How the First Home Fund works
The First Home Fund has proved so popular in recent months that the Scottish Government has closed applications for this financial year, but plans to reopen it next year. Peter McGregor, Independent Mortgage Advisor at ESPC Mortgages, explains how the scheme works.
The First Home Fund is a shared equity scheme offered by the Scottish Government to assist first time buyers in Scotland. The scheme provides individual first time buyers or couples (as long as at least one is a first time buyer) with a sum of up to £25,000 toward the purchase price of a new home. The property can be either a new build or an resale property.
There is no interest or rent element payable on the £25,000 contribution. Instead the Scottish Government will own a percentage stake in the property based on the amount of contribution compared to the value/purchase price of the property (for example, if a £15,000 loan is offered for a property costing £100,000, the Scottish Government would own a 15% share in the property).
This will need to be repaid when the property is sold or before then if the homeowner’s financial situation allows for this. The amount to be repaid will be dependent on the future value of the property and will be the percentage that was originally contributed from the Scottish Government funds.
The Scottish Government financial contribution must be used toward the deposit on the property up to the valuation amount. Lenders would also need a contribution of 5% of the buyer’s own funds toward the deposit. It should be noted that none of the funding can be used to bid over the valuation of the property; this would need to be funded from the buyer’s own resources on top of their own 5% deposit contribution.
First Home Fund applications
Applications to the First Home Fund are completed online and can only be made once you have an offer accepted to purchase a property. A sustainability calculator to ensure the mortgage repayments are affordable going forward would need to be completed and evidence of earnings and an agreement in principle from a lender would also be required. The First Home Fund charges a fee of £550 once an application has been agreed.
Due to the high number of applications received in the summer months, the Scottish Government closed the scheme to new applications at the start of October for transactions due to complete this financial year. However, due to the popularity of the scheme, they plan to reopen it for applications in the new year for the 2021/22 financial year.
This article appeared in the October 2020 issue of the ESPC magazine. Find out more about the ESPC magazine and read the latest issue.
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The information contained in this article is provided in good faith. Whilst every care has been taken in the preparation of the information, no responsibility is accepted for any errors which, despite our precautions, it may contain. No individual mortgage advice is given, nor intended to be given in this article.
The initial consultation with an adviser is free and without obligation. Thereafter, ESPC Mortgages charges for mortgage advice are usually £350 (£295 for first time buyers). YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOANS SECURED AGAINST IT.
ESPC (UK) Ltd is an Appointed Representative of Lyncombe Consultants Ltd which is authorised and regulated by the Financial Conduct Authority.