First Time Buyer Mortgage In Scotland

Buying a home for the first time can be daunting, and if you’re looking for a mortgage to go along with it, things can seem even more complicated.

Although property prices in Scotland have traditionally been lower than in some other parts of the UK, many other things remain to be figured out. 

Whether it’s the property location, mortgage rates, or lender choice, there are many aspects to remember and questions to answer.

But don’t worry, for we’re here to help you out! If you’re looking for a first time buyer mortgage in Scotland, you’ve come to the right place.

Just read on and clear your doubts.

Maximum Mortgage Amount That A First Time Buyer Can Get In Scotland

Multiple factors will decide the maximum amount you can get as a first-time mortgage taker in Scotland. 

The following are some of the essential factors that lenders consider:

• Credit history
• Affordability
• Income and expense patterns
• Existing financial commitments 

The exact requirements vary slightly from lender to lender, but the basics remain the same. Lenders usually offer mortgages up to 4.5 times your annual income. 

This means if your yearly income is £50,000, the maximum amount you can get is around £225,000.

Remember that this is just a rough estimate; different lenders will have different criteria and limits. Lenders might assess your credit rating and offer a larger loan amount or may potentially based on your occupation if you are a professional.

Factors Affecting The Mortgage Deposit For First Time Buyers In Scotland

After the mortgage amount, the next question on the first-time buyer’s mind is usually the deposit they must put down. Here also, there are multiple factors at play, like the following:

1. LTV Ratio

The Loan-to-Value or LTV ratio represents the value percentage of the property you’re borrowing from the lender, and this determines the deposit amount to a large degree. If you can put down a higher deposit, the LTV ratio will be lowered, making the deal more favourable and usually with lower interest rates.

As a first-time buyer in Scotland, you’ll usually need to put down a minimum deposit of 5-10% of the property’s Home Report Value or purchase price, whichever is lower.

2. Lender’s Affordability Assessment

The next factor determining your deposit is the lender’s affordability assessment. This usually varies from lender to lender but involves an evaluation of income and expenses, credit history, etc. The higher the amount you can borrow the potentially lower deposit you may need to put down. 

3. Property Value

This is rather obvious. The property value you’re about to buy will determine the deposit amount. If you’re purchasing a £200,000 property with a 5% deposit, you must put down £10,000. 

Apart from the above, the lender’s preference, the borrower’s financials and market conditions can also influence the deposit amount.

What’s more, the deposit amount is not the only cost you need to worry about, as buying a property comes with several other associated costs, such as:

• Land and Buildings Transaction Tax
• Solicitor and valuation fees
• Surveyor fees
• Mortgage arrangement fees

So, along with the deposit, you’ll also need to be ready with cash for these costs.

Is It Tougher To Get First Time Buyer Mortgage In Scotland?

In most cases, no. You can get the mortgage approved as long as you meet the lender’s criteria. That said, some lenders prefer experienced buyers as they are considered low-risk borrowers.

Lenders might consider people who have never taken a mortgage and have no record of paying back loans a gamble. 

To minimise this risk, there are some government schemes like the Mortgage Guarantee Scheme and special mortgage products like Guarantor Mortgages.

Some lenders also specialise in first-time buyer mortgages and are more than willing to help you buy a house. 

We recommend partnering with an experienced mortgage broker who can help you understand the ins and outs of the process and get the best offer.

Types of First Time Buyer Mortgages In Scotland

1. Fixed Rate Mortgages

This is self-explanatory to a large degree. Fixed-rate mortgages have a fixed interest rate, meaning your monthly repayment remains unchanged. Such mortgages help you plan your finances without worrying about interest spikes.

2. Discount Rate Mortgages

These mortgages usually offer a discount on the lender’s variable rates. These mortgages are variable, and your interest can go up and down with the market rates. So, your monthly payments will vary.

3. Tracker Mortgages

Here, the interest rate ‘tracks’ the Bank of England base rates and goes up or down accordingly.

First Time Mortgages In Scotland For The Self-Employed

We’ve previously mentioned that your income assessment plays a significant role in your mortgage application. 

This assessment is easier for salaried individuals, but self-employed individuals might struggle to show a fixed income every month/year.

But that should not hinder your getting a mortgage, as your income will be assessed differently if you’re self-employed. 

Most lenders will ask you to provide 2-3 years of account statements and tax returns. 

Frequently Asked Questions (FAQs)

1. What is an Agreement In Principle?

An Agreement In Principle (AIP), sometimes called a Mortgage Promise, allows you to apply for a mortgage even if you haven’t found a property to buy. This lets you determine how much you can borrow and whether the loan would be feasible.

2. What is a Home Report?

A Home Report is a document the seller of any property must provide to the buyers. The seller must bear the cost of the report, and the buyers can access it for important information about the property. A Home Report consists of the following three parts:

• Property Questionnaire
• Energy Performance Certificate
• Scottish Single Survey

This document is used by lenders to assess the viability of a property that’s about to be mortgaged. Of the three parts, the Scottish Single Survey is the largest part of the report. This part of the document provides a detailed analysis of the property in question and places the mortgage valuation on it.

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

All content is written by qualified mortgage advisors to provide current, reliable and accurate mortgage information. The information on this website is not specific for each individual reader and therefore does not constitute financial advice.