Information for lenders and IFAs
This section gives information on the Help to Buy (Scotland) Affordable New Build Schemes for lenders and independent financial advisors.
The main Help to Buy (Scotland) Affordable New Build Scheme is available to larger home builders, while the Help to Buy (Scotland) Small Developers New Build Scheme is available to smaller builders.
The rules to both schemes are identical and the agents administering the schemes will identify which one an application should be processed under.
Who can apply
The schemes are available to help first time buyers and existing homeowners buy a new build home up to a maximum threshold price.
Existing homeowners must sell their home before they can buy a home with assistance from the scheme.
The threshold prices for the scheme are:
- £230,000 for purchases which complete on or before 31 March 2017
- £200,000 for purchases on or before 31 March 2018
- £200,000 for purchases on or before 31 March 2019
If an application is submitted before 31 March in a year but the purchase isn't actually completed until after that date, the maximum threshold price for the year in which it's completed will apply.
For example, if an application is sent in November 2016 but the proposed settlement date is May 2017, the maximum threshold price will be £200,000.
How buyers can apply
All buyers should be provided with a copy of the information leaflet for the scheme.
Before a buyer can apply to the scheme, they must contact a participating home builder, who will then tell them to speak to a lender or an independent financial advisor.
An application form can only be sent after the buyer has discussed the situation with a lender or IFA.
Application forms should be requested from and submitted to the relevant administering agent. They can't be submitted more than 9 months before the expected completion date for the purchase of the home.
The Scottish Government encourages lenders and independent financial advisors to complete the application form together with the buyer.
It's strongly recommended that buyers only submit a full mortgage application once an Authority to Proceed Letter has been issued by the administering agent.
Assisted sale is when a home builder helps a homeowner sell their existing property so they can buy a new build house. This usually involves putting them in touch with an estate agent to sell their existing property, based upon an agreed sale fee.
Home builders participating in the Help to Buy (Scotland) Affordable New Build can use assisted sale, as long as:
- the existing house is sold before the purchase of the new build house is completed
- it doesn't become a part-exchange situation, where the builder (or a company associated with them) ends up buying the existing property.
The value of any estate agency fees or other costs that a home builder offers to pay for shouldn't be more than 5% of the open market price value of the house.
Applicants are not eligible for the scheme if:
- the house price is higher than the threshold for that year
- they can afford over 100% of the purchase price through a combination of a mortgage and a deposit
- they need a mortgage of more than 4.5 times their income (if a single person) or 3.5 times their joint income (if a couple)
- their monthly costs (mortgage, service charges and fees) are more than 45% of their net disposable income.
To be eligible for the scheme, a buyer must take out a first charge mortgage with a lending institution.
This mortgage must be a repayment mortgage of at least 25%. If it's an interest-only first mortgage, the buyer won't be eligible for the scheme.
A mortgage lender is likely to require a deposit of around 5%. The mortgage and deposit must cover a combined minimum 85% of the total purchase price.
All applicants will need to submit payslips for the last 3 months along with a copy of their application form.
The level of mortgage offered by lenders will depend on expenditure as well as income, but it is generally expected that single buyers can borrow 4.5 times their household income and couples can borrow 3.5 times their joint income.
Repayment of Scottish Government Equity Share
There is no set deadline for buyers to repay their equity support to the Scottish Government.
The scheme runs on indefinitely and purchasers can decide to buy back all or some of the Scottish Government's equity stake in their home whenever they want.
However, the buyer will need to pay back the full equity support in certain situations, such as if they decide to sell their home.
The value of the equity to be repaid is based on the value of the property at the time of the repayment.
The Scottish Government has designed a sustainability calculator which may be helpful to lenders and independent financial advisors to determine if a buyer is eligible to participate in the scheme.
There is also a guidance document for this sustainability calculator.