The First Home Fund provides loans of up to £25,000 to first time buyers to help boost their deposit to purchase a property in Scotland. The scheme, which is unique to Scotland and provided by the Scottish Government, closed to new applications on 2nd October 2020. This was due to a high number of applications over the summer of 2020.
However, the Scottish Government reopened the scheme for applications at 9am on 1st April 2021 for home purchases due to be completed in the 2021/2022 financial year.
The Scottish Government has allocated £60 million to the First Home Fund for the 2021/2022 financial year, which is a reduction on the previous year.
The First Home Fund will close once the budget has been exhausted. Importantly, and perhaps controversially, the Scottish Government has advised they will not be able to provide advance notice of this. This could leave some buyers stranded and some transactions may fall through just as they’re about to complete.
The Government is reporting that they’ve been inundated with enquiries and applications are already processing since reopening the scheme five days ago.
For a more detailed analysis of the fund please and some FAQ’s the please keep reading…
How much money are buyers entitled to?
The First Home Fund will lend eligible buyers up to £25,000 (this will be capped at 49% of the property valuation or purchase price, whichever is lower) to help boost their deposit and help them on to the property ladder.
Is a deposit contribution still needed?
Yes, you will still need to contribute a deposit of at least 5% (subject to individual lender requirements) of the value of the house or flat. The loan is available to help boost this deposit.
Am I eligible?
The scheme is open to all first time buyers in Scotland who are taking out a mortgage. You can’t apply to the scheme if you are a cash buyer or if you have previously owned a property in the UK or abroad at any time, as either a sole or joint owner.
There is a limit of one application per property – you can submit a joint application, but you will be limited to one award of £25,000. Your mortgage must be capital repayment and be at least 25% of the purchase price.
The property must be your sole residence – the scheme is not eligible for buy-to-let properties.
You also cannot apply for any other Scottish Government shared equity schemes, while applying for this scheme. You must withdraw any other open applications if you choose to apply for the First Home Fund.
Can I use money from a Help to Buy ISA or Lifetime ISA alongside the First Home Fund?
You may have been using a Help to Buy or Lifetime ISA in order to save for your first home, as these both offer a 25% government boost on savings. You can use the money from these for your deposit when using the First Home Fund.
What if my partner isn’t a first-time buyer?
Only one of the joint purchasers of a property must be a first time buyer in order to apply for the scheme. However, the other purchaser will need to ensure any properties they own have been sold before the completion or date of entry of the new property being purchased.
How do I apply?
Once you’ve had an offer accepted on a property, you can fill out the application form on Link Housing, which will ask for personal details and information about the property you are purchasing. You must do this before your Solicitor concludes the missives for your purchase.
Further advice on the application process should be sought from a Financial Advisor, Bank, or Mortgage Advisor.
Equity Loan Scheme:
Buying a property through a shared equity scheme means you split the cost of purchasing the property with the Scottish Government. You will fund your share through a deposit and mortgage and the Scottish Government will fund the rest.
Whatever amount the Scottish Government fund (up to £25,000, which is capped at 49% of the valuation or purchase, whichever is lower), will be invested as a percentage share of the property valuation.
However, you will own the property outright and hold the full title.
When do I repay the loan?
You must repay the loan when you sell the property. How much you need to repay depends on how much you borrow on the scheme and what percentage of the property’s value this make up.
For example, if you use £25,000 for a property valued at £100,000, you will need to repay 25% of the property’s selling price to the government when you choose to sell. You can also pay the loan back before by increasing your equity in the scheme.
Can I use the loan money to bid over the valuation of the property?
The Scottish Government has confirmed that the loan amount is not intended to be able to be used to bid over the Home Report valuation of property. This means that you will need to save a 5% deposit, and the money required to bid over the Home Report valuation of the property.