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Help to Buy Mortgage - Scotland

Is help to buy different in Scotland? Find out here.

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By Pete Mugleston   Mortgage Advisor

Last updated: 15th April 2019 *

Help to Buy is a UK-wide scheme that helps homebuyers and home-movers to buy an affordable new-build home in Scotland.

Need a little advice about how it works, or want to know if you qualify? Even if you’ve been declined a help to buy mortgage in Scotland, why not have a chat with one of the expert advisers we work with? Your circumstances are unique and they can advise you based on your specific needs.

Here’s what you’ll learn in this article

What is Help to Buy? How does it work?

Scotland’s version of Help to Buy consists of two schemes - the ‘Affordable New Build Scheme’, and the ‘Smaller Developers Scheme’.

Both work in exactly the same way - the only real difference is the size of the home builders involved.

Provided you qualify, the Scottish Government will help you to buy a home, providing you with an equity loan that is up to 15% of the property’s value. This loan carries no interest, which makes it far cheaper than conventional borrowing.

As a result, your costs are lower, and you can buy sooner - allowing you to get a mortgage for 80%, whilst providing a 5% deposit.

The scheme is only available through participating home-builders, and your applications need to be submitted no more than 9 months from the expected purchase date of your new home.

The scheme runs until April 2021 - you should aim to have your application completed by then. The program will be extended in a more limited capacity until 2023 - being restricted purely to first time buyers.

Example: buying a £175,000 house with a 15% equity loan

  Price Percentage
Total price of home £175,000 100%
Your Deposit £8,750 5%
Your Mortgage £140,000 80%
Scottish government equity loan £26,250 15%

How to apply for a Help to Buy mortgage

The process of buying a home through Help to Buy is a little different from normal, as you’re required to go through the additional step of securing the government’s equity loan. This involves an administering agent and some forward planning.

Sounds complicated? Don’t worry - just speak to one of the help to buy experts we work with, they’re experts and help people like you do this every day.

  • Step 1:
    You reserve a home - getting a ‘reservation agreement’ in writing from the builder (this may incur a fee).
  • Step 2:
    Once you have the reservation agreement, you apply for funding through your local administering agent. If you qualify, your agent will send you ‘Authority to Proceed’.
  • Step 3:
    Once you have Authority to Proceed (and only then), you submit your mortgage application.
  • Step 4:
    Assuming your mortgage application is successful, your solicitor will check that all the paperwork is in order. They’ll then gather the funds from your deposit, the government and the lender - which will be used to pay the builder.
  • Step 5:
    Assuming this is all successful, you can move in.

The advantages

There are a number of obvious benefits to using Help to Buy.

Home ownership:

Though you share some equity with the Scottish government, you, for all intents and purposes, own the house - in much the same way you would with a conventional mortgage on your home.

You can buy sooner

You don’t need to save a large deposit, which can allow you to buy sooner.

You can save money

The smaller mortgage can result in lower monthly repayments.

You can buy more equity in your home:

You have the option to buy an increasing amount of equity in your house when it suits you (though you’ll have to do this by at least 5% each time). You’ll have to pay all of the additional costs associated with his, however.

The disadvantages

There are some downsides to the scheme, which we’ve outlined below.

There are restrictions on what you can do with the house:

As the Scottish government is a stakeholder in your house, you’ll have to ask for their permission for more major things - such as subletting, remortgaging, renting the house out, or major  renovations.

The government has a stake in your house until you buy them out

As such, the government will benefit from any rise (or fall) in its price when you sell, unless you ‘tranche up’ and buy them out before selling.

Am I eligible for a Help to Buy mortgage in Scotland?

To be eligible, you must:

  • Be buying a new build home from a participating builder, in Scotland, that is valued at less than £200,000
  • Have a deposit of at least 5%
  • Be taking out a repayment mortgage of at least 25% - interest-only mortgages are not allowed
  • Be able to make up at least 85% of the purchase price with your mortgage and your deposit
  • Not own (or part own) any other property. If you’re an existing homeowner, you’ll have to sell your other home before getting help from the scheme
  • Be aiming to obtain a mortgage of no more than 4.5 times your income (if single) or 3.5 times (if in a couple)
  • Be able to ensure that your monthly costs (mortgage, fees and service charge) are no more than 45% of your net disposable income.

What is the term of the mortgage and loan?

The government’s equity loan can be repaid at any time within 25 years - it does not accrue any interest at any point, but must be paid off by the sale of the property. If you sell the property with some of the loan outstanding, the proceeds will be used to pay off the equity loan.

Your mortgage will be much the same as any other residential mortgage - you can choose a range of time-frames for repayment, with most people opting for 25 years.

How does Help to Buy in Scotland differ from the rest of the UK?

There are a few differences between Help to Buy in Scotland and the rest of the U.K.

For example, in England and Wales, the government’s equity loan goes up to 20%, not 15% as in Scotland. The price limits in England and Wales are higher too - £600,000 and £300,000 respectively.

Most interestingly, the Scottish Help to Buy equity loan is interest free forever, whereas the English and Welsh equity loans begin to accrue increasing interest from year 6.

Need some guidance about Help to Buy in Scotland? Speak to the experts

We’ve helped over 68,000 people find the right mortgage, in fact our customers consistently rate us 5 stars on Feefo, mainly because of the level of service and the fact that we offer  OMA offers a 5-star service-, with access to leading brokers who:

  • Are experts on Scottish Help to Buy - accredited by OMA and the LIBF
  • Cover the whole market
  • Can help you find the best lender for your needs

If you have questions and want to speak to an expert for the right advice, call Online Mortgage Advisor today on 0800 304 7880 or make an enquiry here.

Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances.  – We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.

Updated: 15th April 2019
OnlineMortgageAdvisor 2019 ©

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

Find out more about Help To Buy

Help To Buy Mortgages