What is Shared Equity

There are two Shared Equity schemes in Scotland:

  • New Supply Shared Equity scheme

  • Open Market Shared Equity scheme

New Supply applies to buying new build homes specifically for the scheme, while Open Market is for any home on the open market that’s deemed suitable.

In both cases, the Scottish Government purchases a proportion of your property and hold the equity until you sell. It’s not a loan, so you don’t need to pay it back and you won’t be charged interest.

How does Shared Equity work?

The New Supply version allows you to buy a stake in a property between 60% and 80%, while the Open Market scheme enables you to buy between a 60% and 90% stake. 

In both cases you typically fund your share with a mortgage.

The Scottish Government purchases the rest - so if you buy 75% of a home, it will assist with the remaining 25%.

You don’t have to pay any interest or rent on the government share.

However, similarly to Help to Buy the government profits if your property price goes up.

Who's eligible for a Shared Equity scheme?

Whether you’re buying in Aberdeen or Edinburgh, if you want to use the Shared Equity schemes you’ll need to be able to show that you can’t afford to buy a home that meets your needs without help.

However you also need to have the means to afford a mortgage on your share.

You need to be either:

  • A first-time buyer

  • Over the age of 60

  • A social renter

  • Disabled

  • A member of the armed forces

  • An armed forces veteran that left within the past two years

  • A widow, widower, or other partners of service personnel whose partner lost their life while serving in the past two years

The New Supply version is available to people who’ve previously owned a home but have experienced a significant change in circumstances – for example, a marital breakdown.

How to apply for Shared Equity

Applying for the Open Market Shared Equity scheme

If you think you meet the eligibility criteria you’ll need to contact Link Housing, a registered social landlord by calling 0330 303 0125 or emailing [email protected].

If you’re deemed eligible you'll receive a 'passport letter' which says you can now look for a home under the scheme.

It will also tell you the maximum price you can pay, the maximum size of the home you can buy, as well as guide you through the next steps.

Finding a home

Once you find a home, the seller will usually provide you with a Home Report, which will outline how it’s valued.

Then you need to find a solicitor to assist you in purchasing the home - the Scottish Government will have its own solicitor to handle work involving its equity share.

After that you’ll need to pay legal costs, registration fees, as well as any Land and Buildings Transaction Tax costs.

Applying for the New Supply Shared Equity scheme

Rather then depending on the price, with the New Build Shared Equity Scheme there’s a list of associations that participate in the scheme that are listed on the Scottish government website.

You’ll need to contact them directly to determine what’s available and receive guidance on applying.

The association will scrutinise how much you can afford to pay, including the size of the mortgage you’ll likely be able to get.

After that you’ll be told in writing whether or not you’re eligible.

Can you increase your share?

With both versions of the scheme, you can increase your share of the property if your financial situation changes.

You can buy up to an additional 5% share from the government every year until you own 100%.

Golden share

The exception to this rule is if a clause has been signed that ensures the government will keep a certain share of the property, known as a ‘golden share’.

In some cases the government will keep a 20% share with New Supply and 10% with Open Market if you’re in an area where there are few affordable homes available.

Selling your home on the Shared Equity scheme

If you sell the property with the government still holding a stake in the property, the government will share in any house price increases or decreases over that time. 

For example:

  1. You buy a home for £100,000 with a 20% loan from the Scottish government (amounting to £20,000)

  2. You sell the home for £150,000 several years later

  3. The government receives £30,000 (20% of the sale price)

Maximum price thresholds (Open Market only)

When using the Open Market Shared Equity scheme you can’t buy a home that exceeds a ‘maximum threshold’ price.

This is listed on the Scottish government’s website and depends on the size of the property you’re buying.

Frequently asked questions (FAQs)

Which lenders offer Shared Equity mortgages?

As of 1st November 2019 there are 12 mortgage lenders that offer mortgages for the Open Market Shared Equity Scheme:

  • Bank of Scotland

  • Barclays

  • Capital Credit Union

  • Glasgow Credit Union

  • Halifax

  • Leeds Building Society

  • Lloyds Bank

  • Nationwide

  • Natwest

  • Scottish Building Society

  • Skipton

  • TSB

Can you remortgage on the Shared Equity scheme?

To remortgage your home, you’ll need to contact the association or local council who handled your purchase.

Despite the Scottish Government owning a stake in the property, you'll be solely responsible for any administrative costs.

Can you rent out your home on the Shared Equity scheme?

Typically you’re not allowed to sublet properties bought using one of the schemes.

Your property has to be used as your primary residence.

Do I have the same responsibilities as other buyers when buying with the government?

Yes. You’re responsible for the same costs as any other homeowner - council tax, insurance, repairs, etc.

What happens if I want to sell?

Should you choose to sell, the total you’re due will vary depending on the following:

  • The price at which you sell your house

  • The size of your equity stake

  • The amount you’ve paid towards the mortgage

So, if you have a 60% share of your house, you’ll get 60% of the price of sale when you sell it and the Scottish Government gets the remaining 40%. 

This means you can also benefit from any increase in the value of your home since you bought it. If you paid £200,000 and go on to sell at £220,000, you’ll still be entitled to the same equity stake percentage you went in with. In this case 60%. Likewise, the government would also benefit in the same way.

How does the scheme differ from Help to Buy?

Unlike the Help to Buy scheme, with Shared Equity the Government can purchase a larger share of the property and you don’t need to put down a deposit if you prefer not to.

However, there are tighter rules around eligibility as you would need to prove that you wouldn’t be able to afford a suitable home without help.

Further resources

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Your home could be repossessed if you don't keep up repayments on your mortgage.

You may have to pay an early repayment charge to your existing lender if you remortgage.

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Sources

(1) MyGov.scot (Open Market Shared Equity)

(2) MyGov.scot (New Supply Shared Equity)