When you’re looking to get onto the property ladder in Scotland but the prices are out of reach, the Low-cost Initiative for First-Time Buyers (LIFT) may be the solution you’re looking for. Having helped thousands of people to buy homes since its inception in 2007, this shared equity scheme provides you with funding of up to 40% towards a property’s price.
How does the LIFT Open Market scheme work?
Under the LIFT Open Market Shared Equity (OMSE) scheme, you can receive a 10% to 40% contribution from the Scottish Government towards a property that’s available on the open market. As long as you own 60% to 90% of the property, they will fund the rest of the purchase. As it is a shared equity scheme, this means the government owns the share they have contributed towards. For example, if you want to buy a property in Trinity, Edinburgh for £200,000 and can only afford £120,000, the government will pay the remaining £80,000 towards the purchase price. You then own 60% of its equity and the government owns 40% of its equity.
Your name is on the title deeds but a mortgage must be taken out as security to ensure the share funded by the Scottish Government is protected. Just like any other homeowner, you must ensure you maintain your mortgage repayments, take out building and contents insurance, deal with any maintenance or repairs and pay your council tax as well as the water, lighting and heating bills.
Are there any limits to what you can buy?
This scheme has price thresholds and you are limited on the property size depending on your circumstances. For example, if you are a single parent with one child, you may be able to buy a property with up to two bedrooms. The price thresholds are set within each region of the country and are set by the local authorities.
The eligibility criteria
The LIFT scheme is predominantly to help first-time buyers who have a low to medium income although there are some exceptions to this. Priority applicants also include members of the armed forces, people with disabilities, people aged 60 and over, those who rent from a housing association or council, veterans who have withdrawn from the armed forces within the past 2 years and partners of service personnel who have died within the past 2 years whilst serving in the armed forces.
The amount of funding agreed to will be determined by the amount you are able to secure for a mortgage in comparison to the property’s value. You will not be accepted for this scheme if you can acquire over 90% of the purchase price. You may be required to pay a deposit to be accepted for a mortgage. This is typically between 10% and 15% although your lender may accept a deposit of 5%. This is at the lender’s discretion and is dependent on how much of a risk they consider you to be.
You can increase your equity share
When your financial situation allows, you can increase your share of the equity. This must be done by a minimum of 5% in a year. You can usually do this until you own your home outright although the Scottish Government can retain 10% in some cases. Known as a ‘golden share’, this only tends to occur in regions where fewer affordable homes are available. Ask your solicitor to check whether there is a ‘golden share’ clause in your shared equity agreement.
What happens when you sell the property?
There’s nothing to stop you from selling your property but how much you receive from the sale proceeds depends on a couple of factors. You will receive a percentage based on your share of the equity. For example, if you own 60% of the equity, you will receive 60% of the sale proceeds and the government will receive the other 40%. Out of the 60% that’s due to you, you must first repay your outstanding mortgage.
The LIFT New Supply scheme
The LIFT New Supply Shared Equity (NSSE) scheme works in much the same way as the LIFT Open Market scheme. The main difference is that it applies to new-build properties rather than normal properties available on the open market. These new-build homes are available via the local councils or housing associations.
As well as first-time buyers and the priority groups mentioned above for the LIFE Open Market scheme, this scheme is also open to previous homeowners who have suffered a considerable change in their circumstances. This could be a marital breakdown, for example.
For this scheme, the Scottish Government contributes between 20% and 40% of the purchase price. You can increase your equity share by a minimum of 5% in a year and can usually do this until you own 100% of the property. However, should there be a ‘golden share’ clause in your shared equity agreement, the government will retain a 20% share of the property’s equity.