The First Home Fund: What is it, how does it work and is it right for me?

31st January 2020 | Buying a property

What is the First Home Fund?

Launched in December 2019, the ‘First Home Fund’ is the latest Scottish Government scheme designed to assist First Time Buyers with getting on the property ladder. Upon successful application, First Time Buyers can receive a loan of up to £25,000 towards their property purchase. There are a number of key benefits to the First Home Fund which set it apart from existing schemes including:

  • No limit on the value of the property you can purchase
  • Ability to offer above market value on a property
  • Ability to use your Help to Buy ISA or Lifetime ISA in conjunction with the fund
  • Joint applications are allowed - as long as one of you is a first time buyer
  • No interest charges on the government loan

The scheme is set to run until March 2021 with the aim of assisting at least 6,000 people so you will have to move quickly before the fund runs out.

How does the scheme work?

The scheme is equity based, meaning that the government will own a part of the property in proportion to what they have lent you. Unlike traditional loans there are no monthly repayments to worry about and the money that is borrowed will not be subject to interest charges. The government contribution is restricted to £25,000 or 49% of the property value, whichever is lower, however you can choose to take a smaller amount if you wish.

Do I qualify?

To qualify for the scheme, you must be a first time buyer. The scheme is not means tested so your income will not affect your ability to apply, however, you must have a minimum deposit of 5% and be using a mortgage for your purchase - so cash buyers cannot apply. The mortgage that you take out must be for at least 25% of the purchase price and the property must be used as your sole residence.

Joint applications are allowed but if one of you already owns a property this must be sold before using for the scheme.

How do I apply?

To apply for the scheme you must first make an offer on a property. Be sure to have a mortgage agreed in principle in order to ensure that you have the necessary funds for your purchase and so that you can qualify for the First Home Fund. Once your offer has been accepted you can then make your application to the fund online.

When purchasing a home it is vital to enlist the services of a competent solicitor who will laisse on your behalf with both the property seller and the administrator from the first home fund.

If you are a first time buyer and would like more information, we offer a free, no obligation appointment with our conveyancing team who can help walk you through the often complicated business of buying your first property.