There’s good news for first time buyers in Scotland who, from 1 April 2021, will have the chance to apply for up to £25,000 to support them in buying a new build or second hand property through the Scottish government’s First Home Fund. Yet, warns Your Move, it's important to act fast if you want to take advantage of it – here’s why.
What is the Fund?
It’s a shared equity scheme that’s been made available by the Scottish government. The Fund offers first time buyers in Scotland up to £25,000 (or up to 49% of the property valuation figure or purchase price - whichever is lower) towards the cost of a new or second hand property. The buyer has, however, to provide a minimum deposit of 5% of the value of the property and have a capital repayment mortgage available to cover the remaining price of the property – at least 25% of its value.
Why should buyers act quickly to gain support from the Fund?
Last year, when the First Home Fund launched, it proved to be very popular and it took just ten months for the original funding to be claimed. It’s possible, therefore, that there will be a similar rush from buyers who want to take advantage of it and, because there is less funding available this time, that it will become unavailable well before the intended closure date of 31 March 2022.
Will the government have ownership of the property being bought with the help of the Fund?
No. The property will be owned by the buyer but, when the property comes to be sold, the Scottish government will expect the equity share they have put into the property to be paid back to them. For example, if the first time buyer managed to cover 90% of the value of their property with their deposit and mortgage, and only gained 10% of its value from the First Home Fund, they will need to pay 10% of the sale price back to the government.
How do buyers apply for the Fund?
In its First Home Fund Guidance Leaflet the Scottish government recommends that, before applying to the Fund, first time buyers should gain advice from a Financial Adviser to help them in understanding how much money they may be able to borrow from a mortgage lender and what deposit and additional funding (from the Fund) may be required. It’s worth noting that whilst the Scottish government requires a minimum 5% deposit to be paid, for example, it’s possible that some mortgage lenders may ask for a higher amount in return for offering a more competitive mortgage deal. A good Financial Adviser will be able to offer advice on this and ultimately find the best mortgage for the buyer’s individual circumstances and budget.
What can buyers do now – in advance of the Fund becoming available?
It’s important that first time buyers start researching the location they want to live and what kind of properties may be on offer there – and at what price. This should help them in understanding how much mortgage, deposit and additional funding they may need. They should also start reviewing their spending and identify ways in which they could save money to make sure that, when it comes to applying for a mortgage, lenders will consider them suitable borrowers. There’ a handy first time buyers guide on the Your Move website that provides advice about this. And, to further improve the chances of securing funding from the First Home Fund, it would be a good move to book an appointment with a Financial Adviser.
Overall the Fund is a great opportunity for many first time buyers in Scotland and clearly not one to miss.
If you’d like to find out more about the First Homes Fund – and other options that may be open to you as a buyer – why not book an appointment with a Financial Adviser from Embrace Financial Services (who work in partnership with Your Move) today.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Embrace Financial Services usually charges a fee for mortgage advice. The amount of the fee will depend upon your circumstances and will be discussed and agreed with you at the earliest opportunity.
The Your Move Content Marketing Team
