Differences Between the First Home Fund

The First Home Fund closed applications in October last year, but the government has confirmed that applications will re-open early this year. It runs alongside Help to Buy (Scotland). Eligibility for both is subject to lender terms and conditions, but what are the similarities and differences between the two schemes? Here we break it down so you can decide which scheme is right for your circumstances:

Who can apply?

Help to Buy: Open to all first time buyers (including those who have owned a property before) and existing home owners

First Home Fund: Open only to first time buyers who have never previously owned a property.

What contribution do I need to make?

Help to Buy: The government will contribute up to 15% of the purchase price.

First Home Fund: The government will contribute up to £25,000 or 49% share of the purchase price.

What is the minimum deposit required?

Help to Buy: A minimum of 5% deposit is required.

First Home Fund: A minimum of 5% deposit is required.

What type of property can I purchase using the scheme?

Help to Buy: It applies only to new build properties that are built by registered builders.

First Home Fund: This scheme applies to all new build and existing properties.

What is the maximum property price?

Help to Buy: What are the Key Differences Between the First Home Fund and Help to Buy?There is a maximum property price of £200,000

First Home Fund: The maximum house price is unlimited but is subject to lender terms and conditions.

What is the minimum mortgage amount that I will need?

Help to Buy: The mortgage will need to be at least 25% of the purchase price.

First Home Fund: The mortgage will need to be at least 25% of the purchase price.

What is the equity interest?

Help to Buy: There is no interest paid on the additional equity.

First Home Fund: There is no interest paid on the additional equity.

Is there a restriction on the type of mortgage?

Help to Buy: The scheme cannot be used with a buy-to-let mortgage and can only be used for a residential mortgage.

First Home Fund: The scheme cannot be used with a buy-to-let mortgage and can only be used for a residential mortgage.

What is the deadline?

Help to Buy: This scheme ends on 31^st March 2021.

First Home Fund: This scheme ends on the 31^st March 2021 and is limited to a budget of 150 million pounds.

If you are looking to purchase a first or even second home, you could use one of these schemes. Talk to us at Urban Union about the properties we currently have available in Edinburgh  and Glasgow. Your dream of owning a property could become a reality! See more. 

Buying Your First Home

At present lenders are regularly changing the availability of their mortgage products, leading to confusion for those wanting to buy a new home, in particular first time buyers.

Today’s property market still remains challenging given the current lockdown restrictions. In addition, it is unlikely that many first-time buyers will benefit from the increase in the LBTT threshold, as first-time buyers were already exempt on properties valued to a maximum of £145,000.

The combination of the LBTT holiday and highly competitive mortgage rates on lower LTV deals has been designed to get the housing market moving again and the result has been a rise in house prices in the last month here in Scotland.

Despite the challenging market there has been a record number of mortgage approved in recent months. There are still several options available to first-time buyers that will make purchasing a home more affordable.

Guarantor Mortgages

This type of mortgage has been designed for those who have a poor credit rating or do not have access to the deposit required to obtain a mortgage. There are still several guarantor mortgages currently available in the market. If you’re interested in a guarantor mortgage you will need a close relative to be willing to be liable for the entire mortgage should you default on your repayments. Your guarantor will be required to put up collateral by way of savings or their own home as part of ‘springboard’ deals. It’s worth noting that guarantor mortgages are usually a higher rate than a standard residential mortgage. Due to the small number of deals available it’s advisable to talk to an independent mortgage advisor.

Help to Buy (Scotland)

The Help to Buy (Scotland) scheme enables those who want to buy a property to do so with just a 5% deposit. Help to Buy (Scotland): Affordable New Build and Smaller Developers Schemes have now been extended to March 2022 with an additional £55 million provided in 2021/22. This additional funding means that the government can help another 2,000 households to buy new-build homes.

Under the scheme buyers can borrow an equity loan from the Government up to an additional 20% of the property’s value meaning they can buy with a mortgage that covers 75% of the house price.

Demand is higher in areas where property is cheaper – and during the lockdown developers have been able to continue to sell property as they were already well-adapted to using virtual viewings and CGI imagery, and reservations could still be taken. This has resulted in a greater degree of activity compared to existing homes that could not take viewings or go on the market.

First Home Fund

The First Home Fund launched in December last year to help first-time buyers purchase a property.

It is a shared equity scheme whereby the Scottish Government will have an equity share in the property, but you will own the property outright. You will normally repay the government’s share when you sell your home, but you can also choose to pay this off earlier.

The scheme is open to anyone who does not own, or has previously owned, a property in Scotland or anywhere else in the world. You will need a 5% deposit of the purchase price (subject to individual lender requirements) and your mortgage must be at least 25% of the purchase price.

This scheme allows those who want to get onto the property ladder to split the cost of purchasing the property with the Scottish Government and funding your share via a smaller deposit than otherwise would be required, and a mortgage.

You won’t need to pay monthly instalments or interest to the Scottish Government for their contribution but will pay it back when you sell your home. While you own the property, you will have full ownership rights and will hold the full title.

You cannot apply for this scheme if you are a cash buyer or if you own a property in part or full or have previously owned a property as a sole or joint owner.

The maximum contribution from the Scottish Government is £25,000 or 49% of the property valuation figure or purchase price (whichever is lower). You can submit a joint application and the property must be the sole residence of all applicants. In addition, you cannot apply to any other Scottish Government shared equity schemes such as Help to Buy Scotland while applying for this scheme. You must withdraw this if you have an existing application.

Shared ownership

Shared ownership enables you to buy a share of a home instead of having to fund its entire cost. You can buy a 25%, 50% or 75% share of a home with the remaining share is owned by a housing association. Because the housing association owns a share of your home you don’t own it outright but will pay an Occupancy Charge to the housing association.

Shared equity

If you cannot afford the full price of a home for sale in the open market you might be able to get help through the Open Market Share Equity (OMSE) scheme. This is available across Scotland to first-time buyers and priority groups including those over 60, social renters, disabled people, members of the armed forces, veterans and widows or widowers of those who have served.

You’ll pay for the biggest share which is usually between 60% and 90% of the home’s cost. The Scottish Government will hold the remaining share under a shared equity agreement which it will enter into with you. You’ll have complete title and hold the deeds but the mortgage will have a security on the home to protect the Government’s share. If you sell the home, the Scottish Government will get a share of the money.

It is important to consult with an Independent Financial Adviser before applying to the scheme as they can help you to decide which is the most appropriate scheme for your circumstances.

The Help to Buy and First Home Fund schemes can be used to purchase one of the many properties available from Urban Union across all our developments. Contact us to find out more about current and future availability.

Find out the key differences between Help to Buy (Scotland) and the First Home Fund: https://www.urbanunionltd.co.uk/2020/02/18/differences-between-the-first-home-fund/

What you need to know about applying for a mortgage this year

During the restrictions we have been placed under since the lockdown was lifted in June, one thing that has remained open is the property market. What’s more, the UK has seen an unprecedented boom in sales with demand outstripping supply.

As the housing market continues to be exceptionally busy and the LBTT deadline approaches in March 2021, you may be wondering if and how the mortgage market may have been affected at this time. Have lenders changed their criteria? Do you need a larger deposit? How long will an application now take? Here we look at the answers to some of the most common questions that house buyers are asking:

What mortgages are currently available?

Over the last few months, many lenders have restricted their products and withdrawn the high LTV (Loan to Value) mortgages. Before the pandemic, the banks were starting to bring in 95% and even 100% mortgages, but along with lockdown came a stricter lending criteria as affordability became an issue for many. However, it’s worth noting that some lenders have ‘flash’ offers so talk to an independent mortgage advisor who will have their finger on the pulse and be aware of who is offering which deals and what you are eligible for.

Can I use Help to Buy or the First Home Fund?

Both of these schemes are operating as normal and require just a 5% deposit when used – however, the First Home Fund has temporarily put a hold on applications and will re-open early next year for properties purchased from March 31^st onwards. Help to Buy (Scotland) is still running as normal and you can apply when buying an Urban Union property (terms and conditions apply).

Lending

There have been some changes in lending this year, but mortgage approvals are currently the highest they’ve been since 2007. This is a result of the demand for new homes since March due to the LBTT holiday (no LBTT is payable up to £250,000 in Scotland and £500,000 in England) and a change in buyer’s priorities with more home working, demand for outside space and less importance on being close to the city and transport links. The most significant change is the amount of money that banks are lending – instead of the high LTV deals, more common today are the 85% deals. They have also slightly changed the affordability criteria with buyers in certain industries (such as travel or hospitality) required to give more evidence of earnings and job security. They have also started to recalculate earnings and you may have issues if your wages are being paid by the furlough scheme. Applications are looked at on an individual basis so talk to a mortgage advisor to find out what yoru options are. You can improve your chances by saving for a larger deposit, reducing your debts before you apply, improving your credit rating and looking at other ways to finance a new home – for example help from parents or Help to Buy.

Mortgage application times

As the market is so busy and many offices and banks have been temporarily shut, there is a backlog and so an application could take slightly longer to be processed. The mortgage is only one part of the buying process and at present you also need to allow up to 3 months for conveyancing. You can speed things up by getting a Mortgage in Principle before you purchase a home.

Buying new

Buying new can save a lot of time – once you have paid a reservation fee (which will be offset on completion) the property is yours and the process is much quicker. There’s no chain, no negotiating and you don’t have to rely on your seller’s timings for when they can move out.

Talk to us about how you can purchase a new build home.

Moving Home During Tier 4 Restrictions

As several areas of Scotland enter into Tier 4 restrictions on November 20th, the highest level, it has been made clear that all aspects of house moves are permitted to continue, provided they are carried out safely. Here at Urban Union this means that we can still take property renovations and hand over keys to new owners. In addition, you can move from one tier to another for the purpose of moving home.

Help to Buy Schemes

At present the applications for the First Home Fund are on hold, but the Scottish Government has confirmed that they plan to reopen applications in the new year for purchases to be completed in the 2021/2022 financial year. Help to Buy (Scotland) is still running and you can purchase an Urban Union property using this scheme.

Moving home

House moves can go ahead as long as they are done safely but if any member of either household has symptoms of COVID-19 or has been asked to self-isolate by track and trace, the move must be delayed for at least two weeks. Two or more households are able to combine for the purposes of moving for example for a house or flat share but once you have formed the new household you must comply with guidance on the current restrictions in terms of meeting up with other households.

Property viewings

Property viewings must be done virtually at the first instance and only in person when you are seriously considering making an offer.  Urban Union properties, for example the two remaining apartments at Muirton, are unoccupied this makes the process simpler with just a clean required between viewings required. If you wish to visit our sales cabin or view a property this must be done by appointment only and only if you have no symptoms or have not been asked to self isolate.

Property valuations

If you are considering selling your existing home, you are permitted to have an estate agent in your home to provide a valuation and also to take video footage or photographs and measure for the floorplan. All parties should adhere to government guidance on hand washing, social distancing and respiratory hygiene. You may also wish to consider wearing a face covering. Surveyors are now permitted to go to properties for the purpose of completing a Home Report. This remains the case following the new tier approach implemented on 2nd November, provided it can be done safely. Surveyors are also permitted to enter your property in order to produce the Home Report.

Solicitors and estate agents

Solicitors, mortgage brokers and lenders are all open during all tiers but with visits from the public only available by appointment only.

LBTT

Land and Building Transaction Tax (the equivalent of Stamp Duty) has been raied from £145,000 to £250,000 until 31st March 2021. This means that residential property transactions where the purchase price is under £250,000, and to which the Additional Dwelling Supplement (ADS) does not apply, will attract no LBTT.

Lending

You are still able to apply for a mortgage but you may want to talk about your options with a mortgage broker to find out what deals are available and how much deposit you will require to secure a mortgage.

Selling a property

If you have a property to sell, you must ensure that when a potential buyer views your home they only visit with one other member of their household and open viewings are not permitted. Between viewings you must clean surfaces and door handles and, if possible, open windows. Make sure that social distancing is carried out by all parties and that the agent carries out the viewing.

If you are interested in buying a new home, talk to us at Urban Union.

Securing a mortgage when self employed

Applying for a self-employed mortgage can be daunting – but as long as you’re well prepared, hopefully you will manage to secure the right mortgage for your circumstances. It’s important to make sure your application is as bulletproof as can be, have your forms and deposit ready to go. Here are some expert tips on what to consider when applying for a mortgage if you’re self-employed:

Preparation is key

Requesting the required forms you need to prove your earnings can take several weeks so make sure you do this as soon as you know you want to purchase a property. Acquiring a mortgage when self-employed can be a little more complicated, so it’s worth taking the time to make sure everything is in order so that your application is complete. You will also need to prove the source of your deposit so if this is a gift from a family member it will need to be declared. Talk to a financial advisor or independent mortgage advisor to find out exactly what you need to get the ball rolling. It’s also worth getting advice when you’re considering a property purchase so that you can start to manage your accounts and any outstanding credit to your advantage.

Check your credit score

As soon as you decide to buy a property, check your credit score. This is what lenders use to determine if you are a reliable applicant for credit. To ensure your credit score is high, make sure you’re on the electoral roll, you haven’t applied for too much credit in the space of year (it’s advisable not to apply for more than three), your credit cards aren’t at their limit, you haven’t missed any payments and you avoid making the minimum payments. If you have a low credit score, talk to a mortgage advisor as it may be worth holding off until you can improve your score. There are mortgages available for those with a poor credit rating, but they can be very costly so it’s better to wait and build up your score.

Gather the documents you need

If your income goes up and down each month and changes from year to year, you will need to gather as much evidence of your overall income as you can. Lenders will look at your average profits and you may need to provide some evidence that you expect the upcoming year’s income to be on a par with previous years. You could gather evidence from employers, existing contracts and proof of new clients. Alternatively you will need to show that you have savings aside from your deposit to meet your repayments should you lose work.

Employ an accountant

A qualified accountant can prepare the accounts you need, and this is usually the preferred option from lenders. In fact, some lenders won’t even consider the accounts unless they have been signed off by a certified accountant. You may need up to three years of accounts and you will need to break down profits, expenses, dividends etc.

Get the right advice

By using an independent mortgage advisor, you can get the right advice on which mortgage you will be eligible for, as well as their requirements. A mortgage advisor can search the whole of the market and often have access to lenders that provide specialist mortgages.

If you are considering an Urban Union property, talk to us today and we can advise you on availability and costs.