Getting a Mortgage in Scotland

When it comes to applying for a mortgage in Scotland, certain parts of the processes you need to factor in are slightly different to the rest of the UK.

By following this guide, you’ll learn everything you need to know about how to apply, the types of mortgages available, and where to look for any help and guidance.

How to get a mortgage in Scotland

If you’re thinking of getting a mortgage for a property in Scotland, here’s the recommended process to follow. Starting with contacting a local broker who can help make the process much more straightforward.

1. Find a broker. Online Money Advisor can match you with someone who has knowledge of the local market and can help you find the best mortgage to match with your specific requirements
2. Apply for a mortgage in principle. A broker can help you prepare all the financial documentation you’ll need and identify the right lenders for your circumstances
3. Find a property. This is the fun part. Get looking online and booking viewings.
4. Contact a solicitor. Once you’ve found somewhere you’d like to buy, a broker can connect you with a solicitor who will then submit your “note of interest” to the seller and request a home report. Sellers are legally obliged to share this in Scotland.
5. Make an offer. The solicitor can submit this on your behalf along with any other details to support your case.
6. Let your broker know so they can help you prepare your mortgage application.
7. Wait for the solicitor to complete the missives process. The solicitor will also be doing a series of checks to make sure there are no issues with purchasing the property.
8. Submit any extra information requested by the lender. Sometimes a lender might want to do their own mortgage valuation. A broker can walk you through anything that might be needed.
9. Wait for the lender to provide a formal mortgage offer. Once they do, let your broker know so they can accept on your behalf. Then wait for the solicitor to keep on with the paperwork.
10. Settlement. This means paying the money and exchanging keys on a predetermined date agreed upon in the missives process.

Mortgage process in Scotland

Just like everywhere else in the UK, a Scottish lender must assess your income and expenses to judge your ability to make repayments on a mortgage. So the premise of the mortgage application process is the same, it’s just the process that differs slightly.

A number of the brokers we work with are well-versed in that process and are actually based locally in Scotland. This means they’ve got the expertise to guide you through from start to finish.

The main differences compared to the UK

So if the premise is the same, what parts of the process are different? Here’s an outline of some of the key factors you need to be aware of when applying for a mortgage in Scotland:

1. There are less lenders in Scotland. This means less for you to choose from, which can make it more difficult to get the mortgage you need and/or at a competitive interest rate.
2. Many of the lenders have postcode restrictions. This means they can only offer a mortgage to those looking to buy within the postcodes they operate. So, if you’re looking to buy a property in the highlands or off the mainland, it can be more difficult.
3. You must have the money to buy the property in place. In England, having a mortgage agreement in principle – a document from your lender indicating that they are willing to lend you a certain amount – is enough to put in an offer. But Scotland likes to see that you’ve physically got the funds for the deposit and other fees. This might cause an issue if you’re still waiting to sell your house. On the flip side, if you’re part of a chain and know everyone already has the money, things are less likely to fall through.
4. Home reports are mandatory rather than just recommended. These give an indication as to the condition of the property and provide a valuation.
5. Some properties come with title burdens. These are certain rules signed over to the new owner by the previous owner in what’s called a “disposition.” They vary but could include rules as to where bins can be stored or stipulations on the type of extension you could build.
6. You have to exchange missives. These are a series of legally binding letters that solicitors for the buyer and seller exchange, nailing down all the final details of the purchase. In England, solicitors usually exchange a single contract but in Scotland they exchange a whole range of correspondence. After all the missives have been sent, the seller then has a legal obligation to transfer the property deed to the buyer.
7. You’ll need a solicitor at an earlier point. These extra steps mean you’ll need the services of a solicitor a little earlier but a broker can let you know when and who to reach out to.

The documents required

Lenders need to see a number of documents to make sure you can afford the mortgage you’re applying for.

In Scotland, that includes copies of:

Read our comprehensive mortgage application guide for more help and assistance on what documentation may be needed.

Using a specialist Scottish mortgage broker

The process involved with getting a mortgage in Scotland is something a broker specialising in the local market will be able to help you with. They have deep working relationships with Scottish-based lenders so know the ins and outs of these processes well.

They’ll also help you avoid any geographical restrictions, which could hinder your mortgage hopes and have a working knowledge of any packages exclusive to the Scottish market, such as the LIFT scheme (see below).

The brokers we work with are all trained to make the mortgage application easier for you, saving you both time and hopefully some money too. If you get in touch we can arrange for a broker with experience of arranging mortgages in Scotland to contact you directly.

What are the deposit requirements?

Just like the rest of the UK, Scottish lenders will take your risk level into account, assess your situation and determine what amount of deposit they’d accept for the mortgage you’re applying for. That can be anything from 5% of the property value upwards.

It’s common for a lender to let you loan up to 4.5 times your income but obviously different lenders will have different thresholds so this is where it’s handy to have a broker who knows which lenders are open to what.

Other fees

In addition to the deposit and other costs already outlined so far, there’ll be a few other associated fees and charges to take into account:

1. Mortgage agreement in principle fee
   Some Scottish lenders ask for a fee once the mortgage agreement in principle is in place. The amount varies and although it’s annoying to have yet another bill, it does buy you more security. The agreement means that other offers are usually no longer accepted and that the property is taken off the market.
2. Lands and Buildings Transaction Tax
   The English equivalent of this would be called Stamp Duty. It’s the amount of money to be paid to HMRC when you purchase land or property over a certain value. In England, you’ve got 14 days after completion to pay but in Scotland that extends to 30 days.
   The specific amount is a percentage of the value of the property you’re buying but that percentage depends on which value band the property falls into. Check out the table below for an indication of what you might need to pay.

   Value of property	Lands and Buildings Transaction Tax to pay
   £145,000 to £250,000	2%
   £250,001 to £325,000	5%
   £325,001 to £750,000	10%
   Over £750,000	12%

Types of mortgages available

Just like in the rest of the UK, there are many mortgage options – for first-time buyers, springboard and guarantor mortgages as well as joint ownership mortgages and those for students. There are also:

• Self-build mortgages
• Help to buy schemes
• Mortgages for someone with bad credit
• Buy-to-let mortgages

A few Scotland-specific mortgages include:

The Low-cost Initiative for First Time (LIFT) Buyers mortgage

Set up in 2007 by the Scottish government, there are two schemes people can opt for under LIFT:

New Supply Shared Equity Scheme.

This scheme allows a buyer to purchase a new build house from a housing association or cooperative for only 51% to 80% of its value. The government covers the rest of the cost and after a few years you can start buying more of it.

The idea is to eventually solely own the property – although sometimes the associations like to keep a 20% stake. Alternatively, you can buy from a developer. In this case the developer would take the place of the association or cooperative.

Open Market Shared Equity Scheme

This scheme allows someone to purchase a property on the open market for between 60% and 90%. Renters are usually given first priority to buy the home they’re already living in from a local authority or housing association.

Other prioritized groups include people living with a disability, armed forces personnel, and widows and widowers of service personnel who died during service.

Get matched with a Scottish mortgage broker

Getting a mortgage for a property in Scotland, whilst broadly similar, does have some slight distinctions from the application process across the rest of the UK. That’s why speaking with a local mortgage broker is one of the shrewdest moves you can make.

They will be able to outline all the subtle differences and help guide you through the process from start to finish, finding you the right lender with the best interest rate offer available.

Call 0808 189 0463 or make an enquiry and we’ll set up a fee, no-obligation chat between you and a Scottish-based mortgage broker today.