Renters are paying 19% more than homeowners in monthly housing costs in Scottish housing gap crisis
According to a report presented to the Scottish government in October 2022, renters spend an average of 26% and 24% of their household income on renting from the private sector and social renting sectors, respectively. Meanwhile, owner-occupiers with a mortgage only spend an average of 7%.
“First time buyers regularly struggle to get a deposit together partly because of high rental costs” commented Kevin Gardiner, managing director of Mortgage It.
Unfortunately, it’s getting more challenging to save for a deposit as the cost of living increases while wages struggle to keep up with inflation.
The good news is that there are financial schemes available to help you overcome this challenge. “Many would-be home buyers aren’t even aware of the various options available to them for buying their first home. That’s where we come in, making sure they know what’s available and how these options can help with getting onto the property ladder.” said Kevin.
Here are two examples:
The LIFT Schemes
The LIFT schemes can financially assist low-income, first-time homebuyers, in purchasing a house on the open market or a new build from a local authority or housing association. They are:
Open Market Shared Equity (OMSE), which provides financial assistance to buyers to purchase a house on the Open Market.
New Supply Shared Equity Scheme (NSSE), which provides financial assistance to aid the purchase of a New Build from a local authority or Housing Association.
Here are some key points to keep in mind:
The scheme can provide up to 40% funding towards new homes.
In certain circumstances, it may be possible to buy with no deposit at all
The buyer will own the property. However, when they sell the property, the Scottish Government will need to be paid back the percentage (that they received by way of funding) of the sale value.
The Deposit Unlock Scheme (Homes for Scotland)
Launched in November 2021, this scheme allows buyers to purchase a new build home with just a 5% deposit. It replaces the Help to Buy initiative that ended in March 2022 and applies to the purchase of two-bedroom apartments or houses (no studio flats or one-bedroom accommodation).
Here are some key points to keep in mind:
Buyers will own 100% of the property once they’ve repaid the mortgage loan.
The mortgage will cover 95% of the home value, so they won’t need to consider paying back an equity loan owed to a builder.
Although the monthly mortgage repayments will be higher because of borrowing such a high percentage, the builders will pay a Mortgage Indemnity Premium to an insurance company on the buyer’s behalf to offset any potential risk to the lenders. This results in more competitive rates being available.
It’s important to note that as of the time of publishing, only three lenders are participating in this scheme, and not all builders have signed up to participate.
MortgageIt.co.uk is a UK mortgage broker offering fee-free mortgage advice nationwide. With an aim of making mortgage advice more accessible everyone, they can advise customers on their home buying and mortgage options to find the right one for them.
Homes may be repossessed if buyer’s do not keep up repayments on their mortgage.