Buying your first home is a very exciting time, however we know that it can also sometimes feel like a daunting process! The logistics of purchasing your first home are not something you are taught in school or university. The advice you receive from friends or older family members may also be outdated if they have not purchased a property in a long time. Every property is different and each buyer’s circumstances vary drastically so the process of purchasing your first home is not a one size fits all procedure.

At Blackwood & Smith we love helping first-time buyers get on the property ladder and we are honoured to help navigate them through this exciting journey.  As part of the purchasing process we often receive a variety of common questions from first-time buyers; here is my guide to some of my most frequently asked questions…

• Q: What is Land and Buildings Transaction Tax (LBTT)?

A: This is the most common tax payable when you purchase a property in Scotland. This tax was introduced in April 2015 to replace its predecessor UK Stamp Duty Land Tax (you may still hear people talking about Stamp Duty as this is still the equivalent property Tax applied in England). LBTT is a slice system where successive bands of the total purchase price are taxed at increasing rates. The intention behind the introduction of this tax is so that the tax is structured in a way that makes the amount due more proportionate to the actual price of the property. The tax only applies to properties over a certain value as the amount of tax you pay is calculated on the price you are paying above the nil rate band. The current residential nil rate band is £145,000 so LBTT is only charged where the price (chargeable consideration) is greater than this value. An additional relief is available for first time buyers which increases the residential nil rate band to £175,000 for qualifying purchasers.

This all sounds quite complicated but put simply the amount of tax you pay is calculated on the price you are paying above the nil rate band. If the value of the property you are purchasing is greater than the nil rate band, to work out the amount of tax payable, you will need to calculate the amount due within each rate band and add these together to find the amount of LBTT due. The current rates and bands for a residential purchase are:  2% between £145,001 and £250,000; 5% between £250,001 and £325,000;  10% between £325,001 and £750,000; and 12% for purchases over £750,000.

The first-time buyer relief could result in a reduction in the amount of tax payable of up to £600. Your solicitor will ultimately be responsible for submitting this tax return on your behalf but will discuss this with you during the process of your purchase.

Revenue Scotland have a really helpful guidance and a useful tax calculator on their website. The tax calculator can be found here https://revenue.scot/calculate-tax

• Q: I need a mortgage to purchase the property, at what stage do I apply for this?

A: You should only finalise your mortgage application  once you have an offer accepted for a property. It is important however that prior to this you have a conversation with a mortgage advisor or mortgagelender as early as possible to discuss how much you are likely able to borrow. This will be of great assistance in your search for a new property as it will give you an indication of what level of property you can afford.  Once you start your property search you should also obtain a Decision/Agreement in Principal prior to offering; this is where a mortgage lender gives you an indication in writing of how much they are willing to lend you. The Decision in Principal will support you in submitting an offer for a property as some sellers will not accept an offer without this.

• Q: What outlays are involved in the purchase?

A: There are various outlays incurred when purchasing a property. The biggest cost is your contribution to the purchase price of the property. If you are getting a mortgage this will be your deposit contribution. Your mortgage provider will require that you pay a certain percentage of the purchase price before they agree to lend you the rest.  When calculating your costs you will also have to take into account any potential Land and Buildings Transaction Tax (LBTT) due. You should also consider the legal costs associated with purchasing a property. These include: your solicitor’s conveyancing fee for their work in purchasing the property; some smaller outlays incurred due to Registers of Scotland to register your Title to the property, and your Standard Security if you are obtaining a mortgage; and depending on the type of property and the Home Report findings you may also wish to instruct a specialist survey before committing to your purchase and this will also need to be factored into your costs. Your solicitor will provide you with a quotation during your initial discussions for their conveyancing fee and their outlays. Whilst this is not an exhaustive list at this stage it will give a good indication of the Legal Fees involved with your purchase.

If you are getting a mortgage you will also likely have to pay your mortgage advisor for arranging your mortgage. You should also take into account costs associated with any van hire or removal company you require.

• Q: How do I claim my Help-to-Buy ISA bonus or my Lifetime ISA bonus?

A: Your solicitor does this on your behalf.

Although you can no longer open a new Help-to-Buy ISA, those that hold an account can still pay into their account until November 2029 and claim their 25% bonus until 2030.

Once you know that your  property purchase is formally going ahead, you should close your Help-to-Buy ISA account and provide your solicitor with your closure statement for the account. They will then claim the government bonus on your behalf. This amount is paid directly to your solicitor to be used for the purchase of the property.

If you are choosing to withdraw a Lifetime ISA for the purchase of your first home, you will usually have to intimate the withdrawal with the holder of your ISA yourself. Your solicitor will then claim the bonus from your ISA holder directly. As with the Help-to-Buy-ISA the funds will be paid directly to your solicitor for use in the purchase of your property.

It is important to note that you can only claim either the Help-to-Buy ISA bonus or the Lifetime ISA bonus for the purchase of your first home, you are not able to claim both.

• Q: What are missives?

A: Missives is the term used by solicitors to describe your contract to purchase the property. This contract is composed of various formal missive letters between the seller’s solicitor and the purchaser’s solicitor issued on behalf of their respective clients. You may have heard the term ‘concluded missives’, this refers to the point at which  the seller and purchaser are in a legally binding contract to proceed with the transaction. As the contact is legally binding at this point in most cases missives will only be concluded for your purchase once you have obtained your mortgage offer so it is important that your get started with this as quickly as possible.

• Q: How long does it take to buy a property?

A: Each transaction is slightly different. The time it takes is variable and often depends on if the purchaser wants any additional surveys carried out to the property and if they have to apply for a mortgage. Most transactions however take roughly eight weeks between the point of offering and the date on which you take over ownership of the property.

As a first time buyer it is likely that you will have lots of questions about your purchase. At Blackwood & Smith LLP. we can guide you through the whole conveyancing process in a way that is as simple and straight forward as possible whilst ensuring that you are fully aware of the details of the transaction. Our team would  love to assist you with your conveyancing transaction, please contact us on 01721 720131 or email us at office@blackwoodsmith.com to discuss.