18 Jan 2021
How to use lockdown to get your first home deposit in shape!
So, here we are, back in lockdown again, watching Joe Wicks hopping around his living room like a demented frog.
Many have been using the extended stay at home period to get themselves into shape – aided by ‘The Body Coach’ – but what help is out there for first-time buyers who want to get their deposit in shape for spring?
Like with keeping fit, the first step is always the hardest when it comes to buying property. There is a world of new terms you have never heard before, and then there is the mammoth effort of getting all of the money together for your deposit.
However, our independent mortgage advisers and friendly solicitors can guide you through the process and help you access a number of government schemes which may assist you.
Here’s a round-up of the help currently available...
Help to Buy (new build homes only)
This scheme can help you buy a new-build home (under £200,000) without having to fund its entire cost. You'll be expected to pay a minimum of at least 85% of the home's total purchase price and the Scottish Government will hold the remaining % share under a shared equity agreement. Essentially, this means the government will own a small percentage of your home.
When you want to sell your home, you'll have to pay the Scottish Government their share of the sale price depending on how much equity it owns. So, if the Scottish Government gave you 15% of the home's purchase price and you haven't paid any of this back, it will be due 15% of the sale price.
If a house is bought for £150,000 (with Scottish Government share of 15%) and it sells for £170,000, the Scottish Government is entitled to 15% of £170,000. This is the same even if the house value drops – if a house sells for £130,000, Scottish Government is entitled to 15% of £130,000.
First Home Fund
The First Home Fund is a Scottish Government scheme which provides first-time buyers with an interest-free loan of up to £25,000 to help them buy a property.
It is open to all first-time buyers in Scotland and can be used to help buy both new build and older properties.
Buyers are required to fund around 5% of the value of their new property from their own funds as a deposit.
The Scottish Government contribution is secured on the equity of the home, is repayable in full at any time, and must be repaid if the home is sold. No monthly payments apply.
The scheme has been hugely popular and is currently closed – however, it is expected to re-open in April and if you want to use it, you should seek advice now.
LIFT Scheme
The LIFT (Low-cost Initiative for First-Time Buyers) Open Market Shared Equity (OMSE) scheme has helped over 13,000 people since 2005. Applicants can receive up to 40% funding towards the price of a home on the open market.
The Scottish Government contributes between 10% and 40% towards the price of a home you have chosen on the open market. For example, if you find a home for £100,000 and can afford to contribute £70,000 (through mortgage and deposit), the Scottish Government could provide the remaining 30% (£30,000). When the property is sold, 30% of the sale price would be returned to the Scottish Government.
However, the property must be under a certain value to qualify, which varies depending on the size of the house and where in Scotland it is.
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Before applying for one of these schemes, it is best to establish how much money you can borrow for your mortgage.
Our independent mortgage advisers offer free whole-of-market advice.