First time buyers in Scotland – don’t miss out on new government funding

February 8th 2021
By: Embrace

The Scottish Government has announced that, from 1 April 2021, it is to offer first time buyers a further £60 million to support them in buying property via its First Home Fund following its success last year.

The Fund, which was originally launched in January 2020, offers first time buyers in Scotland the chance to receive up to £25,000 towards the purchase of a second hand or new build property. Due to its popularity, however, initial funding for the 2020/2021 scheme ran out in less than 10 months and only now is the Fund to be replenished to help more buyers realise their dreams of property ownership.

We asked Sandy Hollingworth, a Financial Services Manager for Embrace Financial Services in Scotland, about the Fund and what first time buyers should do if they want to take advantage of it.

Could you tell us more about the Fund?

Yes, it’s a great opportunity for first time buyers in Scotland to purchase a property but, as demonstrated last year, it is important to act fast and get advice now if you want to take advantage of it because with less funding this year, the opportunity might not last long.

As it’s a shared equity scheme, both the buyer and the Scottish Government will hold an equity share in the property under a shared equity agreement. The buyer will need to provide a minimum deposit of 5% and you’ll then need to take out a capital repayment mortgage to pay at least 25% of the remaining property price. The deposit amount could, however, vary dependant on the mortgage lender.  

The Scottish Government will have an equity share in the property but you will own the property outright and, only when you come to sell it, will you have to pay back an equity share to the Scottish Government.

Buyers can either buy alone or be a joint purchasers and payments from the Fund can be up to £25,000 or up to 49% of the property valuation figure or the purchase price - whichever is lower.

What are the deadlines?

The allocation of £60m to the Fund is available from 1 April 2021 for purchases completing from that date until 31 March 2022.

Buyers will, however, need to complete the purchase within three months, if it’s a second hand property, or within a further 6 months if it’s a new build property.

How can buyers apply for the Fund?

There’s quite a lot involved and the Scottish Government itself recommends, in its First Home Fund Guidance Leaflet, to gain the advice of a Financial Adviser before applying to the Scheme. The reason is that there is a process to follow and steps to take in finding a suitable lender and mortgage – and there are restrictions that might apply. Unfortunately it’s not simply filling out a form.

So what should buyers do now to be in the best position to gain the funding?

Whilst the Fund is not available until 1 April 2021, buyers can definitely start the ball rolling by researching the local market to find out what kind of properties might be available to them and also what funds may be required - not only as a deposit but also from a mortgage.

We are already seeing first time buyers who will qualify for the funding and we are helping them in understanding the Scheme, getting approval with a suitable lender and a mortgage for their particular circumstances and budget. It means that, when the funding does become available, they are in the best position possible to take advantage of it. We helped numerous buyers to secure the funding last year and look forward to helping even more this year.

If you’d like to find out more about the First Homes Fund – and other options that may be open to you as a buyer – why not book an appointment with an Embrace Financial Adviser today.

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. Embrace Financial Services usually charges a fee for mortgage advice. The precise amount of the fee will depend upon your circumstances but will range from £499 to £999 and this will be discussed and agreed with you at the earliest opportunity.