Buying your first home in the UK can feel overwhelming, especially when navigating the range of government-backed schemes available.
Two popular options in 2025 are the First Homes Scheme and the Lifetime ISA (LISA).
While both are designed to help first-time buyers, they operate very differently. This article will compare the First Homes Scheme vs LISA to help you decide which route best suits your journey to homeownership.
What Is the First Homes Scheme?
Launched in 2021, the First Homes Scheme offers newly built properties at a 30% to 50% discount compared to market value. It’s aimed at first-time buyers, particularly key workers and local residents, helping them stay in the communities they serve.
Key Features:
- Discount: Minimum 30%, up to 50% in some areas
- Eligibility: First-time buyer, income under £80,000 (£90,000 in London)
- Property Type: New builds only
- Resale Rules: Must pass on the same percentage discount to the next buyer
- Price Cap: £250,000 after discount outside London, £420,000 in London
- Local Connection: Many councils require local residency or employment
This scheme is particularly attractive to key workers like nurses, teachers, and military personnel looking to buy in high-cost areas.
What Is a Lifetime ISA (LISA)?
A Lifetime ISA is a long-term savings account for people aged 18 to 39. It allows you to save up to £4,000 per year, and the government adds a 25% bonus on contributions (up to £1,000 annually). The money can be used to:
- Buy your first home (valued up to £450,000)
- Save for retirement (accessible after age 60)
Key Features:
- Eligibility: First-time buyers aged 18–39
- Bonus: 25% annual government bonus on savings
- Usage: Must be used for first home or retirement
- Withdrawal Penalty: 25% charge if withdrawn for non-qualifying reasons
- Property Type: Any home under £450,000 (not limited to new builds)
LISA funds can be combined with a mortgage to cover your deposit and other costs.
Comparison Table – First Homes Scheme or LISA
| Feature | First Homes Scheme | Lifetime ISA (LISA) |
|---|---|---|
| Type | Property discount | Government-backed savings bonus |
| Buyer Eligibility | First-time, local priority | First-time buyer, age 18–39 |
| Max Home Value | £250,000 (£420k in London) | £450,000 (UK-wide) |
| Government Contribution | 30–50% discount | 25% bonus on savings |
| Repayment/Resale | Resell with same discount | None (except penalty if early) |
| Property Type | New builds only | Any property below limit |
| Flexibility | Limited to scheme homes | Nationwide use, very flexible |
Can You Use Both Together?
Yes, in many cases you can use a Lifetime ISA to help fund a purchase through the First Homes Scheme, as long as the home meets the LISA rules (under £450,000 and a first-time purchase).
You can use your LISA savings toward the deposit or closing costs on a First Home Scheme property.
Things to Check:
- Does the property price fit LISA rules? It must be below £450,000
- Do lenders accept both? Most mortgage providers now accommodate both
- Check local authority restrictions: Some councils may have limitations
Pros and Cons Breakdown
First Homes Scheme
Pros:
- Significant upfront discount of 30% to 50%
- Great for key workers and people tied to a local area
- No repayment of discount required
Cons:
- Resale restrictions (you must sell at the same discount)
- Limited availability in some regions
- Only applies to new builds
Lifetime ISA (LISA)
Pros:
- 25% government bonus on your savings
- Use for any eligible home (not just new builds)
- No resale restrictions
- Can also be used for retirement savings
Cons:
- Age-limited (only available to those aged 18–39)
- Withdrawal penalty if funds used for anything else
- Annual cap of £4,000 on contributions
Which Is Better in 2025?
There is no one-size-fits-all answer. Here’s when each option makes more sense:
Choose the First Homes Scheme if:
- You’re a key worker or meet local residency criteria
- You’re buying a new build and meet the income threshold
- You want a large discount up front and plan to stay long-term
Choose LISA if:
- You’re still saving for a deposit and want to grow your savings tax-free
- You prefer a wider choice of properties, not just new builds
- You’re not eligible for the First Homes Scheme (e.g., you don’t meet local requirements)
Best of Both Worlds:
If you’re eligible, using your LISA to fund a First Homes Scheme purchase could offer huge benefits: the discounted home price and bonus savings together could make homeownership much more affordable.
People Also Ask (FAQs)
Can I use both a LISA and the First Homes Scheme?
Yes, if the property is under £450,000 and meets both scheme requirements.
Is the First Homes Scheme still available in 2025?
Yes. As of 2025, the scheme is active and expanding across more local councils in the UK.
What happens if I withdraw money from my LISA early?
You pay a 25% penalty on the amount withdrawn unless it’s used to buy your first home or you’re over 60.
Can I use LISA to buy a new build through First Homes Scheme?
Yes, as long as the home is priced under £450,000 and you’re eligible for both schemes.
Which is better: First Homes Scheme or LISA?
If you have savings and want flexibility, LISA is great. If you qualify for a local housing discount, First Homes offers a bigger immediate cost saving.
Conclusion
When comparing the First Homes Scheme vs LISA, the best option depends on your financial situation, location, and timeline.
If you’re ready to buy and meet local criteria, the First Homes Scheme gives you a significant discount up front. If you’re still saving and want flexibility and a guaranteed bonus, the Lifetime ISA might suit you better.
Many first-time buyers in 2025 can benefit from combining both options for maximum affordability. Just make sure to check eligibility rules, local restrictions, and property price caps before you decide.
Take your time to understand each scheme and speak to a mortgage advisor or housing expert to see how they can work in your favour. Getting on the property ladder might be easier than you think—especially with the right support.