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How Do Mortgage Applications Work in Scotland?

Our guide to finding a mortgage for a Scottish property and the key differences you might notice from a mortgage application assessment elsewhere in the UK.

Mortgage Application Process In Scotland: Explained

Mortgages and the property market in Scotland are a little different than in England and Wales.

Here we'll explain how the system works and what differences to look out for. If you would like professional assistance with your mortgage requirements in Scotland, contact the Revolution Brokers team on 0330 304 3040, or email us at [email protected].

What is the Mortgage System in Scotland?

Just as in any other region, lenders have requirements around affordability and eligibility. There are also fewer mortgage providers who lend against Scottish properties and some postcode restrictions.

The most significant differences are in how long mortgage transactions take, the valuation process, and at which stage the sale becomes final.

Some of the other factors to consider include:

  • Given that there are fewer lenders, it is even more crucial to consult an independent mortgage broker to get your application right the first time.
  • You need to have funding in place before making an offer on a property. This can make the process more complicated but does make it less likely that a property chain will fall through.
  • Scottish property buyers need to appoint a solicitor earlier in the process, as the offer to buy is handled through them.
  • Most properties in Scotland are freehold, so it's unusual to find a leasehold purchase.
  • Homes tend to be listed at around 5% to 10% under the valuation - and usually expect offers to be over this value.
  • When a buyer accepts your bid, it is legally binding. You then move on to negotiating details like the exchange date.

Most mortgage applications go through faster, and property sales tend to be completed within six to eight weeks of the date that the offer is accepted.

How Much Deposit Do I Need to Purchase a Property in Scotland?

Lender deposit requirements vary substantially, depending on your circumstances.

  • Most Loan to Values are capped at 85%. You can find LTVs of 90% or even 95% if you have a 5% deposit and meet all the other eligibility requirements.
  • Any properties that are new-builds or non-standard constructions tend to require a higher deposit, usually at least 20% or 25%.
  • It is rare to find a 100% mortgage, but government mortgage schemes or guarantor mortgages are available to homebuyers who do not have a deposit.

Are There Differences in the Property Purchase Process in Scotland?

There can be, yes. Let's run through some of the common terminologies you might come across and what they mean:

  • Title burdens are conditions within the deeds. They might dictate how you can use the property, what alterations are permitted, or where refuse bins are stored.
  • The Sasine Register is due to close by 2024, replaced with the Land Register of Scotland. It is the oldest national public land register globally. Existing properties will be on this Register, and therefore a new mortgage or remortgage will require a Land Register application.
  • Home reports are the equivalent of a mortgage valuation, including things like energy efficiency.

Is There a Maximum Mortgage I Can Get in Scotland?

Similarly to England, the maximum loan depends on your income assessment. Lenders will usually offer up to 4.5 times your annual income, although they can offer as high as five or even six times your salary in the right circumstances.

When you apply for a mortgage agreement in principle, you can be charged to reserve that quotation.

A broker can advise on the best deals available on the market to ensure you have the most competitive rates, and if it is worth reserving the agreement to be able to go ahead with an offer.

What Paperwork Do I Need for a Scottish Mortgage Application

Documentation required depends on whether you are employed or self-employed but will generally include:

  • Bank statements for the last three months.
  • Payslips for three months or three years of self-employed accounts.
  • A year's worth of mortgage statements or records of rent payments.
  • Copies of buildings or contents insurance if in place.
  • Information about life endowment policies you have.

How Does Stamp Duty Work in Scotland?

Rather than Stamp Duty, you pay a tax called Lands and Buildings Transactions Tax (LBTT). This falls due within 30 days of completing a purchase.

LBTT is charged as follows:

  • Properties between £145,000 and £250,000 - 2%
  • Properties between £250,001 - 325,000 - 5%
  • Properties between £325,001 - £750,000 - 10%
  • Properties over £750,000 - 12%

What are the Eligibility Requirements for Scottish Mortgages?

Most of the standard terms are similar to those in England and Wales, although they vary between lenders depending on their policies.

There are more likely to be upper age caps, as more Scottish lenders place limits on applicants' maximum age.

Some of the less typical aspects of a property purchase include:

  • Reduced likelihood of gazumping, with properties removed from the market as soon as a bid has been accepted.
  • You may be asked to submit a sealed bid, with the highest bidder notified on the day.
  • Letters exchanged between solicitors are called missives and are legally binding.

What Mortgage Schemes are Available in Scotland?

If you are a low-income or a first-time buyer, several schemes and initiatives are available to make it easier to buy a property.

The Low-Cost Initiative for First Time Buyers (LIFT) is a scheme run by the Scottish government, with two different programmes.

  • New Supply Shared Equity Scheme enables buyers to purchase a new-build from a co-op or housing association at 51% to 80% of the market value (usually 60% or above). After two years, you can increase your proportion ownership, and again in year three. In some regions, the housing association will retain a 20% stake, and in others, you can gradually purchase 100% of the property.
  • The Open Market Shared Equity Scheme works similarly but means that buyers can purchase a property on the open market between 60% and 90% proportion.

Other options include:

  • Guarantor mortgages, with a close family member, usually offering their home as security. This option can enable you to purchase a property up to a £500,000 value without a deposit.
  • Barclays offer Springboard Mortgages and combine a Helpful Start account to save up to 10% of the purchase cost for homes up to £500,000 in value. In effect, you don't need a deposit and can get a 100% first-time buyer mortgage.
  • Help to Buy mortgages are available in the form of a shared equity loan, boosting your deposit value through an interest-free loan for the first five years.
  • Shared Ownership is a way for council and housing association tenants to buy a proportion of their homes, either 25%, 50% or 75%, and pay rent for the balance. This reduces your rent and can be topped up until you buy all of the property.
  • Lifetime ISAs can make it faster to save enough for a deposit. The government adds a 25% top-up to your savings.

Can I Get a Non-Residential Mortgage in Scotland?

You can indeed - there are all the usual mortgages from self-build financing to buy to let mortgages.

Land and agricultural mortgages are less common, and the terms usually are a little stricter. You can generally borrow between 30% and 50% of the cost of a land purchase but can find a higher LTV by leveraging another property as security.

Most land mortgages require planning permission in advance.

Lenders also need to see:

  • Three years of certified accounts, along with current management reports.
  • Two to six months’ worth of bank statements.
  • A statement of your assets and liabilities.

Can I Get a Student Mortgage in Scotland?

Yes, but the terms are relatively strict. Most applicants will need at least a 15% deposit and a guarantor, even if they're in student employment.

Guarantors must be permanent UK residents aged below 75-80 to be accepted.

Another possibility is a joint ownership mortgage. This means that you buy the home along with a friend or family member, and if one party passes away, their share transfers automatically to the other.

Common property purchases are also possible, although each party has autonomy over what they do with their share.

Are There Scottish Second Home Mortgages?

There are mortgages for second homes, property investments, and holiday lets available. Most lenders will need at least a 25% deposit and to see that your affordability comfortably covers both mortgages.

You are less likely to be approved with any bad credit issues and will need to budget for the additional 3% LBTT surcharge payable on all second property purchases.

What are the Average Scottish Mortgage Rates and Terms?

In general, the mortgage products themselves are similar to elsewhere in the UK. You will find repayment mortgages and interest-only mortgages.

Most terms run up to 35 years as a maximum. You'll find the same classification of non-standard properties, so anything listed or unusual will require a specialist lender.

Homebuyers can also consider:

  • Secured loans as a way to consolidate debts or raise capital for other purposes. This secured borrowing is available between £3,000 and £50,000 and tends to run up to 25 years depending on how much you borrow and the equity in your home.
  • Large mortgage loans are usually considered as being over £500,000. A higher mortgage value will require a senior underwriter's approval, and most lenders will require a 25% deposit, although a broker can negotiate this down in some cases.
  • Remortgaging is also possible and is often used to switch from an interest-only product to repayment or when a fixed-interest period comes to an end.

When you repay a mortgage or loan secured against your home, you need to file a discharge to have the charge removed. There is a mortgage discharge fee of £50 for online applications and £60 for hard copies.

You can appoint a solicitor to manage this process for you.

Expert Advice on Scottish Mortgages

If you're looking for a mortgage of any kind in Scotland and need to know more about the home purchase process or what rates you could achieve, get in touch with the mortgage advisors team.

As independent, whole-of-market brokers, we help thousands of buyers find the ideal borrowing product every month. Give us a call on 0330 304 3040, or email via [email protected].

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