After closing to new applications in October 2020, the First Home Fund is reopening and will be available for purchases from 1 April 2021 and completed before 31 March 2022. This article will look closely at how the scheme works, the eligibility requirements and provide you with all of the key information you need to know.
If you would like advice tailored to your particular circumstances, speak with one of our property lawyers today by requesting a callback here.
What is the First Home Fund?
The First Home Fund is run by the Scottish Government and is designed to help first-time buyers purchase a new build or an existing property. It is a shared equity scheme where the Scottish Government can provide you with up to £25,000 to help you buy your first home.
How does it work?
There are no monthly repayments, and instead, the money is paid back when you sell the property or increase your equity share. The Scottish Government contribution cannot exceed 49% of the purchase price or value of the property (whichever is lower).
For example, you manage to save for a deposit and obtain a mortgage. Between these, you can pay 85% of the purchase price, with the Scottish Government covering the final 15%. You do not have to make any payments towards that 15% borrowed from the Scottish Government. Instead, when you sell the property, you would get 85% of the sale price, and the Scottish Government would get 15% of the sale price.
Will I own the property if I buy through the First Home Fund?
It is important to note that even though the Scottish Government assists in the purchase of the property, they do not become an owner or part-owner. You will be the owner of the property outright and the title deeds will be in your name.
How do I increase the equity?
Before you sell the property, you can repay the loan by increasing your equity. This does involve some conditions:
- Any increase in equity must be an increase of at least 5%
- Once your equity is over 90%, any further increase must be to 100%
If you decide to increase your equity, this reduces the Scottish Government's percentage when you sell the property. For example, if you increased your equity from 85% to 90% (with 5% being the minimum required), that would mean the Scottish Government would receive 10% instead of 15% of the sale price.
To increase your equity, it is a good idea to consult a solicitor as there are fees involved. Click here to see how Raeside Chisholm solicitors can help you today.
Who can use the First Home Fund?
The First Home Fund is available to all first-time buyers in Scotland with no restrictions in relation to earnings or the value of the property being purchased. There are some criteria that must be met:
- You cannot currently or have previously owned property either in the UK or abroad
- You must be able to contribute a deposit of at least 5%
- You cannot be purchasing the property with cash
- Your mortgage must be at least 25% of the purchase price
- Your mortgage must be capital repayment
- The property you are purchasing will be your residence. This scheme is not designed for assisting people who are intending to buy-to-let
- Your application must be submitted before missives are completed
If you are looking to purchase your first home and meet the criteria above, then it is important that you seek legal advice at the earliest opportunity to ensure that the process is completed as smoothly as possible.
Can I use it to buy with another person?
If you are purchasing the house with someone else who is not a first-time buyer, you can still apply, provided that the other purchaser has sold all of the properties that they own before purchasing the new home.
It's important to note that you can only submit one application per property, meaning you can make a joint application with the person you are buying the property with. However, it is still limited to a maximum of £25,000 and not £25,000 per person.
Contact our Conveyancing Solicitors in Glasgow City Centre
Our team of experienced property lawyers can discuss with you and guide you through your application for the First Home Fund. Contact our property solicitors today on 0141 248 3456 or complete our online enquiry form.