First time buyer's advice

First time buyers do benefit from the lower rates of Land and Building Transaction Tax now payable for properties up to around £150,000, but they still have to find a deposit from somewhere as most lenders remain willing to advance only 70%-80% loan to value (LTV) mortgages.

100% mortgage deals have almost entirely vanished. Some lenders are willing to offer higher LTV mortgages if a parent, step-parent or grandparent is willing to stand guarantor and secure the loan against their own home. It’s important though to remember that a guarantor will be pursued for the money if you find yourself in difficulties.

If first time buyers could save at least a 5% deposit, they did have access to the Help to Buy (Scotland) scheme, but as of 26 May 2015 the scheme was closed and is no longer accepting any applications.

The only option available to first time buyers would seem to be to save up as much as they can for a deposit. That’s easier said than done of course if you also have to cover living expenses like rent in the meanwhile and don’t have relatives who can lend you the money, but anything you can save towards a deposit will help.

First time buyers on low to moderate incomes can still get support to become home owners from two Scottish government schemes that remain in effect. You will still need to find a deposit, but it will be lower than might otherwise be required. The Low-cost Initiative for First Time Buyers (LIFT) brings together several ways to help households access home ownership through a shared equity approach. These include:

  • New Supply Shared Equity scheme allows first time buyers to buy a new build property from a housing association
  • Open Market Shared Equity scheme allows first time buyers to buy a property on the open market

Shared equity is a way to buy a home without having to pay for all of it. When you buy a shared equity home from a housing association or on the open market you pay for the majority share in it and the Scottish government pays the rest under an agreement which it enters into with you.

Under the New Supply Shared Equity scheme, you own the home outright, but the Scottish government holds a security over the proportion of it has funded. When you later sell your home, the government will receive the value at the time of sale of the percentage equity stake it funded.

Under the Open Market Shared Equity scheme, you also own the home outright, but the Scottish government and the private house builder will jointly fund an interest-free equity loan for you and each holds a security over the proportion of your home they have funded.

When you sell your home, the government and the private house builder will each receive the value at the time of sale of the percentage equity stake they jointly funded.