Buying your first home can be one of the most exciting times of your life. The buzz of viewing properties to picking out decor and furniture to make the house a home. However, it can also be a very daunting prospect. The thought of saving a large deposit or the worry of committing to a hefty monthly repayment, there are plenty of things that can be off putting. What you may not know is there are various schemes and help to get your foot on the property ladder.
Many of the schemes available are shared equity schemes. A shared equity scheme is where the government or third party gives you a percentage of the purchase price for a percentage of the property you are looking to buy.
When using a scheme like this a lender will still expect you to have a deposit saved, minimum of 5%. You can pay back most shared equity schemes at any time, but they must be repaid when you sell the home. As it is a percentage of the equity that is owned, you may repay more or less than originally granted, dependant on the value of the property at the time.
First Home Fund
The First Home Fund is available to all first-time buyers in Scotland. It is a shared equity scheme where the government will give you up to £25,000 towards purchasing your first home. This scheme is available for both new build and existing properties, lenders will be looking for you to have at least a 5% deposit saved yourself.
One key benefit of the First Home Fund is that there is no monthly or interest payments to be made. You can increase your own equity share by buying at least 5% back from the government at a time up to 100%. Like all other shared equity schemes the equity share must be repaid if the property is sold.
Purchase price– £150,000
Personal deposit– £7,500 (5%)
First Home Fund– £ £24,000 (16%)
Mortgage required– £118,500
With receiving the contribution from the Scottish Government, it could mean you are able to buy a property that was previously too expensive or keep monthly mortgage payment more affordable. Now let’s look at the scenario if you were to sell the above property for a profit.
Selling price– £160,000
Repay First Home Fund– £25,600 (16%)
The 16% you repay is based on the selling price. In theory you could also pay less if the selling price is less than the original purchase price.
Help to Buy (Scotland)
This scheme is for when you want to buy a new home and need some help for affordability. The scheme is designed to help get on the property ladder or move into a bigger property. It is open to both first-time buyers and existing homeowners and can offer up to 15% towards the purchase price of a new build home.
As with the First Home Fund you will require a personal deposit of 5% minimum. Help to Buy (Scotland) requires your mortgage and deposit to make up a minimum of 85% of the purchase combined. Again, with this scheme you are able to buy back the equity share at any time. It will need to be repaid when the property is sold.
The main differences between Help to Buy (Scotland) and the First Home Fund are, Help to Buy is only on new builds whereas the First home Fund can be used for existing properties and new builds. The maximum amount available on First Home Fund is £25,000 whereas Help to Buy will offer 15% of the purchase price with a maximum purchase price of £200,000.
LIFT (Low-cost Initiative for First Time Buyers)
There are two separate LIFT schemes: the Open Market Shared Equity scheme and the New Supply Shared Equity scheme.
The Open Market Shared Equity scheme is to help people buy their first home on the open market, so an existing property not a new build. There are thresholds on purchase price and the size of property dependant on where the property is and how many people will be living there.
The New Supply Shared Equity scheme is to assist in buying a new build home from either a local council or housing association. With the LIFT scheme the equity share can be bought out at any time, either partially (5% at a time) or in full.
However, in some cases, where there is a limited supply of affordable housing Scottish Ministers may retain an equity share of around 10% in the Open Market Shared Equity scheme or 20% in the New Supply Shared Equity scheme, this is known as the Golden Share.
Forces Help to Buy
The Forces Help to Buy scheme allows servicemen and servicewomen to borrow up to 50% of their salary. It is an interest free loan to either buy their first home or to move to another home on assignment or if there is a change in family circumstances. The maximum that can be borrowed is £25,000 and can be used towards the deposit and other costs, like solicitor fees.
All regular personnel are eligible as long as they have completed at least 2 years of service. Personnel must have at least 6 months left to serve and meet the right medical categories. With Forces Help to Buy it is important to remember that there will be a monthly repayment for the loan alongside your new mortgage. This is something our mortgage advisors will help you to factor in. Our advisors ensure you can afford the mortgage and all your outgoings.
The Big Barratt NHS Thank You
Barratt Homes are currently offering a 5% deposit contribution on one of their new builds. You can get up to £15,000 for all NHS workers. This scheme is Barratt’s way of showing their gratitude for the work of the NHS during the pandemic. This can still be used alongside a Help to Buy and does not have to be repaid. A 5% minimum deposit will still be required by the lender from the customer.
Speak to one of our mortgage advisors today to start your property journey.
Your mortgage is secured on your property. Your property may be repossessed if you do not keep up repayments on your mortgage.