Annex E - Worked Examples
Case study 1
Ben and James currently rent a two bedroom flat in Dundee from a private landlord.
Both work full time. Three recent pay-slips show that Ben earns a salary of £30,000 and James earns £25,000 a year. They have met with their financial advisor who has advised them that the maximum mortgage they will be able to obtain is £165,000 and that they will be expected to contribute a deposit of 5% of the full purchase price.
Ben has seen an advertisement from a home builder participating in the Help to Buy (Scotland) Affordable New Build Scheme who has a development of new build homes in an area that he and James would like to live in. Ben and James make enquires about purchasing a three bedroomed semi-detached new build home which is currently being marketed for sale at £230,000.
In September 2016, Ben and James submit an application form to an agent administering the scheme. Their application form and the attached reservation form show that the anticipated completion date is May 2017.
Ben and James's application to the scheme cannot proceed because the maximum threshold price for transaction that will conclude from 1 April 2017 – 31 March 2018 is £200,000.
Case Study 2
Sally and Jack currently rent a one bedroom flat in Glasgow from a private Landlord. They have been married for a year and are expecting their first child.
Both work full time – Sally earns a salary of £21,500 and Jack earns £20,000 a year. They have met with their financial advisor who has advised them that the maximum mortgage they will be able to obtain is £144,000 and that they will be expected to pay their lender a 5% deposit.
Jack has seen an advertisement from a developer participating in the Help to Buy (Scotland) Affordable New Build Scheme who has a development of new build homes in an area that he and Sally would like to live. Jack and Sally make enquires about purchasing a three bedroomed semi-detached new build home which is currently being marketed for sale at £170,000.
Jack and Sally have submitted an application form to an agent administering the scheme. Their application has been assessed and it is eligible to proceed. Jack and Sally can afford to buy an 90% share of the property for £144,500. This includes a 5% deposit to their lender of £8,500.
|Value of Property||£170,000|
|Deposit of 5% of mortgage||£8,500||(5%)|
|Owners' equity stake||£144,500||(85% stake)|
|Scottish Ministers' Equity Stake||£17,000||(10% stake)|
Guidelines advise that your monthly costs (mortgage, service charges and fees) are no more than 45% of your net disposable income; in this case Jack and Sally's mortgage will be around 28% of their monthly income.
Case study 3
Mary and John are married with three children. They currently own a three bedroom home but they are looking to buy a larger property with four bedrooms.
Mary and John must sell their own home before they can buy a home under the scheme.
John and Mary have submitted pay slips with their application form indicating that John's annual salary is £22,500 and Mary earns £21,000.
John has seen a local advertisement from a developer participating in the Help to Buy (Scotland) Affordable New Build Scheme who is marketing 3 bedroom detached homes for sale for £165,000. John and Mary can contribute a £17,500 deposit.
Using the rule of thumb of 3.5 times John and Mary's salary, the maximum level of borrowing that they should be able to achieve is £152,250. This combined with their deposit of £17,500 amounts to around 103% of the purchase price of the property.
In the application form, John and Mary have no outstanding monthly debts other than their mortgage and utility bills.
The couple are unsuccessful as they can afford to buy the property without assistance from the scheme.
John and Mary's IFA has provided written evidence confirming that the maximum amount that their lender is willing to offer is £130,000.
The couple are successful as the amount of £130,000 combined with their deposit of £17,500 totals £147,500 and equals 89.40% of the purchase price of the property. They are therefore entitled to a contribution of £17,500 (10.60%) from the Scottish Government.
Case study 4
Robert and Michelle are looking to buy their first property. They have heard a radio advertisement from a developer for three bedroom properties being built in an area that they want to live in. The homes are available under the Help to Buy (Scotland): Affordable New Build Scheme.
The house they would like to buy is priced at £200,000. They have saved a deposit of £20,000 and they have provided payslips with their application that shows that Robert's wage is £35,000 and Michelle's is £38,000. Using the rule of thumb, Robert and Michelle should be able to obtain a mortgage of around £255,500.
In the application form, Robert and Michelle have no outstanding monthly debts other than their mortgage and utility bills.
Robert and Michelle's application has been assessed and they are not eligible to receive assistance from the scheme as they can afford to buy the home without assistance from the scheme.
Robert's IFA is asked to provide additional information to the administering agent including a Decision in Principle form. The Decision in Principle shows that the maximum level of borrowing from their lender is £160,000.
This additional information has been provided and therefore Robert and Michelle's application to the scheme is eligible. They are required to contribute £180,000 which is 90% of the total price of the property and they are entitled to a contribution of £20,000 which is 10%.