First Homes Fund: Information for Lenders and Independent Financial Advisers

Eligibility criteria

Although the scheme is open to all first-time buyers wishing to purchase a property in Scotland there are some specific requirements that applicants must meet.

Applicants must take out a mortgage to qualify for the scheme as it is not intended to help cash buyers. The mortgage must be capital repayment and be for at least 25% of the purchase price. Applicants will not qualify for the scheme if they are taking out an interest-only mortgage.

Applicants should expect to contribute a deposit of around 5%, subject to lender requirements and any amount over valuation must be cash funded.

There is a £300,000 cap on the value of the property that can be purchased through the scheme. The Scottish Government contribution cannot exceed £10,000 or 49% of the value of the property or purchase price (whichever is the lower amount). The £10,000 contribution is the maximum allowed, but an applicant can choose to take a smaller amount if they wish, therefore reducing the Scottish Government’s equity share in the property.

Applicants can purchase properties above market value and still take part in the scheme. However equity shares will always be calculated against the open market value of the property, or purchase price, whichever is lower, for existing builds. In the case of new build properties, the valuation will either form part of the mortgage offer or be provided in a separate valuation report given to the lender. The equity shares will be calculated by reference to the valuation of the property, unless the purchase price is lower than valuation in which case the equity shares will be calculated by reference to the final purchase price. All equity shares will be calculated to two decimal places when expressed as a percentage.

Where joint applicants apply, only one requires to be a first time buyer, provided that none of the joint applicants remain the owner of a property by the time the applicants are completing the purchase of the property with shared equity support through the scheme.

There is a limit of one award per property, so if two first-time buyers make a joint application they will be only be eligible for a single award through the scheme.

The property being purchased must be the applicants' sole residence as the scheme is not intended to assist buy-to-let investors.

Applicants cannot combine this scheme with any other shared equity scheme offered by the Scottish Government, Open Market Shared Equity or New Supply Shared Equity schemes). However they are able to use the proceeds of a Help to Buy ISA or a Lifetime ISA towards their deposit.

There is no restriction on builder incentives, but part exchange is not allowed, although assisted purchase is permitted.

A sustainability check will be completed by the administering agent as part of the application process. This will involve checking that the monthly mortgage and other debt repayments do not exceed 45% of the applicants' net disposable income.