Do you need help to buy to get on to the property ladder? Not sure how you can afford the deposit or mortgage for the home you need? In this blog, we’re looking at one of the options that may be available to you – the Scottish Government’s shared equity scheme, LIFT: Low-cost Initiative for First Time Buyers.
We’ll take a look at:
- What is shared equity?
- Two LIFT schemes – what’s the difference?
- Who is eligible for the LIFT schemes?
- How to find further information or apply
- Important notes to remember
What is shared equity?
First things first – before we talk about the LIFT schemes, we need to understand shared equity.
Shared equity is a form of help to buy, and is when you share the cost of a property with another party. Under the LIFT (Low-cost Initiative for First Time Buyers) schemes, you pay the majority of the market value of the property and the Scottish Government pays for the rest. While you have outright ownership of the property, the Government will hold their share under a shared equity agreement.
You’re purchasing a property at £120,000; you pay 80% of the asking price and the Government pays the remaining 20%. You have an 80% share in the property and the Government has a 20% share.
|You: 80%||Government: 20%||Total|
If you decide to sell the property, you each receive your percentage share back. If the market value of the property has decreased or increased, then you still receive your 80% share of the sale income and the Government receives a 20% share.
Your £120,000 property has increased in market value and sells for £130,000.
|You: 80%||Government: 20%||Total|
|Income from sale||£104,000||£26,000||£130,000|
What are the two LIFT schemes?
There are two help to buy LIFT schemes, which both help people who want to buy a home but can’t afford the full price.
Both schemes are administered by Link Homes on behalf of the Scottish Government.
Open Market Shared Equity (OMSE) scheme
This is for properties which are for sale on the open market and funding is offered for between 10% and 40% of the purchase price.
In most cases it is possible to increase your percentage share over time, up to 100%.
Maximum property purchase price thresholds
There are set thresholds for the maximum property purchase prices, which are determined by region and property size. You can see these listed on the Scottish Government’s website here. When looking at this, keep in mind that an ‘apartment’ is classified as any habitable room, so a one bedroom property with a living room is classed as a ‘2 apartment’ property; a two bedroom property with a living room is a ‘3 apartment’, and so on.
New Supply Shared Equity (NSSE) scheme
This is for new build properties which have been built specifically for shared equity sale. Funding is normal offered for between 20% and 40% of the property purchase price.
In most cases, it is possible to increase your percentage share over time, up to 100%.
According to Link Homes, there are currently no properties available for purchase under the NSSE scheme, but you can keep an eye out for updates. Properties are advertised on the Link Homes property listings and property websites such as Zoopla and S1 Homes.
If you get help to buy through the LIFT schemes you need to remember that you have the same responsibilities as any other homeowner, including:
- Paying your mortgage
- Home contents insurance
- Building insurance
- Repairs and maintenance
- Council tax
- Heating, lighting and water bills
- Fittings and furniture
Who is eligible for the LIFT schemes?
The LIFT schemes are open to first time buyers and to these priority access groups:
- people aged over 60 who can demonstrate a housing need to move and meet with the criteria
- Social renters (people who rent from the council or a housing association)
- People with a disability
- Members of the armed forces
- Veterans who have left the armed forces within the past two years
- Widows, widowers and other partners of service personnel for up to two years after their partner has lost their life while serving
Both schemes are aimed at households with low to medium incomes and applications are assessed on a case-by-case basis. You need to show that you are not able to buy a home that meets your needs without help from the scheme.
How to find further information or apply
There’s lots of information available online, on both the Link Homes website and on the Scottish Government’s website. As well as step-by-step guides, there are a number of information leaflets which explain all you need to know in detail.
Apply to the OMSE scheme
If you believe you are eligible for the OMSE LIFT (Low-cost Initiative for First Time Buyers) scheme and want to apply, or you need to chat anything through, you can contact the Shared Equity team at Link Homes:
Call: 0330 3030 0125
Online enquiry form: https://linkhousing.org.uk/contact-us/#
You won’t be able to apply for the NSSE Scheme until properties become available.
What happens next?
Your application will be considered, and if approves, you’ll be sent a ‘passport letter’. This confirms that you can go ahead and look for a property. The letter will also advise the maximum property price and maximum size (remember those thresholds we talked about earlier?) and it will let you know what you should do next.
It’s important to remember…
The LIFT (Low-cost Initiative for First Time Buyers) schemes are there to help you buy, but you will still need to arrange your own mortgage, and in most cases, to provide a sum of money towards a deposit.
This is where advice from an independent financial adviser will be important – you need to make sure you look at all the options available to you and have the right information so you can choose the option that’s best for you and your situation.
At Stisi Group, our friendly, professional mortgage experts can talk you through things and guide you step by step through the mortgage process. We are always delighted to help first time buyers to get on to the property ladder, and with access to over 12,000 mortgages from over 90 different lenders, our team are here to make sure that you get a deal that’s right for you.
When you have a mortgage agreement and you’re ready to buy your property, you’ll need a solicitor to act on your behalf. The shared equity with the Scottish Government will be managed by a solicitor representing the Government.
When you buy your home, you’ll pay for your share of the home’s price in the usual way. Keep in mind that there may be additional associated costs, including legal fees, registration fees and any Land and Buildings Transaction Tax.
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.