Only Have a Small Deposit? How the New2.5% Scheme Compares With Other First-Time Buyer Options

For many first-time buyers, the biggest obstacle to buying a home isn’t necessarily the monthly mortgage payment.

It’s getting the deposit together.

If you’re looking at a £300,000 property, a traditional 10% deposit means finding £30,000 before you even think about solicitors’ fees, moving costs and everything else that comes with buying your first home.

That’s why the government’s announcement of a new scheme allowing some first-time buyers to purchase with a deposit of just 2.5% has understandably attracted attention.

The new Your First Home scheme is expected to combine a 2.5% buyer deposit with a government-backed equity loan of up to 20% for qualifying new-build properties in England.

Full details are expected at the Budget.

But if you only have a small deposit, does that mean you should wait for this scheme?

Not necessarily.

There are already several different routes available to first-time buyers with smaller deposits.

The important thing is understanding how they differ.

TL;DR: What options do first-time buyers with small deposits have?

What is the new 2.5% deposit scheme?

The government announced Your First Home on 26 September 2026.

Under the proposed structure, eligible first-time buyers in England could purchase a qualifying new-build home with a deposit of 2.5%, supported by a government-backed equity loan of up to 20%.

The scheme will also have household income limits and local property price caps, although those figures have not yet been announced. Developers will need to sign up to participate.

For example, on a £300,000 property:

Your deposit at 2.5%: £7,500
Government equity loan at 20%: £60,000
Remaining amount: £232,500

Subject to affordability and lender criteria, you would then need a mortgage to cover the remaining amount.

That sounds attractive if saving a deposit is what’s holding you back.

But there is another side to it.

The important difference: an equity loan is not the same as a bigger mortgage

This is probably the biggest thing buyers need to understand.

If you take a conventional mortgage, you’re borrowing money from a mortgage lender.

With Your First Home, part of the purchase would instead be funded through a government equity loan.

The government has confirmed that the equity loan will have an initial interest-free period, but the detailed repayment arrangements have not yet been published.

That means we don’t yet know exactly what happens when you eventually repay it.

The previous Help to Buy scheme linked equity loan repayments to the value of the property at the time of repayment.

Whether Your First Home will operate in exactly the same way has not yet been confirmed.

So buyers shouldn’t simply compare:

2.5% deposit versus 5% deposit.

You need to compare the whole arrangement.

What if I can get a 95% mortgage instead?

A 95% mortgage normally means putting down a 5% deposit and borrowing the remaining 95% from the lender.

On a £300,000 property that would mean:

5% deposit: £15,000
Mortgage: £285,000

Compared with Your First Home, you would need to find more money upfront and potentially take a larger mortgage.

However, there would not normally be a separate government equity share to deal with later.

That creates a very different financial structure.

For some people, finding the additional deposit may be difficult.

For others, avoiding an equity loan may be more important.

That’s why looking at the full picture matters.

What about a 98% mortgage?

There are also mortgage products designed for buyers with deposits below the traditional 5%.

A 98% mortgage could potentially mean providing around 2% yourself and borrowing the rest from the lender, subject to the lender’s particular criteria.

This can sound similar to putting down 2.5% through Your First Home, but the structure is very different.

With a conventional 98% mortgage:

• You generally borrow more from the mortgage lender
• There is no government equity loan
• Interest is charged on the mortgage borrowing
• Your lender’s affordability and property criteria will determine whether you qualify

With Your First Home:

• The main mortgage could be smaller
• The government could provide up to 20% as an equity loan
• There will be an initial interest-free period on that equity loan
• The long-term repayment terms still need to be confirmed

Neither option should be judged simply by the size of the initial deposit.

Can you really buy a house with no deposit?

There are also some 100% mortgage products in the market.

These don’t normally mean that anybody can simply walk into a lender and borrow the full purchase price.

The criteria can be quite specific.

Some products may look at things such as:

• Your rental payment history
• Your income and affordability
• Your credit history
• Family support
• How long you’ve been renting
• The property’s value
• The lender’s individual affordability rules

For the right applicant, a 100% mortgage could remove the traditional deposit barrier altogether.

But it is not automatically suitable or available to everybody.

Can my parents help with my deposit?

Yes, and family support remains an important route for many first-time buyers.

This doesn’t always mean parents have to become joint owners of the property.

There are several possible structures.

Gifted deposit

A parent or family member may be able to give you money towards your deposit.

The lender will normally want confirmation that the money is genuinely a gift rather than an undisclosed loan.

Family-assisted mortgages

Some mortgage products allow parents or other family members to provide savings or other financial support without necessarily gifting the money permanently.

The structure varies between lenders.

Joint Borrower Sole Proprietor

A Joint Borrower Sole Proprietor, often shortened to JBSP, mortgage may allow another person’s income to support the affordability assessment without that person necessarily being named as an owner of the property.

This can sometimes help where income rather than the deposit is the main barrier.

Again, criteria differ between lenders.

What about Shared Ownership?

Shared Ownership is another route worth understanding.

Instead of purchasing the whole property initially, you generally buy a share and pay rent on the remaining portion.

You may then have the opportunity to purchase additional shares later.

That can reduce the amount you need to borrow initially.

However, Shared Ownership works very differently from both a normal mortgage and the proposed Your First Home scheme.

There can be rent, service charges and restrictions to consider alongside the mortgage.

It should be assessed as a separate home ownership route rather than simply another low-deposit mortgage.

Should I wait for the new 2.5% scheme?

This is a question we’re likely to hear a lot.

If you’re already in a position to buy, it doesn’t necessarily make sense to stop looking at your existing options simply because a new scheme has been announced.

Your First Home still has important details to be confirmed, including its implementation timeline. The government says those details are expected at the Budget.

In the meantime, you may already qualify for another mortgage route.

For example, you could potentially discover that:

• You can already buy with your existing deposit
• A 95% mortgage works for you
• You qualify for a higher loan-to-value mortgage
• Family support changes your affordability
• A gifted deposit is possible
• Shared Ownership suits your circumstances
• Waiting and saving a little longer gives you more options

The important thing is to understand where you stand now.

Then, when the full Your First Home details are available, you can compare it properly.

A smaller deposit doesn’t automatically mean a cheaper way to buy

This is an important point.

It is easy to see:

2.5% deposit

and assume that must be better than:

5% deposit

or:

10% deposit.

But deposit size is only one part of the calculation.

You also need to consider:

• Mortgage interest rates
• Monthly repayments
• Total borrowing
• Equity loan obligations
• Future property value
• Product fees
• New-build pricing
• How long you expect to own the property
• Your plans to move or remortgage
• What happens when any interest-free period finishes

For example, Your First Home is initially expected to be restricted to qualifying new-build properties from participating developers.

A new-build may cost more than an existing property of a similar size in the same area.

So the fact that one purchase requires a smaller deposit doesn’t necessarily mean it will cost less overall.

How do I know which small-deposit option is right for me?

Rather than starting with a particular mortgage product or government scheme, start with your own numbers.

Work out:

How much deposit do you actually have?

Not what you’d ideally like to have in six months. What could you realistically use now?

What monthly payment feels comfortable?

The maximum a lender may offer and the amount you actually want to spend each month are not necessarily the same.

How much can you borrow?

Your income is important, but lenders will also look at debts, commitments, dependants and other expenditure.

What type of property do you want?

Your First Home is currently expected to be focused on qualifying new-build properties. If you want an older property, it may not be relevant.

How long do you expect to stay there?

Your future plans can matter when comparing mortgages and equity-based schemes.

Once you know those answers, it becomes much easier to compare the routes available.

Our view at Greenstone Mortgages

We welcome anything that gives first-time buyers another realistic route onto the property ladder.

A 2.5% deposit could make home ownership feel much closer for people who have good incomes but are struggling to build a large deposit.

But we also don’t think first-time buyers should assume they have to wait for Your First Home.

The mortgage market already offers more options for smaller deposits than many buyers realise.

The right starting point is to look at all of your options, rather than deciding that one particular scheme or product must be the answer.

At Greenstone Mortgages, we can look at your income, deposit, affordability and circumstances and help you understand which routes may be available.

Then you can decide which one feels right for you.

First-time buyer small deposit FAQs

Can I buy a house with a 2.5% deposit?

Potentially.

The government’s proposed Your First Home scheme is expected to support eligible first-time buyers purchasing qualifying new-build homes with a 2.5% deposit and a government-backed equity loan of up to 20%.

There may also be other mortgage products available to buyers with relatively small deposits, depending on individual circumstances and lender criteria.

Do I need to wait for Your First Home if I only have a small deposit?

Not necessarily.

There are already low-deposit mortgage options available.

It can be useful to find out what you qualify for now and then compare those options with Your First Home once the final scheme details are announced.

Is a 2.5% deposit mortgage the same as Your First Home?

Not necessarily.

Your First Home is expected to combine the buyer’s 2.5% deposit with a government-backed equity loan of up to 20%.

A conventional low-deposit mortgage generally involves borrowing more directly from the mortgage lender instead.

Is Your First Home a 100% mortgage?

No.

The proposed structure combines your own deposit, a government equity loan and a mortgage.

That is different from a conventional 100% mortgage where the mortgage lender potentially provides the full purchase price, subject to its criteria.

Will I repay more than I borrowed through the government equity loan?

The detailed repayment calculation has not yet been confirmed.

The old Help to Buy equity loan was linked to the property’s value when the loan was repaid, but buyers should not assume the new Your First Home scheme will use exactly the same rules until the government publishes the full details.

Can my parents help me buy my first home?

Potentially, yes.

Depending on your circumstances and lender criteria, options could include a gifted deposit, family-assisted mortgage or Joint Borrower Sole Proprietor arrangement.

Is a 95% mortgage better than using an equity loan?

There isn’t one answer that applies to everybody.

A 95% mortgage may require a larger initial deposit and a larger mortgage.

An equity loan could reduce the mortgage required but creates a separate financial arrangement that may need to be repaid later.

The overall costs and your individual circumstances need to be compared.

Can I buy a new-build with a small deposit?

Potentially.

Your First Home is specifically expected to support qualifying new-build purchases, while other new-build mortgage options may also exist depending on the development, lender and your circumstances.

What’s the first thing I should do if I want to buy but have a small deposit?

Find out where you currently stand.

Understanding your affordability, likely borrowing capacity and available mortgage options can tell you whether your deposit is actually preventing you from buying or whether another route may already be available.

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Speak to Greenstone Mortgages

If your deposit is smaller than you’d like, don’t assume that means buying your first home is impossible.

There may be more options available than you realise.

At Greenstone Mortgages, we can review your deposit, income and affordability and explain the different routes you may be able to consider.

That could include a conventional low-deposit mortgage, family support, Shared Ownership or, once the full details are available, the new Your First Home scheme.

Speak to the Greenstone Mortgages team to understand your first-time buyer options.

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Important information: The Your First Home scheme has been announced, but the final terms have not yet been published. Information in this article is based on the government announcement of 26 September 2026 and may change when further details are announced at the Budget.

This article is for general information only and does not constitute personal mortgage advice. Recommendations depend on individual circumstances, affordability and lender criteria.

Your home may be repossessed if you do not keep up repayments on your mortgage.