Getting on the property ladder can be stressful and expensive, with the average age now moving out of the family home, being 27. Nicola Sturgeon recently announced a new £150 million national pilot scheme to help first time buyers get on the property ladder in Scotland. This scheme will provide loans to first time buyers to help them purchase a property in Scotland.
While not all the details of the scheme have been finalised and announced, this article covers everything we know so far about Scotland’s new first time buyer scheme. If the news of this scheme has motivated you to buy your first home, make sure to enter our first time buyers’ prize draw to be in with a chance of winning £3,000 towards your first home deposit. How much money are first time buyers entitled to from the cheme? Nicola Sturgeon announced that the scheme would lend eligible buyers up to £25,000 to help boost their deposit and help them on to the property ladder.
Will I still need to contribute a deposit payment?
Yes, you will still need to contribute a deposit of at least 5% of the value of
the house or flat. The loan is available to help boost this deposit.
When does the loan need to be repaid?
The loan is secured on the equity of the house and can be repaid in full at any time. It must be repaid in full if the house is sold. This means no monthly payments are required, unlike a mortgage.
How much interest will be charged?
The interest amount has not been determined and announced yet.
How is this new initiative different to Scotland’s current help-to-buy scheme?
The government has informed ESPC that this new scheme will be applicable to both re-sale and new build properties. The help-to-buy scheme is only available on new build properties. The loan amount is also different – the help-to-buy scheme helps to fund 15% of the purchase price (equity loan) while the new scheme will offer first time buyers up to £25,000 (cash loan). For the help-to-buy scheme, the property purchase price must also be below the threshold price which is currently £200,000 – at the moment, no threshold price has been announced for the new scheme. Repayment options also differ at the moment – a help-to-buy loan must be repaid when you sell, but you also have the option of increasing your equity in 5% steps before this. The loan in the new scheme must be repaid in full once sold but can also be repaid in full at any point before this – no staggered payment option has been announced for the new scheme. As further details emerge about the new scheme, more differences, or similarities, to the help-to-buy scheme may emerge.
Will this scheme replace the current help-to-buy scheme?
No, the government has confirmed that this scheme will not replace the current help-to-buy scheme. The details of how the two will work together are yet to be announced, however.
Who is eligible and how will they decide how much money to lend?
At the moment, there are few details about who will be eligible for the scheme other than it being limited to first time home buyers. No age restriction has been announced for the scheme. In terms of how much will be loaned to first time buyers, there have been no specific details about how this will be determined and whether it will be means-tested or related to the value of the property.
I’m a first time buyer but my partner is not – will we be eligible for the scheme?
The government intends that there only be a requirement that one partner in a couple is a first time buyer. However, they have not confirmed this and whether the partner who owns a property would be required to sell it before being eligible for the loan.
Can I use the loan money to bid over the valuation of the property?
No, the government confirmed to ESPC that this is a deposit scheme so the money can only be used to boost your deposit. 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. Starter homes in Edinburgh and the surrounding areas are in high demand, so are frequently
sold for over their Home Report valuation.
So, will this scheme actually help first time buyers in Scotland get on the property ladder?
You are already required to save at least a 5% deposit and the money to bid over Home Report valuation. However, this scheme will help by boosting your deposit which will make monthly repayments more manageable. Depending on your salary, you may not be eligible for a big enough mortgage to secure a property with just a 5% deposit, particularly with house prices rising. The loan amount may therefore provide the boost you need to secure a property. One of the advantages of this scheme is that it will be applicable to both resale and new build properties, meaning you have a greater choice of homes and areas. The help-to-buy scheme was only available with new build developments, meaning you would be restricted to areas where these developments are being built.
When will the scheme be rolled out?
The Scottish government are currently working on the details of the scheme with stakeholders but aim to have the application process open by the end of 2019. It is due to run until May 2021.
Cochran Dickie 