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Which new build schemes in Scotland are included in Shared Equity opportunities?

Publised date : 01 Jan 2019

Many would-be first time buyers discover they can’t afford the new home they really like. If that’s the frustrating position you find yourself in, help could be at hand… through the New Supply Shared Equity (NSSE) scheme.

The scheme was established by the Scottish Government and can help if you are looking to buy your main residence (not a property to rent to others)… so long as you fall into one of the Government’s priority groups. These are buyers who are either:

  • aged over 60
  • renting from the council
  • renting from a housing association
  • are disabled
  • a serving member of the armed forces, or a veteran who has left service within the past two years
  • or you are the widow, widower or partner of a member of the armed forces who died within the past two years, whilst still in service.

If you are in one of these qualifying groups then the NSSE scheme can help if you are a first time buyer or if have previously owned a home but have subsequently experienced a significant change in your personal circumstances, such as a divorce.

You will be assessed to see if you qualify and you must demonstrate to the housing association that you simply can't afford to buy a home that meets your needs without help from the NSSE scheme. If it looks like you could, then you won't be eligible.

How does it work?

Essentially, the Scottish Government will fund a proportion of your mortgage for a qualifying new build home from a participating housing association or local council.

This funding is provided free of interest, under what’s called a shared equity agreement. This is a legal contract, which means your name will be on the title deeds for your home, but there will be a 'standard security' on the property to protect the Scottish Government's share of the equity. That means when you come to sell the home, you will need to repay the Government money, plus a proportion of any profit.

Say you buy a home worth £100,000 and the Scottish Government provides £20,000 towards the purchase. That’s 20% of the equity held under the standard security.

If you then sell the house for £110,000 a few years later, then the Government will be due £22,000 (20% of the selling value). That leaves you £88,000 (less your outstanding mortgage repayment) to invest in a new home.

If you qualify for NSSE, you will need to pay for the biggest share of equity in your home’s purchase price: this usually amounts to at least 60%, up to 80% of the cost.

You can buy a bigger share of the equity in later years if your financial situation changes; but this must be done by buying at least an additional 5% in any particular year.

You can therefore build up your share of the equity over time, and ultimately cover 100% of the property’s value with your own mortgage. But each time you do this you'll also need to pay all the costs, including a current valuation, legal fees for changing the agreement, and any administration costs.

'Golden share'

There are some developments where the Scottish Government will insist on keeping its share of 20% of the equity value in your home. This is called a 'golden share' and it usually only applies in areas where there are fewer affordable homes.

You should check with your solicitor to see if your shared equity agreement from the Housing Association has a 'golden share'. If it does, and you later want to sell your home, you must give the Scottish Government the opportunity to buy your home back at its current valuation at that time.

The Golden Share doesn’t affect the valuation put on your house, but it helps ensure that homes in the area will be available for other qualifying individuals in the future.

Your responsibilities

Because you will have 'complete title' to your home, from day one you'll also be the person legally responsible for paying for your:

  • mortgage
  • factors fees
  • building insurance
  • home contents insurance
  • fittings and furniture
  • heating, lighting and water bills
  • council tax
  • and all necessary repairs and maintenance costs.

Before you buy a house, the seller will give you a Home Report. You should read this carefully to make sure you can pay for any immediate repairs that are needed.

Check availability of homes under NSSE in your local area here

More information

For further information on any of the schemes contact: jamesirvine@positivemortgages.co.uk

General

Your home may be repossessed if you do not keep up repayments on your mortgage.

The value of pensions and investments and the income they produce can fall as well as rise. You may get back less than you invested.

 

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The information and content contained within this website is subject to the UK regulatory regime, and is therefore targeted at consumers based in the UK.

Financial Planning Union is a Trading Style of Positive Solutions (Financial Services) Ltd.

James Irvine is not authorised to give financial planning advice but could refer any queries to a financial adviser within Positive Solutions (Financial Services) Limited.

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