First Homes Fund: Information for Lenders and Independent Financial Advisers

Case Studies

• Case Study 1 - Purchase at Valuation

Iain currently rents a flat in Glasgow but wants to purchase his own home. His gross salary is £32,000 and he has been advised by his bank that the maximum mortgage he can receive is £144,000.

He has had an offer accepted on a property with a value of £140,000 and submits an application for support through the First Homes Fund. His bank requires a 5% deposit contribution from him, and he has decided to accept the full £10,000 contribution from the Scottish Government.

This means that the Scottish Government’s equity share of the property is 7.14%, while Iain holds the remaining 92.86%.

• Case Study 2 - Purchase by a non first-time buyer

Louise and Sarah are recently married and are buying a new home. They currently live in a flat owned by Louise, however Sarah has never owned a property before.

As Sarah is a first-time buyer they are eligible to apply to the scheme, even though Louise is not a first-time buyer. However, they must fully complete the sale of the current property before they can be awarded any funds through the scheme.

• Case Study 3 - Purchase of £20,000 which would mean an SG % stake of 49%

Deborah is purchasing a property valued at £20,000 and wants to apply to the First Homes Fund. She wants to take the full £10,000 contribution from the Scottish Government.

In this scenario the maximum contribution Deborah could receive is £9,800. Any higher than this and the Scottish Government’s equity share would exceed 49% which is not allowed under the scheme rules.

**It is very unlikely that a lender would allow a mortgage of this amount to be taken**

• Case Study 4 - Purchase Below Valuation

Shahid is purchasing a property that has a home report value of £195,000. He has applied to the scheme and has accepted a Scottish Government contribution of £10,000 towards the purchase. However he has been able to purchase the property for £187,000.

Since the purchase price is below the valuation figure, the equity shares are calculated using the purchase price figure.

• Case Study 5 - Purchase Above Valuation

Alex is purchasing a property that has a home report value of £100,000. She has applied to the scheme and has accepted a Scottish Government contribution of £10,000 towards the purchase. The final purchase price of the property is £110,000.

Alex is able to purchase the property above the valuation figure, however the equity share of the Scottish Government is calculated using the valuation figure, not the final purchase price.

This means that the Scottish Government has a 10% equity share in the property and Alex has 90%, as the valuation figure and not the purchase price is used for the calculation. Alex would need to pay the additional £10,000 from her own funds and this would not be included in the equity share calculation.

In this example Alex must contribute £15,000 (i.e. 5% of the valuation as a deposit plus the £10,000 she is paying above valuation) towards the purchase of the property.