Here at Estate Agency Scotland we give you the best information available. The Government are giving "credit worthy" buyers, not only first time buyers, the opportunity to purchase a property with up to an additional 20% deposit from them. This will enable buyers to put down a larger deposit and therefore secure a better lending rate, as part of the Help to Buy Scheme. Sounds too good to be true? Then let’s look at the facts.
There are two different types of scheme under the Help to Buy Scotland umbrella. The first is Help to Buy for New Build properties up to £400,000 and the other is Help to Buy for all types of property including new build properties up to £600,000. You cannot part exchange your current home or be involved in any part exchange arrangement under any of these Help to Buy schemes.
Your first steps are finding both a lender and a builder who participate in this scheme. Provided the property is priced at no more than £400,000, you have a 5% deposit and are “credit worthy” and you have met the affordability criteria.
You would then obtain a 75% mortgage giving you access to better interest rates. The government would contribute 20% towards the deposit and you would have to provide 5%. This mortgage must be a repayment mortgage. You do not have to be a first time buyer but this has to be your main home and you cannot own any other homes - if you do you must tell the administrator who will decide if you can apply.
The Government will take an equity stake (which is called a standard security) on your home equivalent to the percentage they have provided. They will not charge you interest and you can pay it off at any time. You must pay it off when you sell your home. If the price of you home has risen you will pay them the higher stake representational of the percentage stake contributed by them. This also applies if the property value has fallen. The Government will take a reduced amount based on the percentage stake.
If you can reasonably afford 90% and above of the mortgage of the property you will not be eligible for assistance.
Your mortgage company must participate in the scheme as must the builder so please check this before proceeding.
Below is an example illustrating prices paid and percentages taken. This example is from the Scottish Government website. Click Here for the leaflet from the Scottish Government Website.
Example of Scottish New Build Home Ownership
Purchase price of new home
£150,000 = 100% Mortgage obtained by buyer of 75% £112,500 = 75% Buyer pays 5% deposit
£7,500 = 5% Total Contribution from buyer including the mortgage £120,000 = 80% Scottish Government Assistance of a 20% equity stake £30,000 = 20%
This scheme is for all properties, established and new builds valued up to £600,000. Again, the buyer contributes a 5% deposit and the government will provide a guarantee to the lender of 15% of the loan value under a repayment mortgage only. This scheme is not available for interest only or buy to let properties. The guarantee will last for 7 years and will provide the mortgage lender the confidence and security to lend up to 95%.