Understanding First Homes discount scheme, how student loans affect affordability, regional variations across England, eligibility with student debt, and strategic assessment for graduates
First Homes provides 30-50% discount on new build properties in designated areas, helping first-time buyers and key workers overcome affordability barriers created by student loan debt. A property with £200,000 market value becomes £140,000 with 30% discount, requiring £126,000 mortgage instead of £180,000—a reduction that partially offsets the borrowing capacity loss from student loan repayments. For graduates earning £35,000 with £75 monthly student loan payments, this discount can make the difference between being priced out and accessing homeownership.
However, First Homes comes with strict eligibility criteria including household income caps (£80,000 nationally, £90,000 in London), local connection requirements, and permanent resale restrictions maintaining the discount for future buyers. Regional variations mean some areas offer better opportunities than others, with different local authorities setting additional criteria, priority groups, and availability levels. Understanding how the scheme interacts with student debt, which regions offer the best prospects, and whether the long-term restrictions are acceptable helps graduates determine if First Homes represents genuine opportunity or false economy.
First Homes launched in June 2021 as England's primary affordable homeownership scheme, replacing previous programmes with a simplified discount model.
Property in Birmingham region:
Market details:
Finance required:
Graduate affordability (£35k salary, £75/mo loan):
The 30-50% discount partially compensates for reduced borrowing capacity from student loans, but does not eliminate affordability challenges entirely.
Graduate earning £38,000, £97.50 monthly student loan payment
| Scenario | Property Price | Mortgage Needed | Affordable? |
|---|---|---|---|
| Open market | £210,000 | £189,000 (90%) | ✗ No |
| First Homes (30%) | £147,000 | £132,300 (90%) | ~ Marginal |
| First Homes (40%) | £126,000 | £113,400 (90%) | ✓ Yes |
Max mortgage capacity with student loan: ~£151,000 at 4.5x minus loan impact. First Homes discount makes previously unaffordable properties accessible.
First Homes purchase: £147,000 (30% discount), £132,300 mortgage at 5% over 25 years
Monthly housing costs:
Other commitments:
Income vs costs:
£80,000 household income cap (£90,000 London):
First Homes is England-only, with each local authority setting additional criteria and availability. Scotland, Wales, and Northern Ireland operate different schemes.
London Boroughs
South East (Surrey, Sussex, Kent)
Midlands (Birmingham, Nottingham, Leicester)
North (Manchester, Leeds, Newcastle)
Scotland:
Wales:
Northern Ireland:
First Homes eligibility focuses on buyer status and income, with student loans affecting mortgage approval but not scheme eligibility directly.
1. Buyer status (must meet one):
2. Income limit:
3. Mortgage requirement:
4. Local connection (if LA requires):
Typical graduate scenario:
| Criterion | Status | Notes |
|---|---|---|
| First-time buyer | ✓ Yes | Most graduates qualify |
| Income limit | ✓ Usually | £35k-£45k typical |
| Mortgage approval | ~ Challenge | Student loans reduce capacity |
| Local connection | ✓ Often | Living/working locally |
Understanding how the permanent discount affects long-term equity growth and resale prospects is critical for assessing First Homes value.
Example property over 20 years:
| Year | Market Value | Your Sale Price (30% off) | Equity Gained |
|---|---|---|---|
| Purchase (2025) | £200,000 | £140,000 | £0 |
| Year 5 (2030) | £240,000 | £168,000 | £28,000 |
| Year 10 (2035) | £290,000 | £203,000 | £63,000 |
| Year 20 (2045) | £420,000 | £294,000 | £154,000 |
Reality: You gain 70% of appreciation, but lose 30% to permanent discount. Open market owner gains full £220,000 appreciation.
Both buyers start with £14,000 deposit:
First Homes route:
Open market route (wait 2 years, buy smaller):
Long-term winner: Depends on appreciation rate and flexibility value
Determining whether First Homes offers genuine value for graduates with student debt requires honest assessment of priorities and long-term plans.
Discount reduces mortgage needed by £60,000-£100,000, offsetting student loan impact. However, permanent resale discount caps equity gains at 70% of appreciation. Best for graduates committed long-term to area, priced out of open market otherwise. Consider whether waiting 1-2 years for open market access beats accepting restrictions.
Calculate your First Homes affordability with our First-Time Buyer Affordability Calculator.
First Homes provides 30-50% discount on new build properties, reducing the mortgage amount needed. This helps offset student loan impact on borrowing capacity. For example, a £300,000 property with 30% discount costs £210,000, requiring a £168,000 mortgage (80% LTV) instead of £240,000. Student loans still reduce borrowing capacity, but the lower purchase price makes homeownership more achievable.
First Homes properties must be sold at the same discount percentage to other eligible buyers, permanently. This means you only keep 70% of any property value appreciation when selling. Properties are limited to designated areas and new builds only. You must be a first-time buyer, meet local connection requirements, and income caps apply (typically £80,000 outside London, £90,000 in London). Price caps are £250,000 (£420,000 London).
It depends on your timeline and location. First Homes works if you're priced out of open market, committed to the area long-term, and can accept permanent discount restrictions. Waiting 1-2 years allows career progression, salary growth, and deposit savings - potentially enabling open market purchase with full equity gains. Compare total costs: First Homes gets you in sooner but caps equity; waiting may enable better long-term financial outcome if you can afford to wait.
Student loans don't affect First Homes eligibility criteria (first-time buyer status, income caps, local connection). However, they still reduce mortgage borrowing capacity, meaning you need a larger deposit or must target cheaper properties within the scheme. The 30-50% discount helps offset this by reducing the mortgage amount needed, but you still need to pass lender affordability checks that include student loan deductions.
Yes, Lifetime ISA can be used with First Homes. The 25% government bonus on LISA contributions helps build your deposit faster. Combined with First Homes discount, this significantly reduces the mortgage amount needed. For example, £20,000 LISA savings (£16,000 + £4,000 bonus) plus First Homes 30% discount on £250,000 property means you only need a £140,000 mortgage instead of £200,000. This makes homeownership much more achievable with student loans.
You must sell at the same discount percentage (30-50%) to another eligible First Homes buyer. If the property value increased from £250,000 to £300,000, you sell at £210,000 (30% discount) instead of £300,000. You keep 70% of the appreciation (£35,000 gain on £50,000 increase). This permanent discount restriction means you'll never realize full equity gains, but it also means you can buy your next property at a discount if you stay in the scheme.
Discover additional tools and guides to help you navigate property ownership with student loans
UK Education Policy Specialist
With over 15 years of experience in UK education policy and student finance, Dr. Sharma founded Student Loan Calculator UK to help students navigate the complex world of student loans.