December saw the launch of the First Home Fund – a pilot scheme to help first time buyers with the cost of their first property.
This scheme is an initiative from the Scottish government and will contribute up to £25,000 towards the cost of a property through the shared equity scheme. Between now and March 2021 a total of £150m will be made available, providing assistance to more than 6,000 people.
This scheme does not replace the existing schemes such as Help to Buy, instead it will run alongside them. Help to Buy (Scotland) scheme which contributes up to 15% of the purchase price of a newly built home. This is open to both first time buyers and those who have already owned a property but the property limit is £200,000.
How does it work?
The scheme is open to anyone who has never owned a property before (or jointly owned a property) and can be applied to both new and existing properties, differing from the Help to Buy scheme which only applies to new builds with a cap on the value. Buyers will need a minimum of 5% of the value of the property and the mortgage must be at least 25% of the purchase price.
The purchase cost is split between the buyer and the Scottish government and the government’s contribution is repaid when the property is sold.
As an example, a first time buyer will pay 85% of the property’s value with a deposit and a mortgage. The government will hold a 15% share. When the property is later sold, the buyer will keep 85% of the final sale price and the government will receive their 15% share back.
The scheme allows the buyer to increase their share of equity and repay all or part of the government’s stake in the property over time. Compared to other funding schemes, the First Home Fund has no limits on the property value, and the government contribution could be as high as 49%, allowing for more people to purchase their first home.
First Minister Nicola Sturgeon has announced that this is a move to remove the obstacle of finding a deposit for a first home, removing barriers and supporting people to make the process fairer.
Mortgage rates are currently historically low so this offers first time buyers the opportunity to take advantage of these low rates.
If you would like to purchase your first home and are looking at existing properties, talk to us at Nicol Estate Agents about buying in East Renfrewshire.