Exploring government schemes for first-time buyers in Scotland
Aspiring homeowners in Scotland have access to various government schemes designed to facilitate their journey onto the property ladder. Under the umbrella of the Low-Cost Initiative for First-Time Buyers (LIFT), first-time buyers can explore options such as the New Supply Shared Equity scheme, the Open Market Shared Equity scheme, or Shared Ownership schemes. So far the LIFT scheme has helped over 13,000 people purchase their first home. Not only this, other help is available for first-time buyers such as ISAs and Land and Buildings Transactions Tax relief.
As of 19 July 2024 the Open Market Shared Equity Scheme is paused for new applications. For the latest update on when applications wil re-open, be sure to visit the Open Market Shared Equity Scheme page on mygov.scot.
New Supply Shared Equity Scheme
The New Supply Shared Equity Scheme offers buyers the opportunity to own a property outright while paying only up to 80% of its value. The remaining portion is covered by a loan provided to housing associations or housing cooperatives by the Scottish Government. Typically, properties available under this scheme are new build homes specifically tailored for it. While buyers don't pay rent on the portion of the home they don't own, the government reclaims its proportional share upon the property's sale. Buyers can initially purchase a minimum share of 51%, with the flexibility to increase it to 80% after two years. Some areas may stipulate that housing associations or cooperatives retain a 20% stake, while others allow buyers to acquire the remaining share over time. For more information, visit the Scottish Government website.
Open Market Shared Equity Scheme
Another avenue for first-time buyers is the Open Market Shared Equity Scheme, offering assistance to those seeking homeownership in Scotland. The difference with this scheme is that it only applies to an existing home that’s for sale. However, priority is given to certain groups, including renters from local authorities or housing associations, disabled individuals, recent members of the armed forces, and widows or widowers of service personnel. Applications for this scheme are evaluated by registered social landlords acting on behalf of the Scottish Government, ensuring fair and equitable distribution of resources. For more information, visit the Scottish Government website.
Shared Ownership Scheme
If you're a first-time buyer with a lower income and aspire to own a home but lack the funds for the full purchase, shared ownership offers you the opportunity to possess a 25%, 50%, or 75% stake in a property. This arrangement contrasts with the shared equity schemes mentioned earlier. The remaining portion is held by a housing association, and you contribute an 'occupancy charge' to reside in the property. For further information on this scheme, visit the Scottish Government website.
Scottish First Home Fund
The First Home Fund is now closed and will not be reopened. This scheme provided loans of up to £25,000 to first-time buyers to help boost their deposit to purchase a property in Scotland.
Other help for first-time buyers
Help to buy ISA and Lifetime ISA
Help to Buy ISAs are no longer open for new applications. However, if you already have one, they allow you to save up to £200 per month towards your first home, with the government contributing a 25% bonus (maximum £3,000) on top of your savings.
The Lifetime ISA remains available for opening and serves as a helpful tool for saving towards your initial home purchase. With this ISA, you can save up to £4,000 per tax year, and the government will add a 25% bonus to your savings, akin to the Help to Buy ISA. Additionally, you can earn interest on your savings, and since it's an ISA, the interest is tax-free. Find out more about Lifetime ISAs here.
LBTT reductions for first-time buyers in Scotland
LBTT, known as the Land and Buildings Transaction Tax, serves as Scotland's alternative to stamp duty, applicable to property purchases in Scotland. It operates on a tiered system, with the property's value determining the LBTT amount due.
For first-time buyers, LBTT relief is available for properties valued up to £175,000, exempting them from paying the tax on their initial home if it falls within or below this threshold.
If the first property exceeds £175,000 in value, relief applies to the transaction value up to £175,000, with LBTT payable on the portion surpassing this amount. To calculate how much LBTT you will need to pay, use our handy LBTT calculator.
Find out everything you need to know about buying your first property
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The information contained in this article is provided in good faith. Whilst every care has been taken in the preparation of the information, no responsibility is accepted for any errors which, despite our precautions, it may contain.
ESPC mortgages offer expert independent mortgage advice in Edinburgh. If you are looking for first-time buyer mortgage advice, get in touch with the team on 0131 253 2920 or fsenquiries@espc.com
The initial consultation with an ESPC Mortgages adviser is free and without obligation. Thereafter, ESPC Mortgages charges for mortgage advice are usually £395 (£345 for first-time buyers). YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOANS SECURED AGAINST IT.
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