Buying with a low deposit
The need for a substantial deposit can be a barrier to house purchase. Lenders are currently cautious about the amount of money they will lend. Most first time buyers now need a deposit of 20% of the property value, and the best mortgage rates are available for people who need to borrow only 75% or less.
In Tranent or Prestonpans a two-bedroom property is likely to cost upwards of £120,000. Assuming you require a 20% deposit you will need to have access to £24,000 in order to buy a property at this price.
A number of schemes are available to help people buy a home. They all operate differently and have different criteria for accessing them.
Shared equity schemes help people on low incomes. The purchaser only has to buy a share of the property equity (typically between 60% and 90%) and the scheme provider holds the remaining share. There is normally an option to increase the share at a later date. Depending on the scheme you may still have to pay a deposit on your share. Most schemes will have minimum and maximum income criteria.
Shared ownership schemes are usually provided by housing associations. The purchaser buys a share of the property (25%, 50% or 75%) and pays rent to the housing association for the remaining share.
Mortgage indemnity schemes provide purchasers with a ‘guarantee’ to enable them to obtain a mortgage which represents a higher percentage of the property's value than the lender would normally offer, thereby reducing the deposit that needs to be found. At present there is only one mortgage indemnity scheme operating in Scotland and it is only available for purchasers buying new build properties.