First home fund – pros and cons
If buying your first home feels like a pipe dream, think again because the reopening of Scotland’s First Home Fund on 1 April 2021 could mean you only need a 5% deposit to get you on to the property ladder.
In this short blog, we take a look at Scotland’s First Home Fund; what it is, how it works and how to find out whether you’re eligible.
What is Scotland’s First Home Fund?
The First Home Fund, exclusively available in Scotland, provides loans of up to £25,000 to first time buyers to supplement their deposit to purchase a property in Scotland.
The scheme first opened for applications in December 2019 and, due to a high number of applications, closed to new applications in October 2020.
When does the scheme reopen?
The Scottish Government has confirmed that the First Home Fund will reopen on 1 April 2021 for purchases completing between April 2021 and March 2022.
How does the first home fund work?
Imagine you are buying a house worth £200,000. Here’s how it works:
- You will need a deposit of £10,000 (that is 5% of the purchase price of £200,000)
- The Scottish Government will contribute £25,000 (in this case, 12.5% of the purchase price of £200,000, known as ‘government equity stake’*)
- You will need a mortgage of £165,000 (that is 82.5% of the purchase price of £200,000) from a bank or building society
*It is worth noting that the Scottish Government will contribute a maximum of 49% equity stake based on the property valuation or purchase price, up to a maximum of £25,000, whichever is lower.
Whilst you’ll own your new home outright, the Scottish Government will have an equity stake in your home, which is repayable when you sell your home.
Am I eligible?
The First Home Fund is open to all first-time buyers in Scotland who are taking out a mortgage and can be used to help buy both new build and existing properties.
It is worth noting that:
- You can’t apply to the scheme if you are a cash buyer or have previously owned a property in the UK or abroad at any time, as either a sole or joint owner
- The scheme isn’t available on buy-to-let properties
- You can’t apply for any other Scottish Government shared equity schemes at the same time as applying to the First Home Fund
You can read more about eligibility for the scheme here: https://www.gov.scot/policies/homeowners/first-home-fund/
What should I do next?
If you are thinking of applying to the First Home Fund when it reopens on 1 April 2021, we recommend seeking independent financial advice to see whether the scheme is right for you.
As well as helping you to find your first home, we can signpost you to financial and legal advice, so get in touch with one of our team today to start your first-home journey.