Help to Buy (Scotland) scheme launchesGovernment to offer equity loans to buyers with 5% deposits
01 March 2016
The revamped Help to Buy (Scotland) scheme launches today, providing interest-free equity loans to first-time buyers and home movers.
The scheme works slightly differently to its predecessor, which helped 7,000 home buyers between 2013-2015. Here's everything you need to know.
How does Help to Buy (Scotland) work?
The Help to Buy (Scotland): Affordable Home Ownership Scheme (to use its full name) offers loans of up to 15% of the purchase price of a new-build home.
You’ll need to have saved up a deposit of at least 5%, and your combined mortgage and deposit will need to cover at least 85% of the total price of your desired property.
Under the terms of the new scheme, the maximum price you can spend on a property changes each year.
If you buy a house before 31 March 2017, you can spend up to a total of £230,000. This limit then reduces to £200,000 until 31 March 2018, and then £175,000 until 31 March 2019, when the scheme will close.
The maximum price limit applies for the date that the transaction is completed, not the date the property is reserved.
- If you're considering using Help to Buy (Scotland), you can get tailored, impartial advice about your mortgage options from Which? Mortgage Advisers on 0808 252 7987.
How do I apply for Help to Buy (Scotland)?
Mortgages for Help to Buy (Scotland) are only available from participating lenders, and so far seven have signed up. These are:
- Glasgow Credit Union
- Leeds Building Society
- Lloyds Banking Group
- Skipton Building Society
- Virgin Money.
Affordability for mortgages will be means-tested at the level of 3.5 times your joint annual income if you're buying with a partner, or 4.5 times your annual income if you're buying alone.
To use Help to Buy (Scotland), you'll need to follow these steps:
- Contact a participating house builder and view a show home.
- Speak to an independent financial adviser, who will put you in touch with one of the agents that administers the scheme.
- Request a Help to Buy (Scotland) application form from the agent.
- Reserve a property and obtain a reservation agreement.
- Submit the application form to the agent and await a decision.
If you're still saving for a deposit using a Help to Buy Isa, your savings and government bonus can be put towards a Help to Buy (Scotland) purchase.
Find out more: Help to Buy (Scotland) - check out our full guide
Help to Buy (Scotland) equity loans: what else do I need to know?
There's no set deadline for when you must repay your equity loan, and it's possible to purchase additional equity if you wish. This process is often referred to as 'tranching up'.
You can increase your share by a minimum of 5% in any one year, but bear in mind you'll be buying the 'chunk' of equity at market rate - so you'll need to get a valuation done before purchasing.
There are also some restrictions on how you can use a property bought using a Help to Buy (Scotland) equity loan.
Firstly, you'll need to be using the home as your main residence. This means you can't purchase the property as a buy-to-let investment, and part-exchange isn't available.
You will also need written permission to make any changes or improvements to the property while you're still paying back the government's share.
- How to save for a mortgage deposit - take the first steps to home ownership
- Am I ready to be a first-time home buyer? - ask yourself the key questions
- Buying a home off-plan - discover the pros and cons of buying a house that hasn't been built yet
Your home may be repossessed if you do not keep up repayments on your mortgage.
Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.