaid to the Scottish Government when the home is sold.
- The First Homes Scheme is available in England and offers a 30-50% discount on the market value of a new build home, which is then passed on to the next owner when the home is sold.
- Both schemes are aimed at first time buyers.
- Each scheme has specific criteria, such as income requirements and market value of the home.
- The added benefits of new build homes make these schemes particularly attractive for first time buyers.
- Cala can help advise you on how these schemes might work for your situation
What is the First Homes Fund?
The First Homes Fund is a deposit boost from the Scottish Government to help with initial affordability of a home for first time buyers in Scotland. The government provides a loan of up to £10,000 to buy a new build or second-hand home with a value of up to £300,000. The buyer will own the property, with the government retaining an equity share which will normally be repaid when the home is sold. There are no monthly payments on the loan, and it is interest-free.
What is the First Homes Scheme?
The First Homes Scheme is a government-funded discount on the purchase price of homes for first time buyers in England. It offers a 30-50% discount on the market value of a new build home (or a home you are buying second-hand that was bought as a new build through the scheme by a previous owner). After the discount, properties must cost no more than £250,000 or £420,000 in London. Individual councils set local eligibility criteria and generally they prioritise granting the discounts to people who already live locally, local keyworkers and those on lower incomes. You must be able to secure a mortgage for at least half the cost of the home and not earn more than £80,000 a year before tax as a household (£90,000 if the home is in London). When you sell the home, the percentage discount gets passed on to the next eligible buyer.
What are the key differences between the First Homes Fund and the First Homes Scheme?
While both schemes can help first time buyers get a foot on the property ladder, there are various key differences, summarised here:
| Point of difference | First Homes Fund, Scotland | First Homes Scheme, England |
| Type of support | Shared-equity contribution from the Scottish Government | Discounted market-sale home |
| Main benefit | Up to £10,000 towards buying a first home | Minimum 30% discount on the market value of the home; some areas may get 40% or 50% |
| Where it applies | Scotland | England |
| Who it is for | First-time buyers in Scotland | First-time buyers in England, with local authorities able to prioritise key workers, local residents or other local groups |
| New build or second-hand? | Can be used for new-build or existing properties | Applies to specific First Homes properties, typically new-build homes delivered through the planning system |
| Property price cap | Property must not be worth more than £300,000 | After the discount, the First Home must cost no more than £250,000, or £420,000 in London |
| Income cap | No income cap, open to all first-time buyers | Household income must usually be no more than £80,000, or £90,000 in London |
| Mortgage requirement | Buyer must be purchasing with a mortgage | Buyer must be able to get a mortgage covering at least 50% of the discounted purchase price |
| What happens when you sell? | The Scottish Government’s equity share is repaid | The same percentage discount is passed on to the next eligible buyer, so the home remains discounted in perpetuity |
| Impact on ownership | The buyer owns the property, but the Scottish Government has an equity stake | The buyer owns the property, but it carries resale restrictions so the discount is preserved |
What are the benefits of these schemes for first time buyers?
In Scotland, the key benefit is that the First Homes Fund can reduce the deposit amount you need to save, with the fund’s £10,000 ‘topping up’ your own savings. Depending on your criteria and what’s available, it could also mean that your loan-to-value ratio is more favourable, unlocking more mortgage options and better rates.
For those in England, the First Homes Scheme’s main benefit is reducing the overall cost of the home you are purchasing, by at least 30% or even up to 50%. This means the deposit required and your monthly mortgage payments will be lower. Essentially, you’ll need to borrow less than you would for a similar home at full market value.
Both schemes could cut down the time you need to save and make your move possible sooner. They might also mean that you can afford a property that will suit your needs for longer in terms of space, location, energy efficiency and future maintenance, especially with new build homes.
Examples of each first time buyer scheme in action
First Homes Fund, Scotland
| Item | Without First Homes Fund | With First Homes Fund |
| Property price | £250,000 | £250,000 |
| Buyer’s own 5% deposit | £12,500 | £12,500 |
| First Homes Fund contribution | £0 | £10,000 |
| Mortgage required | £237,500 | £227,500 |
| Effective loan-to-value | 95% | 91% |
First Homes Scheme, England
| Item | Without First Homes Scheme | With First Homes Scheme |
| Market value of property | £250,000 | £250,000 |
| First Homes discount | £0 | 30% |
| Discount amount | £0 | £75,000 |
| Price paid by buyer | £250,000 | £175,000 |
| Buyer’s own 5% deposit | £12,500 | £8,750 |
| Mortgage required | £237,500 | £166,250 |
| Effective mortgage as share of market value | 95% | 66.5% |
What potential buyers should do next
- Look at the Cala developments that interest you
- Reach out to us – our team will be able to tell you which locations and plots are eligible for each scheme
- Speak to an independent mortgage advisor who will be able to tailor advice based on your circumstances – we can put you in touch with our trusted partners
- Work out what you can afford and whether the schemes are right for you
These schemes could make buying feel more achievable for first time buyers, both when it comes to saving a deposit and even with ongoing affordability. And with new build homes offering more certainty for purchasers, with a smoother buying process and less maintenance going forward, using these schemes to secure a brand new home could be a smart move.
For more information, visit the First Homes Fund page.
*Available on selected homes.
Eligibility terms and conditions apply for both schemes and independent mortgage advice is recommended.
