The Help to Buy (Scotland) Smaller Developer scheme explained
The Help to Buy Smaller Developer Scheme in Scotland was created to help buyers who cannot fund the full cost of the home. Under the scheme, the Scottish Government will purchase a 15% equity stake in the property and the buyer covers the remaining 85% of the purchase cost, through a combination of mortgage and deposit.
This allows those wishing to buy a house to do so easier and quicker, with an affordable new-build home worth up to £200,000.
How does it work?
Buyers will need a deposit of at least 5% and the property must be a new build from a developer which is registered with this Help to Buy scheme. The scheme is available to any first-time buyers and existing homeowners in Scotland, similar schemes are available in other parts of the UK. Once the equity loan and mortgage have been paid, then the buyer has full ownership of the property.
The buyer can repay all or just part of the Scottish government’s stake, this process is known as ‘tranching up’. Your share of the property can be increased by a minimum of 5% every year.
The amount the buyer pays for the additional stakes is based on the home’s current market value. So, if the home value has gone up, you will pay more. If the market value has gone down, you will pay less. There isn’t a set timeframe when repaying the equity support, although it must be repaid when the property is sold.
How to apply
There are several stages in the application for the Help to Buy Schemes in Scotland.
Firstly, you must find a house developer that is part of the scheme, consult a lender or independent financial adviser and reserve your desired home.
You can then apply for funding through one of the agents that uses the scheme. If you are eligible to use the scheme, you will receive an Authority to Proceed letter.
The applicant must have concluded missives within 3 months of the date of the Authority to Proceed letter. However, you may have to wait longer before moving into your home to allow for the competition of any construction work.
The application for the scheme cannot be submitted more than 9 months before you expect to finish buying the property.
Things to remember
When thinking about using the Help to Buy Scheme, it’s important to remember that the equity stake amount changes in line with the value of the home.
This scheme is restricted to new build homes only by certain developers, including Places for People at Chapelton. The applications for the Help to Buy Smaller Developer Scheme closes at the end of financial year 2021 to 2022.
New year, new home?
To view affordable homes by Places for People at Chapelton that are available under the scheme, click here.