Scottish Government First Home Fund

The following information is taken from the Scottish Government website and can be viewed at,

www.gov.scot/publications/first-homes-fund-how-to-apply/

Information and conditions may be subject to change and you should refer to the Scottish Government Scheme for current details.

Key facts

  • up to £10,000 towards your first home
  • for first-time buyers in Scotland
  • property value up to £300,000
  • Scottish Government takes a percentage stake
  • apply after your offer is accepted

The First Homes Fund is a Scottish Government scheme that helps first-time buyers in Scotland buy a home. You can get up to £10,000 towards the cost of a property worth up to £300,000.

In return, we take a percentage stake in your property based on our contribution. You do not pay interest or monthly payments on this stake. You pay it back as a percentage of your property’s value when you sell, or you can buy out our stake earlier if you choose.

You own your home outright, and are responsible for all maintenance, insurance, repairs, and running costs.

To apply for the First Homes Fund, you need a capital repayment mortgage covering at least 25% of the buying price or valuation if lower. You will typically also need a deposit of around 5% in addition to the First Homes Fund contribution.

You apply online after you have had your offer accepted on a property, or after you have reserved a new build, and before your solicitor concludes missives. An independent financial adviser or mortgage adviser can apply on your behalf.

Who can apply for the First Homes Fund

You can apply for the First Homes Fund first-time buyer scheme if you:

  • have never owned a home anywhere in the world, either on your own or jointly with someone else
  • are taking out a capital repayment mortgage of at least 25% of the buying price (or valuation, whichever is the lower)
  • are buying the property as your main and only home in Scotland
  • If you are buying with someone else, at least one of you must be a first-time buyer.  If one of you currently owns a property, you must have sold it before your purchase completes.
  • Joint applications receive one First Homes Fund award of £10,000.

You can use a Help to Buy ISA or Lifetime ISA towards your deposit.

Who cannot apply for the First Homes Fund

You cannot apply for the First Homes Fund if you:

  • are buying with cash
  • have owned a home anywhere in the world before, either on your own or jointly
  • are buying a property to rent out
  • have an open application to another Scottish Government shared equity scheme – you must withdraw it before applying
  • are using part exchange (you can use builder incentives and assisted purchase)
  • Your responsibilities as a First Homes Fund buyer

You are responsible for all maintenance, insurance, repairs, and running costs. If your property is a flat, you may have shared maintenance charges or factor fees. Your solicitor will tell you about these before you buy.

The property must meet the Tolerable Standard, the basic legal housing condition in Scotland. Check the Home Report before you buy – you will need to pay for any repairs it flags.
How to apply for the First Homes Fund

Steps to apply for the First Homes Fund

To apply for the First Homes Fund first-time buyer scheme, follow these steps:

  • Speak to an independent financial adviser (IFA) or mortgage adviser to check the scheme suits you and that you can get a mortgage. Use the Financial Conduct Authority register to find a regulated IFA.
  • Find a property with a purchase price of £300,000 or less and have your offer accepted, or reserve a new build.
  • Appoint a solicitor.
  • Apply online at the First Homes Fund website before your solicitor concludes missives. Your IFA or mortgage adviser can apply on your behalf.

You’ll need:

  • your solicitor’s details
  • a mortgage decision in principle
  • proof that your mortgage and debt repayments will not exceed 45% of your net income – three months’ payslips, or an SA302 if self-employed
  • a home report, for open market sales or a Reservation Agreement for new build homes. For private sales, a Scheme 1 Valuation is needed and your solicitor or mortgage lender can help
  • you or the seller find a qualified surveyor.
  • If your First Homes Fund application is successful, you’ll receive an award letter. You have three months to conclude missives and six months from then to complete your purchase. If you
  • miss the three-month deadline, your application will be cancelled and you’ll need to apply again.

There is a £650 application fee. Your award letter gives details of how to pay this. We refund this if the sale does not conclude, unless you gave us false or misleading information.

Your solicitor will handle the legal process. The First Homes Fund funding will be passed to your solicitor alongside your mortgage to complete the purchase. If you’re buying jointly and your co-buyer owns a home, they must sell it before completion.

Land and Buildings Transaction Tax

If your property costs more than £145,000, Land and Buildings Transaction Tax applies. You may qualify for first-time buyer relief. Find out more on the Revenue Scotland website. Your solicitor can advise you further.

Which lenders offer mortgages through the First Home Fund

The mortgage lenders currently offering mortgages through the First Homes Fund are:

Bank of Scotland
Glasgow Credit Union
Halifax
Leeds Building Society
Lloyds Bank
NatWest
Scottish Building Society
Skipton Building Society

How the First Homes Fund works

The First Homes Fund is a Scottish Government shared equity scheme for first-time buyers in Scotland. We contribute an equity loan with no monthly payments or interest. You own your home outright and are responsible for all maintenance, insurance, repairs and running costs.

Our equity stake is our contribution as a percentage of your home’s value or buying price, whichever is lower, rounded to two decimal places.

For example, if we contribute £10,000 through the First Homes Fund towards a home valued at £100,000, we hold a 10% equity stake – even if you pay more than the valuation price.

When you sell, we receive our equity percentage of the sale price or current value, whichever is higher. If you increase your share before selling, we receive our percentage of the property’s value at that time.

Buying above valuation with the First Homes Fund

You can pay above the valuation in cash. If you do, our equity stake is still based on the valuation figure, not the buying price.

For example:

property valuation: £100,000
buying price: £108,000
your contribution: £98,000 (including any deposit your lender requires, plus the £8,000 above valuation)
our contribution: £10,000
our equity stake: 10% (based on valuation, not buying price)
Paying above valuation can put you in negative equity. This means you owe more than your home is worth.

Increasing your share in the First Home Fund

You can increase your share at any time in increments of 5% or more. You pay based on the property’s current value at the time. Contact the administering agent, Link Housing, before you begin – all costs are your responsibility.

If your share is already 90% or more, any further increase must take you to 100%.

For example, say you bought at £100,000 with a 90% share and the property is now worth £150,000. Our 10% stake is now worth £15,000. As you have a 90% share this would cost you £15,000 to increase to 100% ownership.

You’ll need a property valuation before you can increase your share. You have three months from the valuation date to complete the increase and make payment.

Selling your home with the First Home Fund

Contact the administering agent, Link Housing, before putting your property on the market. All selling costs are your responsibility – your solicitor will confirm what these are. These costs are not taken from the sale proceeds.

When you sell, we each receive a percentage matching our ownership share. For example, if we own 10% and you sell for £200,000, we receive £20,000 and you receive £180,000. If your property falls in value, the same percentage split applies.

You need our agreement to sell for less than 95% of the current value.

For more information on increasing your share or selling, see the post-sale information for buyers and the guidance on after sale shared equity procedures.

Disclaimer – This scheme is offered by Scottish Government, Oak-NGate Ltd have no control over the scheme and do not make any recommendation to adopt the scheme or any of the lenders suggested in the scheme, you should seek your own financial advice prior to proceeding.