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Help to Buy Equity Loan Scotland
Help to Buy Scotland is an Equity Loan scheme, similar to the one that runs in England, and is available for new homes provided by approved suppliers. The maximum value of the equity loan is however limited to 15% of the property purchase price and therefore your deposit and mortgage will make up the remaining 85%. The maximum property value that can be purchased was reduced in March 2017 to £200,000.
If you take an equity loan of 15%, when you sell your home you will need to repay the Scottish Government 15% of the sale price, regardless of whether this is more or less than you paid for the property.
The staircase purchasing of additional shares is called “tranching up” and you can buy a minimum of 5% shares of the market each year. Unlike the English scheme, there is no ongoing interest payment after 5 years.
Key information regarding the Scottish scheme:
- Available in Scotland for affiliated new builds up to the purchase price of £200,000.
- Available to both first-time buyers and existing homeowners.
- Buyers need a minimum deposit of around 5%.
- You must occupy the property and it must be your only property.
- Most new builds are eligible, but you may need to check with the property developer.
- Your mortgage from one of the participating lenders must be a repayment mortgage and cannot be an interest-only first mortgage;
- The Scottish Government’s equity stake can be repaid at any time and is based on the value of the property at the time of the repayment.
So what do you need to know?
If you are already a homeowner, you will need to sell your current property before you purchase somewhere new using the Scottish Equity Loan. Most new build properties are eligible, but it hinges on the property developer being affiliated with the scheme. The majority are.
The main condition to be aware of with the Scottish Equity Loan is that you cannot opt for lower mortgage repayments if your income suggests you could maintain something higher. This will likely be based on a multiple of up to 4.5 times your income if you are purchasing alone, or up to 3.5 times for a couple. An assessment will make sure your monthly costs (mortgage, service charges and fees) are no more than 45% of your net disposable income.
For more advice on the Equity Loan scheme, you can speak to estate agents, mortgage advisors, independent financial advisors, and developers.