MI New Home, the scheme that offers up to 95% mortgages on some new homes, goes live today (Wednesday 12th September).
Under the scheme, the buyer puts down a 5% deposit, the builder places a proportion of the selling price with the lender and the Scottish Government provides an additional guarantee. Under the NewBuy scheme operating in England, the builder contributes 3.5% and the government guarantees a further 5.5% of the purchase price. MI New Home is expected to be similar, although exact details will be released later today.
Put these together and the bank or building society has enough security to advance a loan, even though the buyer is only contributing 5% of the purchase price. Nevertheless, the buyer will still have to show that they can afford the repayments before they qualify for a mortgage.
But the scheme will not be available on all new build properties. Individual lenders and builders must agree to take part and which properties the scheme will apply to. Not all lenders will be working with all builders and not every property being marketed by a builder will necessarily be available with a MI New Home scheme. Moreover, interest rates charged by lenders offering the NewBuy scheme south of the border have tended to be a lot higher than for buyers with a larger deposit of their own and some builders in the south argue that this has limited demand for NewBuy. It remains to be seen what rates will be offered to Scottish buyers.
The aim is to increase demand for new build homes and so trigger renewed construction work.
Homes for Scotland estimates that the scheme, at full capacity, will generate an additional 6,000 sales in a year. With around 70,000 property sales expected in Scotland this year, that is a significant, but not a huge figure. In England, a market roughly ten times the size of Scotland, NewBuy is believed to have generated an additional 1,300 sales in the first six months.
So, how do you get access to MI New Home? As far as I can make out, there is no central register (yet) of all the developers taking part, but look out for any property advertisement from any builder – they’ll be sure to mention it if it is available.