If you were considering buying your first home before the coronavirus pandemic, we understand you may feel confused and unnerved at the prospect of starting your search again. With cautious lenders and many buyers and sellers dealing with a change of circumstance, buying conditions will likely be more difficult as we move out of lockdown.
The property market quickly gathered interest following its reopening at the end of June. Rightmove reported its busiest month for sales in a decade, and Trussle saw a 182 per cent increase in mortgage applications from first-time buyers. While it is still possible to buy your first home, many are wondering whether this is the best time and what schemes can help with the transaction.
In this article, we look at factors affecting first-time property buyers as a result of lockdown and provide practical guidance. As always, if you would like personalised advice for your circumstances, get in touch via the online enquiry form.
Is it a good time to buy a property for first-time buyers in Scotland?
Rise in deposits for first-time buyers
Under normal circumstances, lenders would typically require a minimum five per cent deposit from first-time buyers seeking a mortgage. However, as a result of the Covid-19 outbreak, many lenders on the market have now raised this minimum threshold to 10 or even 15 per cent. For the majority of first-time buyers, this increase will be unaffordable as they struggle to save the additional deposit money during this time. Another important factor is that if you have to offer more than the valuation of a property to secure it, the amount which a Bank will lend will still be based on the valuation, not the price you pay.
Timing
It is worth noting that due to the huge volume of cases being dealt with by Lenders just now, applications for Mortgages are taking much longer to be dealt with by them and this will affect the length of time between submitting an Offer and the date when you can get your keys.
Consider the location
There has been strong activity in the property market since its reopening, particularly with regards to homes in rural locations. Inquiries from people currently living in Edinburgh and Glasgow with the hope of relocating to a village increased by 208 per cent and 60 per cent respectively, according to Rightmove.
Research suggests that outdoor space has become a key criterion following lockdown, making countryside homes more attractive for buyers. After months of forced workplace flexibility, numerous employers are also considering flexitime and working from home on a more permanent basis. This has ultimately meant that city homes have lost their appeal for ease of commute and, instead, a strong demand has been created in the property market for those looking to move away from over-populated towns and urban locations.
For those who can overcome the wide-scale changes in finances and employment across the country, this may well be the perfect time to save money for buying a property, or to get a boost for your deposit.
Here, we set out two Scottish government schemes that could help first-time buyers:
Land and Building Transaction Tax (LBTT) holiday
Land and Building Transaction Tax (LBTT) is the term used for Stamp Duty in Scotland. LBTT applies to purchases of both residential property and commercial property in Scotland, with different rates administered depending on the value of the property you purchase. There are several LBTT bands, with a specific percentage of tax applied to each band.
As a result of the pandemic, the Scottish government made the decision to raise the nil percent threshold for residential property from £175,000 to £250,000 for first-time buyers. Therefore, if you plan to buy a property under £250,000 before 31st March 2021, you will not be required to pay LBTT. For many first-time buyers, this could mean saving thousands of pounds.
The Scottish Government First Home Fund
The First Home Fund is a scheme set up by the Scottish government which allows first-time buyers to borrow up to £25,000 from the government to help buy their first home. The scheme is open to anyone in Scotland looking to buy a home for the first time and, unlike the Help to Buy scheme, you can purchase both new and resale properties.
Am I eligible for the First Home Fund scheme?
There are some eligibility criteria you must meet in order to take advantage of the fund:
- You must be taking out a mortgage – you cannot apply to the scheme if you are a cash buyer.
- You cannot apply to the scheme if you have ever owned a property in the UK or abroad, even in circumstances where the property was jointly owned (though, if you are buying along with a partner, it is sufficient that only one of you is a first time buyer).
- The property you plan to buy must be your residence (it cannot be a buy-to-let property).
Can I apply to the First Home Fund while social distancing measures are in place?
Although social distancing measures are still in place throughout Scotland, you can still make an application to the First Home Fund. It is worth noting that applications may take longer than usual to process, and you should, therefore, give yourself plenty of time.
Do I still need to make a deposit payment?
Yes. You will be required to pay a deposit of at least five per cent of the property value. The idea behind the government loan scheme is to help boost your deposit and provide you with access to a wider range of mortgage options.
The First Home Fund helps first-time buyers combat the minimum deposit increase imposed by many lenders at the moment. Rather than having to save a 15 per cent deposit, you can still proceed with a five per cent deposit and borrow additional funds from the government to boost your deposit to 15 per cent of the property’s value.
The other key advantage of this scheme is that it is much broader than the Help to Buy scheme. The fund can be used to purchase both new-build and resale properties, making the range of property available to first-time buyers much greater.
While this could be an excellent time for you to buy your first home, it is essential to remember that buying a property is a big commitment. You should seek both financial and legal advice specific to your circumstances to help you understand what the best option for you is.
Contact Raeside Chisholm Conveyancing Solicitors for First-time Buyers in Glasgow City Centre
We are pleased to help people buy their first home. For advice specific to your circumstances, get in touch today. When you call us on 0141 673 5588 we will arrange an initial consultation to let you know how we can help. To request a callback, you can also contact us through our online enquiry form and a member of our team will get back to you right away.
