Scotland mortgages questions

Lexale

Hi there, 

I am currently living in Wales, am 22 and doing a remote degree which I will finish mid 2024. I currently live at home in an annexe separate from the main house but legally part of the same property and am paying a minimal rent (£200 a month) without any formal contract or lease. I've saved quite a bit towards buying a house in 2024/25 and have used a Lifetime ISA to help with this, as has my partner. I noticed looking at the House Price Index and just on Rightmove generally that Scotland is much cheaper than Wales for almost all property types, more than likely owing to the prevelance of holiday lets and second homes in Wales. Also have seen average incomes in Scotland are higher than Wales so to us it seems like the smarter decision to move there potentially. I have however noticed some quirks about the Scottish mortgage system and was looking for some help clarifying these:

1. You have to submit 12 months of "proof of rent". This is a problem for me as I've never rented from an actual landlord and thus have never signed a formal lease etc. If I could arrange with my parents to set up some sort of formal contract / lease agreement, would this count as proof? Also is this proof 100% essential? My partner will have rented around 4 years by that time so she'd be okay, although she may move into my annexe for a few months at some point while we find jobs after my degree has finished which would of course cause a gap in her formal record of renting, unless I added her to this formal lease agreement. Also note the mortgage is not likely to be large, £60-70k between two of us I'd be guessing over 40 years so hopefully this would mean they'd be a bit more relaxed about it?

2. 3 months of payslips. This is the same as England and Wales but one issue for me is I'd rather stay at home as long as humanly possible before moving to Scotland as my rent here is cheaper. Is it okay for each of us to hold down jobs in Wales for 6 months say, with both of us having full time permanent contracts and then using this as proof of income to buy a Scottish residence in which we intend to live? We'd obviously need new jobs (probably minimum wage ones) in Scotland to be able to cover our outgoings so would this concern a mortgage lender? 

Edit: One other thing. Can't find a concrete answer online but is the standard cap on borrowing in Scotland for joint mortgages something like 3.5x the largest income plus 1x the smaller income? So for instance one partner earning 22k and the other earning 18k gives a borrowing cap of 95k ((22 x 3.5) + (18 x 1) whilst in England and Wales, you'd just take the 40k combined and multiply it by 4.5 to get 180k? I guess that also would explain why prices are around £40k lower in Scotland!

Thank you for your help in advance, I understand this isn't the easiest topic to deal with quickly

K_S

Lexale said:

Hi there, 

I am currently living in Wales, am 22 and doing a remote degree which I will finish mid 2024. I currently live at home in an annexe separate from the main house but legally part of the same property and am paying a minimal rent (£200 a month) without any formal contract or lease. I've saved quite a bit towards buying a house in 2024/25 and have used a Lifetime ISA to help with this, as has my partner. I noticed looking at the House Price Index and just on Rightmove generally that Scotland is much cheaper than Wales for almost all property types, more than likely owing to the prevelance of holiday lets and second homes in Wales. Also have seen average incomes in Scotland are higher than Wales so to us it seems like the smarter decision to move there potentially. I have however noticed some quirks about the Scottish mortgage system and was looking for some help clarifying these:

1. You have to submit 12 months of "proof of rent". This is a problem for me as I've never rented from an actual landlord and thus have never signed a formal lease etc. If I could arrange with my parents to set up some sort of formal contract / lease agreement, would this count as proof? Also is this proof 100% essential? My partner will have rented around 4 years by that time so she'd be okay, although she may move into my annexe for a few months at some point while we find jobs after my degree has finished which would of course cause a gap in her formal record of renting, unless I added her to this formal lease agreement. Also note the mortgage is not likely to be large, £60-70k between two of us I'd be guessing over 40 years so hopefully this would mean they'd be a bit more relaxed about it?

2. 3 months of payslips. This is the same as England and Wales but one issue for me is I'd rather stay at home as long as humanly possible before moving to Scotland as my rent here is cheaper. Is it okay for each of us to hold down jobs in Wales for 6 months say, with both of us having full time permanent contracts and then using this as proof of income to buy a Scottish residence in which we intend to live? We'd obviously need new jobs (probably minimum wage ones) in Scotland to be able to cover our outgoings so would this concern a mortgage lender? 

Edit: One other thing. Can't find a concrete answer online but is the standard cap on borrowing in Scotland for joint mortgages something like 3.5x the largest income plus 1x the smaller income? So for instance one partner earning 22k and the other earning 18k gives a borrowing cap of 95k ((22 x 3.5) + (18 x 1) whilst in England and Wales, you'd just take the 40k combined and multiply it by 4.5 to get 180k? I guess that also would explain why prices are around £40k lower in Scotland!

Thank you for your help in advance, I understand this isn't the easiest topic to deal with quickly

@lexale While the Scottish house buying process is quite different to that in England, I'm not sure what you mean by "Scottish mortgage system". I've done plenty of mortgages for clients buying and re-mortgaging in Scotland and (apart from the valuation process) the lender policies, processes and criteria have generally been no different simply because the property is in Scotland.

1. Which lender is this? It's usually specialist or smaller lenders that ask for proof of rent payments over a 12+ month period. If you are living with family, then I don't see why this would be expected.

2. Not all lenders ask for 3 months payslips. It can be 1, 3 or even none depending on the lender and the client/requirement specifics. But you won't be able to get a mortgage to buy a property in Scotland based on a job which requires you to be in Wales. You would probably be best off moving to Scotland, renting, getting a job and then applying for a mortgage.

LTI - There is no such "standard cap on borrowing" for mortgages in Scotland. It differs across lenders. What you are talking about (3.5x + 1x) probably refers to one specific lender. It's sounds like a small Building Society LTI.

With all due respect, I think you have perhaps got yourself a bit confused. There is no material difference in the mechanics of getting a mortgage in Scotland and England. Generally speaking, the specifics like LTI, criteria will vary across lenders, not across the two nations.

user1977

I agree with K_S's comments - any Scottish-specific differences are in land law, the conveyancing process and some of the legal technicalities about the actual mortgage, tests about affordability etc are going to be the same UK-wide, nothing to do with where the property is or where the lender is based. 

Also not sure you can generalise about property prices between Scotland and Wales, really depends on the specific locations and types of property you're looking at.

Lexale

K_S said:

Lexale said:

Hi there, 

I am currently living in Wales, am 22 and doing a remote degree which I will finish mid 2024. I currently live at home in an annexe separate from the main house but legally part of the same property and am paying a minimal rent (£200 a month) without any formal contract or lease. I've saved quite a bit towards buying a house in 2024/25 and have used a Lifetime ISA to help with this, as has my partner. I noticed looking at the House Price Index and just on Rightmove generally that Scotland is much cheaper than Wales for almost all property types, more than likely owing to the prevelance of holiday lets and second homes in Wales. Also have seen average incomes in Scotland are higher than Wales so to us it seems like the smarter decision to move there potentially. I have however noticed some quirks about the Scottish mortgage system and was looking for some help clarifying these:

1. You have to submit 12 months of "proof of rent". This is a problem for me as I've never rented from an actual landlord and thus have never signed a formal lease etc. If I could arrange with my parents to set up some sort of formal contract / lease agreement, would this count as proof? Also is this proof 100% essential? My partner will have rented around 4 years by that time so she'd be okay, although she may move into my annexe for a few months at some point while we find jobs after my degree has finished which would of course cause a gap in her formal record of renting, unless I added her to this formal lease agreement. Also note the mortgage is not likely to be large, £60-70k between two of us I'd be guessing over 40 years so hopefully this would mean they'd be a bit more relaxed about it?

2. 3 months of payslips. This is the same as England and Wales but one issue for me is I'd rather stay at home as long as humanly possible before moving to Scotland as my rent here is cheaper. Is it okay for each of us to hold down jobs in Wales for 6 months say, with both of us having full time permanent contracts and then using this as proof of income to buy a Scottish residence in which we intend to live? We'd obviously need new jobs (probably minimum wage ones) in Scotland to be able to cover our outgoings so would this concern a mortgage lender? 

Edit: One other thing. Can't find a concrete answer online but is the standard cap on borrowing in Scotland for joint mortgages something like 3.5x the largest income plus 1x the smaller income? So for instance one partner earning 22k and the other earning 18k gives a borrowing cap of 95k ((22 x 3.5) + (18 x 1) whilst in England and Wales, you'd just take the 40k combined and multiply it by 4.5 to get 180k? I guess that also would explain why prices are around £40k lower in Scotland!

Thank you for your help in advance, I understand this isn't the easiest topic to deal with quickly

@lexale While the Scottish house buying process is quite different to that in England, I'm not sure what you mean by "Scottish mortgage system". I've done plenty of mortgages for clients buying and re-mortgaging in Scotland and (apart from the valuation process) the lender policies, processes and criteria have generally been no different simply because the property is in Scotland.

1. Which lender is this? It's usually specialist or smaller lenders that ask for proof of rent payments over a 12+ month period. If you are living with family, then I don't see why this would be expected.

2. Not all lenders ask for 3 months payslips. It can be 1, 3 or even none depending on the lender and the client/requirement specifics. But you won't be able to get a mortgage to buy a property in Scotland based on a job which requires you to be in Wales. You would probably be best off moving to Scotland, renting, getting a job and then applying for a mortgage.

LTI - There is no such "standard cap on borrowing" for mortgages in Scotland. It differs across lenders. What you are talking about (3.5x + 1x) probably refers to one specific lender. It's sounds like a small Building Society LTI.

With all due respect, I think you have perhaps got yourself a bit confused. There is no material difference in the mechanics of getting a mortgage in Scotland and England. Generally speaking, the specifics like LTI, criteria will vary across lenders, not across the two nations.

Hi There,

Thank you for your response, I probably just wrote, “Scottish mortgage system” off the cuff. From online resources they make it seem very different from England and Wales so as you said further down, think I’ve just got confused. Thank you for clarifying!

1. I simply found the 12 month rent proof on this site:

https://www.onlinemortgageadvisor.co.uk/mortgage-application/getting-a-mortgage-in-scotland/

I agree with that, otherwise effectively no one who’d lived with family to save could get a mortgage? Seems quite exclusionary.

2. That makes sense, was probably a silly question but just wanted to make sure, I’m not sure what radius lenders anywhere in the UK actually allow you to buy a residential property from your place of work, but reasonably close I’d expect (reasonable commuting distance).

Regarding the LTI, I found that information here. Again, not the best source but this is what I got when I rooted around online.

https://scotland.shelter.org.uk/housing_advice/paying_for_a_home/mortgages/getting_a_mortgage/joint_mortgages

Thank you very much for your in depth advice!

Lexale

user1977 said:

I agree with K_S's comments - any Scottish-specific differences are in land law, the conveyancing process and some of the legal technicalities about the actual mortgage, tests about affordability etc are going to be the same UK-wide, nothing to do with where the property is or where the lender is based. 

Also not sure you can generalise about property prices between Scotland and Wales, really depends on the specific locations and types of property you're looking at.

Hi There, 

Thank you for your response and clarifying as well! I'm glad to hear the process is pretty standardised across the UK. Of course an independence referendum would shake that up rather drastically if it happens and goes through.

In terms of the prices, I'm just comparing based off the House Price Index really, it seems like the deprived areas in Scotland are way cheaper than the equivalent deprived areas in Wales, although of course every place is different. Even Swansea for example is £190k average which is a rough area for the most part (from experience), and Scotland's entire average is less than even this relatively cheap area!

Thanks for your help

user1977

Lexale said:

user1977 said:

I agree with K_S's comments - any Scottish-specific differences are in land law, the conveyancing process and some of the legal technicalities about the actual mortgage, tests about affordability etc are going to be the same UK-wide, nothing to do with where the property is or where the lender is based. 

Also not sure you can generalise about property prices between Scotland and Wales, really depends on the specific locations and types of property you're looking at.

Even Swansea for example is £190k average which is a rough area for the most part (from experience), and Scotland's entire average is less than even this relatively cheap area!

I know Swansea too, but you can get substantially cheaper, or more expensive, than £190k - the average isn't really all that helpful! You don't get much for £190k in the "nice" bits of Glasgow or Edinburgh.

fewcloudy

Oh dear, here is my post with profanity removed, apologies.

‘Other posts are correct, you can't generalise on house price comparisons. Here in Edinburgh there are some of the most expensive houses in Scotland, and also some of the cheapest.

Then you're comparing the most deprived areas in Scotland against the most deprived areas in Wales, to come to conclusions that it's cheaper to live here?

There's been a lot of nonsense spouted from both sides in the independence debate in the last 10 years, but this is the first time I've heard anyone suggest the mortgage process would in some way be "shaken up drastically". How so? Please explain?’

Lexale

user1977 said:

Lexale said:

user1977 said:

I agree with K_S's comments - any Scottish-specific differences are in land law, the conveyancing process and some of the legal technicalities about the actual mortgage, tests about affordability etc are going to be the same UK-wide, nothing to do with where the property is or where the lender is based. 

Also not sure you can generalise about property prices between Scotland and Wales, really depends on the specific locations and types of property you're looking at.

Even Swansea for example is £190k average which is a rough area for the most part (from experience), and Scotland's entire average is less than even this relatively cheap area!

I know Swansea too, but you can get substantially cheaper, or more expensive, than £190k - the average isn't really all that helpful! You don't get much for £190k in the "nice" bits of Glasgow or Edinburgh.

Oh certainly! Up in Townhill and Mayhill it heads down to £100k or lower, up to over £300k in the Mumbles; I just like to use the average as a starting point given the huge number of areas and markets in the UK alone. That is true, I saw the average flat is over £220k in Edinburgh. Justified though as it is the capital city so I wouldn't expect it to be affordable for most. 

Thanks

Lexale

fewcloudy said:

Oh dear, here is my post with profanity removed, apologies.

‘Other posts are correct, you can't generalise on house price comparisons. Here in Edinburgh there are some of the most expensive houses in Scotland, and also some of the cheapest.

Then you're comparing the most deprived areas in Scotland against the most deprived areas in Wales, to come to conclusions that it's cheaper to live here?

There's been a lot of nonsense spouted from both sides in the independence debate in the last 10 years, but this is the first time I've heard anyone suggest the mortgage process would in some way be "shaken up drastically". How so? Please explain?’

Hi there,

Yes of course, I know every market has expensive top of the ladder properties and the 1 bed flats so the average doesn't paint a perfect picture by any means.

It's just a general impression, of course if I was certain I was going to choose one market over the other I'd do far more in depth research to ascertain which was more affordable and where you get better value. Just looking at the Rightmove HPI released this morning however, average Welsh asking price is £261k and in Scotland it's £80k less than that, Wales seems extremely overvalued for what it is considering the average income is lower.

The mortgage process I can't see being that difference if Scotland was independent, but I'd assume my Lifetime ISA (and everyone's in Scotland for that matter) would become unusable in Scotland if independence were to occur as the terms state it is to be used either when you're over 60 or for UK property as a FTB? Would knock out around a third of my deposit and virtually all of my partners which would be a major setback for us.