Welcome to the February advice column from Mortgage Advice Bureau East Kilbride.
This month I’m going to explain how first time buyers can get on the property ladder with a deposit from as little as five per cent.
In the past year since COVID-19 came into our lives, banks and building societies have restricted their lending meaning people looking to buy a new home would generally require a minimum of 10 per cent to 15 per cent deposit to be able to get a mortgage.
Pre-COVID there were multiple lenders doing mortgages which required only a five per cent deposit, but these disappeared quickly once restrictions started being put in place in March 2020.
Don't miss a thing from your area - sign up for the new Lanarkshire newsletter!
From the latest breaking news to the agenda-setting stories, get it all in your email inbox.
Put your email at the top of this article or follow the instructions on this link!
The good news is the Scottish Government have announced that the First Home Fund scheme for first time buyers will start accepting new applications from April 1, 2021.
The scheme was hugely successful last year and helped thousands of first time buyers get their first home in Scotland.
Here’s a brief overview of how it actually works:
The scheme is a shared equity scheme where the Scottish Government will take a percentage share of your property, depending on how much funding you apply for and then you own the rest via a mortgage and your deposit.
For example, if you are buying a property at £100,000, you would only need to provide five per cent deposit which is £5000.
You can apply for anything up to £25,000 from the First Home Fund, if you go for the maximum, it would give the government a 25 per cent share, then you would get a mortgage for £70,000.
The government’s percentage share is only repaid once the property is sold, so you may end up repaying more or less back depending on the sale price at the time.
It may open up larger or more desirable properties that you thought were out of reach due to the level of support provided by the government and mean less of a mortgage required as well.
You can arrange a mortgage prior to applications opening in April then it’s just a matter of your mortgage broker applying for the First Home Fund on your behalf or you can apply yourself.
This is a fantastic opportunity for people to get on the property ladder, but you need to be quick as the funding is only at £60million this year rather than the £200million last year so I would expect this scheme to be utilised very quickly.
See you all in March, stay safe.