The Scottish Government is encouraging first-time buyers and people on low to medium incomes to take advantage of a discount scheme to help them buy a home in 2023. The Open Market Shared Equity Scheme allows people to buy a home without having to fund its entire cost and is available across Scotland to those buying their first property and people in a priority access group.
This includes those buying their first home, as well as buyers aged 60 and over, people living in either council or housing association properties, disabled people, members of the armed forces and those who have left the services within the last two years.
The bereaved partners of those in the forces who have died while in service in the last two years can also benefit from the scheme, which allows people to buy a share of a home - usually between 60% and 90% - with the Scottish Government then purchasing the remaining share.
However, after the announcement from the Bank of England that interest rates would rise to 4%, the highest rate since 2008, the property market remains a difficult environment to navigate, particularly for first-time buyers.
Although the average house price fell 0.6% in January to £258,297 - the fifth month in a row that prices have fallen - first-time buyers must grapple with high mortgage payments and the cost of living crisis affecting their finances.
Four top tips for first-time buyers
Property expert David Hannah, Group Chairman of the UK's leading property tax specialists, Cornerstone Tax, shares his four top tips for first-time buyers looking to step onto the property ladder.
Understand what you can afford
David explained: “You need to understand what you can afford, if you take on too much mortgage debt and put too much of a strain on your monthly or weekly budget you’re going to run into trouble and that’s just going to lead into a load of stress.
“Every first-time buyer needs to make sure that the mortgage payment that you are committing yourself to is a reasonable fraction of your earnings. If you stretch it too far or don’t fix the rate, you could find yourself in trouble - we’ve recently seen that interest rates can rise rapidly and severely affect a first-time buyer’s monthly mortgage payments."
Understand your budgets
David explained: “New build homes tend to come with guarantees meaning that minor repairs and defects are covered out of the developer’s costs, however, if you buy a second-hand home, these costs can’t be claimed from anybody else.
“If you don’t have a proper survey and an understanding of the state of repair of the property before you buy it, you could be faced with substantial bills for such things as rewiring or a new roof if you didn’t have that anticipated before the purchase.
“In those circumstances, you could be led into financial difficulty because you’re having to spend money that you haven’t anticipated. Also, if the survey report is sufficiently alarming you can pull out of the deal before exchange or renegotiate the price down to take into account these future costs."
Consider renting a room
David also said there are ways to make homeownership more affordable.
He said: “With the increase in house prices over the last 50 years and the shortfall in available rental properties, many homeowners are turning to renting a room.
“This is obviously an intrusion on your family life, but if you vet the room renter carefully then you can end up with an income of as much as £500 each month.
“If you’re paying out around £850 a month on a mortgage that’s a very welcome contribution. You can earn up to £7.500 a year tax free using the rent a room allowance and this can help offset the cost of mortgaging even if you’re a first-time buyer."
Location, location, location
David said the last key tip is to not just focus on the property but also get to know the area you’re moving to. He said: “If you’re looking at a new building, work out where all the other properties are going to be - are you going to be overlooked or does your property back on to a major road?
“It’s important to understand what the levels of noise are likely to be in your area, there are stories of people who have bought properties only to find that their back gardens back onto a dual carriageway.
“You need to look at where the local amenities are, if you’re a first-time buyer and you’re thinking of starting a family, you need to consider where shops and schools are located and if they are commutable or within walking distance.”
David added that these are important factors, not only for your life in your new home but also in the appeal of that property when you come to sell it to move on.
He also warned first-time buyers to take additional costs such as legal costs, surveys and various agent fees into account when planning their budgets.
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