UK First-Time Buyer Schemes: What Each One Actually Gets You
Five government schemes claim to help first-time buyers, but most people pick the wrong one and pay for it for years.
By Firoz Khan|9 May 2026|Updated 20 September 2026|6 min read
Estate agents and mortgage brokers will point you towards whichever scheme is easiest for them to process, not whichever one saves you the most money. A Lifetime ISA and the Mortgage Guarantee Scheme solve completely different problems, and using them interchangeably is how people end up with a 95% mortgage they didn't need or a Shared Ownership lease with staircasing costs nobody explained. Here is what each scheme actually does, what it costs you to get wrong, and which one fits your situation.
Lifetime ISA: the 25% bonus with strings attached
You can put up to £4,000 a year into a Lifetime ISA and the government adds 25% on top, so £4,000 becomes £5,000. That bonus is paid monthly, not at the end of the year, so money in early earns interest or growth on the bonus sooner. The catch is the property price cap: the home you buy must cost £450,000 or less, a figure that has not moved since 2017 while average first-time buyer prices in London and the South East have risen past it. Withdraw the money for anything other than a first home or after age 60 and you lose a 25% penalty, which claws back more than just the bonus.
Mortgage Guarantee Scheme: 95% LTV without the bigger deposit
This scheme does not give you money. It gets the government to guarantee part of a lender's losses if you default, which persuades more lenders to offer 95% loan-to-value mortgages to buyers with only a 5% deposit. On a £250,000 property that means a £12,500 deposit instead of £25,000 for a 90% LTV deal. The trade-off is the interest rate: 95% LTV mortgages typically carry a rate 0.5 to 1 percentage point higher than 90% LTV ones, which on a £237,500 loan can add over £1,500 a year in interest until you remortgage at a lower LTV band.
Shared Ownership: buying a slice, renting the rest
Shared Ownership lets you buy between 10% and 75% of a property's value and pay rent, usually around 2.75% annually, on the share you do not own. On a £300,000 flat, buying a 40% share costs £120,000 to mortgage and deposit, plus rent of roughly £4,950 a year on the remaining £180,000. Staircasing lets you buy further shares later, but each purchase requires a new valuation, and if the property has risen in value you pay the higher price for that extra share, not the original one. Legal and valuation fees apply on every staircasing transaction, typically £1,000 to £3,000 each time, which people rarely budget for.
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First Homes scheme: a discount tied to your postcode and job
First Homes offers a discount of 30% to 50% off the market price on new-build homes, but eligibility is restricted to local residents or key workers such as nurses, teachers and police officers, and the discount is written into the property's title so it applies to every future sale too. A £300,000 home with a 30% discount costs £210,000, but you need a mortgage lender willing to work with the restricted resale terms, and not all of them are. Availability also depends entirely on whether developers in your area have allocated First Homes units, which many have not.
Stamp duty relief for first-time buyers
In England, first-time buyers pay no stamp duty on properties up to £300,000, and a reduced rate of 5% on the portion between £300,000 and £500,000. Above £500,000, the relief disappears entirely and you pay standard rates on the whole amount. On a £400,000 purchase that relief saves £5,000 compared to a non-first-time buyer, but on a £650,000 purchase you get nothing, since that figure exceeds the upper threshold. Check the current threshold before you offer on a property, because these limits have changed before and will likely change again.
Scotland and Wales run different schemes entirely
The Lifetime ISA and Mortgage Guarantee Scheme apply UK-wide, but stamp duty relief does not. Scotland charges Land and Buildings Transaction Tax instead, with first-time buyer relief on properties up to £175,000, a much lower threshold than England's £300,000. Wales charges Land Transaction Tax and offers no separate first-time buyer relief at all, meaning Welsh first-time buyers pay the same rate as everyone else. If you are buying near a border or relocating, check the actual devolved tax rules rather than assuming the England figures apply.
Which scheme actually suits which buyer
If you have years before you buy and are saving steadily, a Lifetime ISA is close to free money, provided your target property stays under £450,000. If you have a reasonable income but a thin deposit, the Mortgage Guarantee Scheme gets you moving sooner at the cost of a higher rate. If your income cannot stretch to a full mortgage on a property you like, Shared Ownership lowers the entry cost but adds rent and staircasing complexity. If you work in an eligible profession and a developer nearby has First Homes stock, that discount usually beats the others outright.
Where people get this wrong
The most common mistake is not checking eligibility before making plans around a scheme. Lifetime ISA withdrawals for a home over £450,000 trigger the 25% penalty, not just a loss of bonus, so buyers who stretch their budget at the last minute can lose money they put in themselves. Shared Ownership buyers frequently underestimate staircasing costs, assuming the next share costs a proportional amount of the original price rather than a fresh valuation. And several schemes cannot be combined the way people expect. A Lifetime ISA can sit alongside a Mortgage Guarantee Scheme mortgage, but Shared Ownership and First Homes properties often have restrictions on which mortgage products and government schemes can be used together, so confirm this with a broker before you fall for a specific property.
A reminder
The FCA risk warning still applies to higher-risk crypto content. Always assess how much risk you are willing to take before buying.
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