What size and percentage of a home can you have?
You can purchase a home with one room more than you currently 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. An apartment is classified as any habitable room, but does not include kitchens, bathrooms, box rooms, utility rooms or hallways. Glass conservatories do not qualify as an apartment
The stake that you take will normally be between 60 and 90 per cent of the price of a property, according to the maximum mortgage that you can obtain and the personal contribution that you are able to make. In most circumstances you will have to take a stake of at least 60 per cent of the price of your property.
In all cases, the maximum initial stake that you can take will be 90 per cent of the price of a property. If you can afford over 90 per cent of the purchase price of a home, your application will not be eligible to participate in the scheme.
In certain circumstances the Scottish Government will keep a 10 per cent stake in the property. This is known as a 'golden share' and is likely to happen in areas where there are only small amounts of affordable housing and few opportunities to build more affordable homes. For example, if you purchased an initial equity stake of 70% and you wish to increase your share, you may only increase up to a maximum of 90% as your property has a 'golden share' provision attached.
Here are some worked examples showing how the scheme operates
Example 1 - Purchase of a home with assistance from OMSE
Mandy currently rents a home from a local housing association and she earns £18,000 a year.
She has £8,000 saved towards the cost of buying a property. She may keep £5,000 and must contribute 90 per cent of the £3,000 balance. Therefore she would be expected to make a contribution of at least £2,700.
After being accepted onto the Open Market Shared Equity Scheme, she identifies a two bedroom (3 apt) property which has been valued at £79,500. This is within the maximum price of £80,000 that can be paid for a 3 apartment property in Falkirk. The maximum mortgage that Mandy can secure is £54,000. This sum, together with her savings of £2,700, means that Mandy can contribute £56,700 towards the purchase of the property.
The Scottish Government will fund the balance of the purchase price of £22,800.
After the property has been bought, Mandy has a 71.32 per cent equity stake in it. The Scottish Government holds the remaining equity stake of 28.68 per cent.
Example 2 - Tranching Up to increase an equity stake where there is no golden share
Jim and Susan purchased 65% of a house through the Open Market Shared Equity Scheme. After around a year, they look again at their financial position. They have both received rises in their salary and they feel that they would now like to increase their equity stake in their property.
As there is no 'golden share', they must increase their stake by a minimum of 5%. The couple seek independent financial and legal advice and decide that they will raise their stake in the house to 80%
After a further couple of years Jim receives another rise in his salary and the couple decide that they would like to have an even greater share in their home. Again, the couple must increase their stake by a minimum of 5% and following advice from an independent financial adviser and their solicitor and decide to go ahead with increasing their share by a further 20%. They now hold 100% of the stake and will receive the whole of any increase or depreciation on the sale price of the house.
Example 3 - Tranching Up to increase an equity stake where there is a golden share
Jane bought a flat through the Open Market Shared Equity Scheme and took a 70% equity stake. Before she bought the property she was informed that the Scottish Government had the legal right to retain a 10% 'golden share' in the property. Her financial situation has improved since she bought the flat and she would like to increase her stake in the property. Because the property has a 'golden share' she cannot increase her stake above 90%. After taking independent financial and legal advice she decides to raise the stake by 20% to the maximum amount of 90 per cent.
You can increase your stake in your home regardless of whether the market value of the property has increased or decreased. (The market value is set by the District Valuer or another independent, professionally qualified valuer.)
You will not be asked about your financial circumstances again after you have bought your home. Before you increase your stake in your property, you are advised to take independent financial and legal advice. You are advised to contact the administering agent when you wish to increase your equity stake.