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By Pete Mugleston | Mortgage Advisor

Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 11th March 2020*

For first-time buyers in Scotland looking to take their first tentative steps on the property ladder the recently introduced First Home Fund shared equity scheme offers a fantastic opportunity to finally turn this dream into a reality. 

In this article, we take a closer look at how the First Home Fund works, who can participate and which providers are able to help with your lending requirements. 

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What is the First Home Fund and how does it work? 

The First Home Fund is a £150 million scheme launched on a shared equity basis by the Scottish Government on 18th December 2019 with the specific aim of assisting first-time buyers buy a property in Scotland. The scheme provides funding assistance up to a maximum of £25,000 or 49% of the property’s value, whichever is lower. 

The table below provides some examples of how this works in practice.

Property Value Maximum Funding Assistance Available % of Property Value
£40,000 £19,600 49%
£50,000 £24,500 49%
£100,000 £25,000 25%
£150,000 £25,000 16.7%

The funding assistance is available on both new-builds or existing properties on a ‘per property’ basis, therefore, any joint applicants are only able to claim one amount between them. There are no maximum purchase price restrictions on the property you’re looking to buy. 

How does shared equity work? 

Shared equity schemes allow for the full cost of purchasing a property to be split between two parties. In this instance a first-time buyer funds their share using a cash deposit and a mortgage with the remaining share provided by the Scottish Government. 

There is no requirement for the buyer to make any regular monthly repayments or interest payments towards the government’s equity share (unless they choose to do so). A buyer is only required to repay the equity upon the sale of their property.  

So, using one of the examples above, if a first-time buyer wishes to buy a house with a purchase price of £100,000 they would need to raise £75,000 (75%) with the other £25,000 (25%) covered by the government. When the property is eventually sold, the owner keeps 75% of the sale price with the remaining 25% paid to the government. 

Despite the equity share, the Scottish Government has no rights to ownership and the buyer will hold the full title deeds to the property. 

Do I still need a deposit? 

Yes, you will. All first-time buyers will need to contribute a minimum deposit of 5% towards the purchase price. Any mortgage lending must also be equivalent to at least 25% of the purchase price. 

Can I use an existing Help to Buy or Lifetime ISA towards my deposit?

Yes, this is possible. Both Help to Buy and Lifetime ISAs receive an additional 25% uplift from the UK government on top of the amount you have already saved and both of these tax-efficient savings schemes can be used towards your deposit requirements. 

If you’d like to know more about how the First Home Fund works give us a call on 0808 189 2301 or get in touch and we’ll arrange for one of the advisors we work with to contact you directly. 

Our advisers are regulated by The Financial Conduct Authority and so you will be dealing with a highly trained person that adheres to strict rules of conduct.

Who can apply for the First Home Fund scheme?

If you’re a first-time buyer living in Scotland you can submit an application for financial assistance from the First Home Fund. A first-time buyer is defined as someone who has never previously owned a property in Scotland, other UK countries or the rest of the world.  

The property you’re looking to purchase must be bought on the proviso it is used as your main residence. The scheme is not available to use for a potential buy-to-let property.  

In the case of joint applications, only one of the applicants needs to qualify as a first time buyer. However, any joint applicant must have completed the sale of any existing property before completing a purchase using assistance from the First Home Fund scheme. 

Can I use the First Home Fund if I’m a cash buyer? 

The First Home Fund is only available to first time buyers who are using a mortgage (and only on a capital repayment basis). If you’re a cash buyer you cannot apply to this particular scheme for additional financial assistance. 

How do I apply for the funding?

Once you’ve found a property in Scotland you wish to buy you first need to have had an offer accepted by the current owner (oral agreement is fine). At this stage you can then proceed with an online application for financial assistance from the First Home Fund scheme. 

You must submit the application, including all the relevant particulars relating to the purchase, before your solicitor completes their legal missives regarding the property you’re looking to buy. 

An Administering Agent will then conduct a sustainability assessment to ensure you have sufficient disposable income to cover your total outgoings, including your mortgage repayments. If satisfied, an Award Letter will then be forwarded to your solicitor.  You then have three months to complete the purchase. 

The Scottish Government recommends all first-time buyers interested in the First Home Fund seek independent financial advice to ensure this scheme suits their requirements. This is where we can help. 

The advisors we work with can discuss this scheme and others with you in detail so you can make an informed choice as to what financial assistance you can and should apply for. 

Which lenders are able to offer mortgage lending for First Home Fund properties in Scotland? 

The official Scottish government website for the First Home Fund provides an up to date list of providers able to offer mortgage lending for any properties purchased using the scheme.

However, in the first instance, it is recommended to speak with an independent mortgage advisor who will be able to help find the best offers from amongst this list which suits your personal requirements. 

Give us a call on 0808 189 2301 or get in touch and we can arrange for an expert to contact you to discuss this with you in more detail.   

Speak to a mortgage expert 

The First Home Fund scheme is a terrific opportunity for first-time buyers who are looking to purchase a property in Scotland. However, it’s important you seek help from an experienced advisor who will be able to guide you through the process. 

The advisors we work with can offer the expert knowledge and advice you need, tailored to your own circumstances. 

All advice is free and any information is always given in the strictest confidence. Call us on 0808 189 2301 or make an enquiry to get started.

Updated: 11th March 2020
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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.