First Home Fund

What is the First Home Fund?

The First Home Fund is a shared equity scheme run by the Scottish Government and aims to help first-time buyers purchase a property. Up to £25,000 is available to all first-time buyers towards the purchase of both new build and existing properties.

A first-time buyer is anyone that does not own, or has previously owned, a property in Scotland or anywhere else in the world. If you are applying for a joint mortgage, only one applicant needs to be a first-time buyer to qualify for the scheme, provided that none of the joint applicants still own another property by the time you are ready to complete the purchase of your new property. If you and your partner are both first-time buyers you will only be able to receive one contribution towards the property from the Scottish Government.

In order to take part in the scheme, you will be required to provide a minimum deposit of around 5% (subject to individual lender requirements) and your mortgage must be at least 25% of the purchase price. Although the Scottish Government will have an equity share in the property, you will own the property outright. There are no monthly payments to be made towards the Scottish Government and no interest will be charged.

You will normally repay the Scottish Government’s percentage equity share when you sell your home, however you can choose to pay this off earlier.

What is Shared Equity?

Buying through a shared equity scheme means you split the cost of purchasing the property with the Scottish Government. You will fund your share through a deposit and a mortgage, with the remaining share being provided by the Scottish Government.

There are no monthly payments or interest payments to the Scottish Government for their contribution. Instead, you will normally pay it back when you sell your property, or you can choose to increase your equity share over time.

As an example, if your deposit and mortgage pays for 85% of your home’s value when you buy, the Scottish Government will hold a 15% share. This means that when you sell, you will receive 85% of the final sale price and the Scottish Government will receive 15%.

This does not mean that the Scottish Government has an ownership right to the property. You will own the property outright and hold the full title.

Who is the First Home Fund for?

The scheme is open to all first-time buyers in Scotland who are taking out a mortgage. You will not be able to apply to the scheme if you are a cash buyer or if you have previously owned a property in the UK or abroad at any time (as either a sole or a joint owner).

While the scheme is open to all first-time buyers there are a few requirements that you will need to be aware of:

  • The maximum contribution from the Scottish Government is £25,000 or 49% of the property valuation figure or the purchase price (whichever is lower). If you purchase a property for less than the valuation figure then the maximum Scottish Government contribution is £25,000 or 49% of the purchase price.

Find out more

To find out more information on the First Home Fund and discuss how it may be able to help you own your first home get in touch with David Butler.

Email: david@portfs.co.uk

Telephone: 01224 679035

Your home may be repossessed if you do not keep repayments on your mortgage.

www.portlethenfinancial.co.uk

Retirement Interest Only Mortgage

What are they?

A retirement interest-only mortgage is very similar to a standard interest-only mortgage, with two key differences.

  1. The loan is usually only paid off when you die, move into long term care or sell the house.
  2. You only have to prove you can afford the monthly interest repayments.

Retirement interest-only mortgages are generally aimed at older borrowers, such as the over 55s, over 60s and pensioners who might find them easier to qualify for than a typical interest-only mortgage.

In this way, they’re similar to types of equity release schemes like a lifetime mortgage, where you pay-off the original capital and possibly any interest when you die or move into long-term care.

However, with a lifetime mortgage you will either:

  • have a larger amount to repay at the end because there are no monthly repayments and the interest is rolled-up and added to the total loan value, or
  • make monthly interest payments and ad-hoc capital repayments during the term of the mortgage. This reduces or stops the effect of interest roll-up, but involves higher monthly repayments.

But, with a retirement interest-only mortgage, you only pay off the interest each month, so your monthly repayments will be lower.

This means you should be more likely to have something to pass on as an inheritance, or pay for long-term care.

How is it repaid?

You will be making monthly payments of the interest on the capital balance throughout the mortgage term with the capital being repaid when the house is sold, on death, or entry to long term care.

 

Advantages of a retirement interest-only mortgage

  • No need to demonstrate a suitable plan for repaying the mortgage.
  • More likely to have something to pass on as inheritance.
  • No problem of interest roll-up – which is when interest builds and builds – like with equity release.
  • Avoid having to downsize to a smaller property.
  • The loan term is not fixed.
  • Generally cheaper when compared to most Lifetime Mortgages.
  • You can unlock some of the equity in your home to pay off outstanding debt.

Disadvantages

  • You will need to pass the mortgage affordability checks to prove you can afford the interest only repayments.
  • Your home will be sold off to repay the loan when you die, enter long-term care or sell your home.
  • Your home is at risk if you do not keep up the repayments.
  • The amount you can borrow is based on your retirement income and your loan to value ratio.

Is a Retirement interest only mortgage right for you?

There is now alternative available to Lifetime Mortgages and Equity Release plans and depending your individual circumstances and requirements a Retirement interest only mortgage may be the best option.

However, it is a big decision to take out a mortgage on your home or increase the existing borrowing and all options should be fully reviewed before a decision is made.

As a specialist financial adviser David Butler is qualified to provide advice on both Equity release and Retirement Interest only mortgages and will take a holistic approach in reviewing your current circumstances and making the appropriate recommendations to achieve your goals.

David is a member of the Society of Mortgage Professionals, Dip PFS & Certs CII (MP & ER)

To arrange a free review appointment, call 01224 784030 or email david@portfs.co.uk

Portlethen Financial Services

www.equityreleaseaberdeen.co.uk

Your home may be repossessed if you do not keep up repayments on your mortgage

Equity release refers to home reversion plans and lifetime mortgages. To understand the features and risks ask for a personalised illustration

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