First Time Buyer Mortgage in Scotland

"I'm a Specialist Mortgage Advisor who can help your property dreams come true."

Ross McMillan

Blue Fish Mortgage Solutions

As a former estate agent of almost 15 years, I now use my vast experience, insider knowledge and access to dozens of lenders to help people like you:

Get in touch for a no-obligation chat about how I might be able to help you.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

Some Buy to Let mortgages are not regulated by the Financial Conduct Authority.

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Buying a home for the first time and looking into obtaining your first time buyer mortgage in Scotland can be a daunting prospect. There’s so many things to think about – and that’s before you’ve even considered the many mortgage products, rates, and lenders to choose from. To help you reduce the stress, here are our top tips for first-time buyers.

So, why are you here and how can I help?

You are looking for a first time buyer mortgage in Scotland. You don’t know where to start. And you’ve probably got lots of questions like these….

How much deposit do I need to buy a house in Scotland as a first-time buyer?

When determining the necessary deposit to buy a house in Scotland as a first-time buyer, several factors come into play. These factors include:

Loan-to-Value Ratio: The deposit amount depends on the loan-to-value (LTV) ratio, representing the percentage of the property’s value borrowed from a lender. Providing a higher deposit lowers the LTV ratio, granting access to more favorable mortgage deals. In Scotland, first-time buyers typically need a minimum deposit of 5% to 10% of the property’s purchase price or Home Report value (whichever is lower).

Affordability and Lender’s Criteria: Alongside the minimum deposit requirement, affordability is crucial. Lenders evaluate income, credit history, and other financial aspects to determine the loan amount. Specific lenders may have criteria regarding deposit amounts, and some may require higher deposits from first-time buyers.

Property Value: The property’s price significantly influences the required deposit. For example, if purchasing a £200,000 house with a 10% deposit requirement, you would need £20,000 as a deposit.

Additional Costs: Beyond the deposit, other expenses come into play when buying a house. These include solicitor fees, valuation fees, survey costs, mortgage arrangement fees, and potential Land and Buildings Transaction Tax (LBTT) if applicable. Considering these costs alongside the deposit ensures adequate budgeting for overall property acquisition expenses.

It’s important to note that specific deposit requirements vary based on the lender, individual financial circumstances, and housing market conditions. Seeking guidance from a mortgage advisor is advisable to determine the appropriate deposit amount for your specific needs and goals.

Remember, a higher deposit can lead to improved mortgage deals, lower interest rates, and reduced monthly payments. Balancing financial capabilities with property aspirations is essential when saving for a deposit.

What is the maximum mortgage I can get as a first-time buyer in Scotland?

The maximum mortgage amount you can get as a first-time buyer in Scotland depends on various factors. Lenders consider your income, expenses, credit history, and affordability when determining the loan amount.

Generally, lenders may offer a mortgage up to 4.5 times your annual income. So, if your annual income is £40,000, you might be eligible for a maximum mortgage of around £180,000. However, this is a rough estimate, and different lenders may have varying criteria. It’s crucial to consult with a mortgage advisor who can assess your individual circumstances and guide you on the maximum mortgage amount you may be eligible for.

  • How do I actually make an offer?
  • How soon after starting or changing to a new job, can I apply for a mortgage?
  • How does the Home Report effect how much of a mortgage I can get?

I can help you with all of these and booking your initial discovery call is definitely worth your while but in the meantime you may also have other questions like the ones below.

Will bad credit affect my application for a first time buyer mortgage in Scotland?

If there’s previous bad credit showing on your credit file, then as with most forms of borrowing this can definitely limit the options available to you when looking to secure a first time buyer mortgage in Scotland.

Potential credit issues you may be faced with are a low or impaired credit score, defaults, County Court Judgements (CCJs), Individual Voluntary Arrangements (IVAs), and Debt Management Plans (DMPs).

I help people with these kind of issues every day but in general the smaller the amounts involved, the less severe and older the issue, and the larger the deposit, the more chance there is of approval.

Worst case, if it’s not feasible to apply for a mortgage right now, I can and will still work with you and advise what things need to be done to improve your chances in the future.

How could I improve my credit score to increase my chances of getting a mortgage in Scotland?

To improve your credit score and increase your chances of getting a mortgage in Scotland, consider following these steps:

1. Check your credit report: Obtain a copy of your credit report from credit reference agencies like Experian, Equifax, or TransUnion. Review it for errors or discrepancies that could negatively impact your score. I recommend CheckMyFile as it pulls together all three these main reporting agencies into one report.

2. Make timely payments: Pay your bills, loans, and credit card balances on time to demonstrate reliability and build a positive payment history.

3. Reduce debts: Aim to pay off outstanding debts and keep credit card balances low. High credit utilization can negatively affect your score.

4. Maintain credit accounts: Keep existing credit accounts open, even if you don’t use them regularly. Long-standing accounts with good payment history can boost your credit score.

5. Avoid new credit applications: Limit applying for new credit, as multiple applications in a short period can be viewed negatively by lenders. Each application leaves a footprint on your credit report.

6. Register on the electoral roll: Being registered to vote enhances your creditworthiness and verifies your address.

7. Correct mistakes promptly: If you spot errors on your credit report, contact the credit reference agency to rectify them swiftly.

8. Build a stable employment history: Lenders consider job stability as a factor in mortgage applications. Consistent employment shows reliability.

9. Seek professional advice: Consult with a mortgage advisor who can analyze your credit situation and offer guidance on improving your credit score specifically for mortgage applications.

10. Be patient: Improving your credit score takes time. Consistently following good credit practices will gradually enhance your creditworthiness.

Remember, each lender has its own criteria, so even with a less-than-perfect credit score, you may still find suitable mortgage options. Working with a mortgage advisor can increase your chances of finding a lender who is willing to work with your specific circumstances.

Can I get a first time buyer mortgage in Scotland if I am self-employed?

The simple answer is “Yes”.

The way your application is assessed overall, won’t typically differ from someone who is in full time employment, however, the way your income is calculated and evidenced is what is different for mortgage applications from those who are self-employed.

Most lenders will want you to produce two or three years of accounts and/or personal tax returns, but there are some providers who will consider applications based on just one year of accounts/tax returns.

If you’re self-employed and looking for a first time buyer mortgage in Scotland, it’s vitally important that you get the right advice from an experienced mortgage advisor as – in particular – the difference in how lenders assess self employed income varies dramatically and this can have a huge impact on the level of your mortgage opportunities.

If income is earned tax-free in a certain country and is brought back into the UK, then self-assessment may be required to evidence the income earned and tax paid accordingly…but this is not always the case.

If no tax is paid at all, then most UK lenders will require an acceptable and viable explanation after which certain lenders may be willing to consider things.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

Is it harder to get a mortgage if you are a first time buyer?

In most instances, it isn’t necessarily more difficult to get a first time buyer mortgage in Scotland as long as you meet the mortgage lender’s eligibility criteria and have enough deposit, but some lenders do prefer home-movers as they see them as lower risk.

In simple terms, people who have no track record of paying a mortgage before might be seen as more of a gamble than somebody with an existing mortgage, a property to sell or a history of maintaining a mortgage in the past.

In order to help minimise this risk, there are currently some government schemes including the mortgage guarantee scheme for people with low deposits and also specialist mortgage products such as guarantor mortgages which can also help in this regard.

Mortgage brokers who specialise in first-time buyers and fully understand their needs will know exactly which government schemes and exclusive deals may be available and have the right knowledge and experience to help you secure the best option for your specific circumstances.

How does an Agreement in Principle differ from a mortgage offer?

An Agreement in Principle, (AIP) also known as a ‘Decision in Principle’ (DIP) or ‘Mortgage Promise’, is useful if you haven’t found a property you want to buy but would like to know how much you could borrow and whether it’s achievable or not. Typically this is the first formal stage in your journey towards securing a first time buyer mortgage in Scotland.

A mortgage offer is issued by a lender once a full application has been made. This can’t happen until you have had an offer on a property accepted as any mortgage requires a specific property for the lender to assess as suitable security for any lending.

After the necessary checks and assessment, such as a valuation and confirmation of your details including income, etc, have been carried out, if the lender underwriter is satisfied with all this, the mortgage offer can then be issued.

It sets out the terms under which the lender is prepared to offer you a loan and enables your purchase to progress through the legal process.

What are the main types of first time buyer mortgage in Scotland?

The most common are fixed, discount and tracker rate mortgages, but there are other types of mortgage.

Fixed rate mortgage

Fixed rate mortgages are just that, fixed. Your interest rates are fixed for a set amount of time. This is quite popular as it allows you to plan your future outgoings. This type of mortgage means the monthly payment is therefore the same every month.

Discount rate mortgages

Discount rate mortgages are usually a discount on the lenders variable rate. This means that as the lender puts their variable rate up or down, your monthly payments go up or down. You can often get a good rate on a discount product, but they lack stability.

Tracker rate mortgages

This type of mortgage usually tracks the Bank of England base rate. This means as that goes up or down your monthly payments also go up or down.

What additional costs should I consider when buying a house in Scotland as a first-time buyer?

When buying a house in Scotland as a first-time buyer, aside from the purchase price, it’s important to consider the following additional costs:

  1. Solicitor’s fees: Engaging a solicitor or conveyancer is essential for handling legal aspects of the property purchase. Their fees cover the necessary paperwork and ensuring the transaction adheres to Scottish law.

  2. Mortgage arrangement fees: Some lenders charge a fee for arranging your mortgage. This fee can vary, so it’s crucial to factor it into your budget.

  3. Stamp Duty Land Tax (LBTT): In Scotland, Stamp Duty has been replaced by the Land and Buildings Transaction Tax (LBTT). LBTT is applicable to properties above a certain threshold, and the amount depends on the purchase price. Ensure you understand the LBTT rates and factor this cost into your budget.

  4. Mortgage valuation fees: Although a transcript from the home report will usually be accepted, it’s worth noting that some lenders may still charge for a basic mortgage valuation, which is distinct from the home report. This fee covers the lender’s assessment of the property’s value

  5. Moving costs: Don’t forget to account for the costs of hiring a removal company or renting a van, as well as any storage fees if needed.

  6. Insurance: As a homeowner, you’ll usually need to arrange buildings insurance to protect your property. Additionally, it’s wise to consider contents insurance to safeguard your belongings.

  7. Renovations or repairs: Depending on the condition of the property, you may need to budget for any necessary renovations or repairs after purchase.

  8. Maintenance costs: Factor in ongoing maintenance expenses, such as regular servicing of boilers or property upkeep.

Remember, these additional costs can vary depending on factors such as the property’s price, location, and individual circumstances. It’s advisable to consult with a solicitor, mortgage advisor, or other relevant professionals to obtain accurate estimates of these costs based on your specific situation.

Speak to an expert!

 Contact me, Ross McMillan, the owner of Blue Fish Mortgage Solutions today for expert advice and guidance on your unique mortgage and property needs. I will work with you one-on-one to help you find the right solution for your specific needs. With my expertise and industry connections, you can rest assured that you are in good hands when it comes to securing the financing you need for your property. 

What is a Home Report?

A legal requirement in Scotland since 2008, the Home Report is supplied and paid for by the seller of any residential property on the open resale market. 

It contains a lot of information of use to buyers at no cost to them and consists of three parts:

1. Property Questionnaire (PQ)

2. Energy Performance Certificate. (EPC)

3. Scottish Single Survey 

A transcript of the mortgage valuation element of the single survey is used by the majority of lenders when assessing any mortgage application.

 

The Home Report-  The Property Questionnaire. 

The Property Questionnaire is completed by the seller and asks  questions relating to the property for sale. 

Its not a legally binding document but must be completed to the best of the sellers knowledge.

The main areas covered within it that you should pay particular attention to as a buyer are:

1. What council tax banding is the property.

2. Who currently supplies the utilities to the property.

3. Have any alterations requiring planning been undertaken on the property and are the relevant permissions in place for these.

4. Are there any communal charges such as factoring associated to the property? And if so do these include a common buildings insurance policy. 

The Home Report-  The Energy Performance Certificate (EPC). 

The EPC is completed by the surveyor conducting the home report and records how energy efficient – or otherwise – the subject property is. The grading system runs from A-G and looks similar to the colour graph that you may find on new appliances these days.

Band A is as good as it gets with band G at the other extreme.

Points are obtained via various energy efficiency measurements such as whether the property has double glazing, gas central heating, insulation etc. and these points then accumulate and equate to the appropriate banding.

As well as recording the current rating, the report also provides recommendations as to what measures could be taken to improve efficiency.

Lenders are increasingly offering “Green” mortgages with incentives for properties that have the highest EPC ratings and conversely those properties with the lower ratings of “E” or below may have less mortgage options.

The Home Report-  The Scottish Single Survey

The Single Survey element within The Home Report makes up the largest part of the report and is completed by the recognised chartered surveyor who conducts this.

In simple terms, the survey provides a detailed summary and analysis of the condition of the subject property and ultimately then places a mortgage valuation on it.

The mortgage valuation or certificate will -in most instances – be used by any prospective mortgage lender as part of their overall assessment of any mortgage application. 

It is important to note that any mortgage and the associated loan to value/deposit contribution required will be based on either the home report mortgage valuation or the purchase price, whichever is the lower.

Buy to let mortgage lenders will not generally use the mortgage valuation within the report primarily as this does not contain the rental valuation that they require. In such instances, the lender will require and typically instruct their own valuation.

As well as an opinion on market value, the single survey grades from a category 1 – 3 and provides commentary on  up to 24 different elements of a properties condition (including type of construction) to assist in identifying any areas that buyers (and lenders) should be aware of prior to making any decisions. 

Conclusion

As a first-time buyer in Scotland, navigating the mortgage process can be complex. It’s crucial to conduct thorough research and seek guidance from a qualified mortgage advisor who understands the intricacies of the Scottish market. By working with a knowledgeable professional, you can assess your eligibility, explore tailored mortgage options, and increase your chances of securing a mortgage for your dream home. With careful preparation and planning, you can embark on your home-buying journey in Scotland with confidence. Best of luck!

Are you a first-time buyer in Scotland looking for expert mortgage advice and assistance? Your search ends here with Blue Fish Mortgage Solutions! As an experienced advisor specialising in Scottish property, I can guide you through the complex process of securing a mortgage for your dream home. I’ll assess your eligibility, taking into account factors specific to Scotland, such as visa status. Contact me today to discover how I can help you achieve your mortgage goals and turn your property ambitions into reality.

What are the key stages of the property buying process in Scotland:

  1. Speak to mortgage advisor to establish and get advice on what a realistic budget for your individual circumstance might be.
  2. Mortgage advisor may then progress to obtain an agreement/decision in principle to give you some confidence – not a guarantee – that you could obtain a mortgage. (aka an AIP/DIP)
  3. Start viewings and then identify property you would like to offer on.
  4. Instruct solicitor to make offer. (once you’ve done sums and consulted with your mortgage advisor to double check/firm up on figures etc)
  5. Once offer accepted, we then look to progress the agreement in principle (AIP) to a full mortgage application.
  6. Legal conveyancing between both solicitors commences.
  7. Once mortgage offer received, solicitor could be in a position to confirm the legal bargain (aka conclude missives) which would include a definitive date of entry/settlement date.
  8. For the date of entry, the monies required from you (i.e. deposit) need to be in your solicitors bank account and cleared.
  9. Solicitor draws down/receives funds from mortgage lender to complete the purchase.
  10. On the date of entry get keys for your new house.🥳 😊

Hopefully the above information has been useful but if you have any other questions or are ready to start your own property journey now, please fill in the enquiry form and we will get in touch!

This article is intended to be a generic overview and each individual situation will need to be considered carefully, with the final decision being down to the lender.

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