Help to Buy (Scotland) Affordable New Build Scheme
What is it?
The Help to Buy (Scotland) Affordable New Build Scheme is designed to help people get on or move up the property ladder with an affordable new-build home in Scotland.
Under the scheme, the Scottish Government takes an equity stake of up to 15% of the total value of the property. A minimum deposit of 5% is typically required, so you’ll need to secure a mortgage for the remaining 80% of the property value.
The main Help to Buy (Scotland) Affordable New Build Scheme is available on homes built by larger house builders, while the Help to Buy (Scotland) Smaller Developers New Build Scheme is on offer on new housing from small house builders. Rules to both parts are identical.
The current incarnation of Scottish Help to Buy launched will run until 31 March 2021, when all transactions must be completed.
What properties are included?
- New-build homes only from participating builders
- The maximum qualifying property value is £200,000 until 31 March 2021
- Homes in Scotland (see Help to Buy England and Help to Buy Wales for the respective equivalents)
Can I take part in the scheme?
- It is open to first-time buyers as well as home movers
- You'll need a minimum 5% deposit
- You must be eligible for a repayment mortgage on the part of the property that is not funded by the deposit or equity stake. This will be from a participating Help to Buy lender.
- The home must be your only residence – you cannot own or part-own any other residential property
How much can I borrow from a lender?
The most you'll be able to borrow under the scheme is 4.5 times your household income. And your mortgage must be a repayment mortgage from a qualifying lender. Interest-only first mortgages are not allowed under the Help to Buy (Scotland) Affordable New Build Scheme.
How do the sums add up?
- Your deposit needs to be around 5% of the purchase price
- Your deposit and mortgage together must cover at least 85% of the full property value
- The Government will give you equity to cover the remaining 15% of the property price
|Example for a home where the sale concludes prior to 31 March 2021||£||%|
|Purchase price of new-build home||200,000||100|
|Mortgage obtained by buyer of 80%||176,000||80|
|Buyer pays 5% deposit||11,000||5|
|Total contribution from buyer||187,000||85|
|Scottish Government contributes a 15% equity stake||33,000||15|
What are the fees and costs involved?
Unlike Help to Buy in England, the equity stake available through the scheme in Scotland is entirely interest-free.
That means that the only 'cost' you'll have to cover - in addition to the capital - will be the valuation, administrative and legal fees associated with repaying the Government.
But you will need to factor in the typical monthly costs of owning a home, such as:
- Mortgage repayments
- Service charges if you buy a home in a development with shared common areas that require maintenance
- Council tax
- Life insurance
- Building insurance
- Utility bills
Will I own 100% of the property?
Although the Scottish Government will have a 15% equity stake in your property, you'll have full title to it. And, like other homeowners, you'll have sole responsibility for repairing and maintaining your home.
However, you cannot extend or make any home improvements or alterations without permission from Scottish ministers. Furthermore, permission is not normally granted. So you should consider paying back part or all of the Government's equity stake before hatching major plans.
How do I pay back the Scottish Government?
You have the freedom to pay back the equity in chunks, often known as 'tranching up'. You can repay the Scottish Government a minimum of 5% of your home's prevailing market value in any one year, regardless of whether the value is more or less than when you first bought the property. Alternatively, you can pay back the equity in one fell swoop.
As long as you own the property, there is no deadline by which you need to repay the Scottish Government. But the equity will have to be fully repaid at the point at which you sell your home.
What happens when I want to sell my home?
You must repay the Scottish Government in full from a share of the sale proceeds.
So if you have an 85% stake in your home when you sell, you'll get 85% of the sale price on completion of the deal. And you'll need to pay back the Scottish Government the remaining 15% of the total price.
Therefore, both you and the Scottish government will share in any increase or decrease in property value.
Are there any restrictions?
The Help to Buy (Scotland) Affordable New Build Scheme is not aimed at helping aspiring buy-to-let landlords.
Therefore, if you (or your partner) own another residential property, you cannot complete on your Help to Buy purchase until your other home has been sold.
And, if you already own a home through Help to Buy, and want to buy another, you'll have to repay the equity first.
You will also not be permitted to let out your home unless you have obtained permission from the Scottish Government.
Where can I sign up for the equity stake?
You'll need to contact a house builder that is participating in the Help to Buy (Scotland) Affordable New Build Scheme first. You’ll then be referred to an independent financial advisor, who will in turn put you in touch with an agent administering the scheme.
They will assess your eligibility and if appropriate, guide you through the process of buying your home through Help to Buy. You can find more information at the Scottish Help to Buy website.