How do I know if I'm eligible?
The property that you buy must be your only home. Although it should be suitable for your current housing needs, you can if you wish buy a home that is a little larger than your current requirements. You will be able to purchase a property that is 1 apartment size larger than your current need. For example, a single person will be entitled to purchase a 3 apartment property as will a couple. A three person household would be entitled to buy a 4 apartment property.
As the New Supply Shared Equity scheme is aimed at low to moderate income households, you will be assessed by the relevant registered social landlord to see whether or not you qualify. To allow this to happen, a form of 'means testing' will be carried out. Because housing costs vary so much from area to area there are no national criteria for this test. Instead, the registered social landlord involved in the scheme will agree on a local set of criteria with the Scottish Government, or the City of Edinburgh Council or Glasgow City Council if you live in those areas.
You will need to demonstrate that you cannot buy a house suitable for your needs without help from the New Supply Shared Equity scheme.
The amount that you contribute must be the maximum mortgage you can reasonably obtain plus any personal contribution that you are able to make towards the purchase. For example, if a property is valued at £100,000 and you can afford to contribute £70,000 (the maximum mortgage that you can raise plus any personal contribution) you would hold a 70 per cent stake in your home.
The registered social landlord will be able to give you information on the income multipliers it uses when considering the level of mortgage finance you can raise - plus any personal contribution you are able to make. The overall amount must be enough to pay for your stake and cover all the costs of buying a home, such as survey and legal costs.
When you apply to buy a house, you will have to state all your sources of finance. Your funds will be considered to be the total of:
- gross earnings, per single person or couple, as appropriate;
- any other income, comprising sickness benefit, unemployment benefit, bank interest, superannuation or pension from previous employment, working families tax credit, widow's pension and shareholder's profits; and
- personal contributions.
Personal contributions may include, for example, savings and gifts. The definition of savings that we use includes: cash; Premium Bonds; stocks and shares; unit trusts; bank or building society accounts and fixed-term investments; the surrender value of any endowment policies; property; redundancy payments; and pension lump sum payments.
You may keep £5,000 of any personal contribution you can make. Above this amount, 90 per cent of the balance will be treated as a contribution towards the cost of buying your home. You should be aware that a lender may expect you to provide a modest deposit in order to obtain a shared equity mortgage and you should discuss this with your independent financial advisor before you apply to the scheme.
An example of how the New Supply Shared Equity scheme works
Ian is single and has seen New Supply Shared Equity properties advertised in the area where he would like to live and thinks that he might be eligible for the scheme. The properties are valued at £100,000 each. He works full-time and earns a salary of £21,000.
Ian has £8,000 saved towards the cost of buying a property. He may keep £5,000 and must contribute 90 per cent of the £3,000 balance. Therefore he can make a contribution of £2,700.
The maximum mortgage that Ian can secure is £63,000. This sum, together with his savings of £2,700, means that Ian can contribute £65,700 towards the purchase of a property.
After the property has been bought, Ian has a 65.70 per cent equity stake in it. The Scottish Government holds the remaining stake of 34.30 per cent.