Mortgage to shared equity
This content applies to Scotland only.
Housing laws vary between Scotland and England. Get advice relating to England
Mortgage to shared equity (MSE) is a Scottish Government scheme. The scheme allows homeowners who can no longer afford their mortgages and who have at least 25 per cent equity in their property to reduce their level of secured debt while retaining a stake in the home.
Eligibility for the scheme
Before you can apply to the scheme, you must first have discussed your situation with both your lender and an independent money adviser (for example, at a Citizens Advice Bureau or money advice centre) and explored alternative means of reducing your arrears and making the mortgage more affordable (for example, by taking a payment holiday, increasing the term of the mortgage and/or making a repayment arrangement).
In addition, in order to be considered for the scheme, you and the property must meet the following criteria:
- you must be at least three months in arrears on their mortgage, and be unable to reach a suitable repayment arrangement with your lender
- your lender must agree to maintain a smaller level of credit if the your MSE application is successful
- you can't have more that £2000 in capital, or £4000 if you are over 60
- your home must not be valued above a set level and must be adequately insured and meet the minimum standard of repair
- your property must be the your main home.
How to apply
Your completed mortgage to shared equity application form and any supporting documents (such as mortgage statements) should be sent to the Scottish Government.
On receipt of the application, the Scottish Government will commission a valuation of your property and establish the amount of debt secured against the property. If the you have at least 25 per cent equity in the property, your application will be passed to a financial adviser acting on behalf of the Scottish Government.
The adviser will then work out the amount of equity the Scottish Government will need to take in the property to reduce the your debt to a manageable level, taking into account your incomings and outgoings, then an offer will be made you.
You then must then decide whether this offer will allow you to manage your debt adequately. In reaching this decision, you should consult an independent money adviser, and with your solicitor and lender.
Rejecting the offer
If you feel the offer will not sufficiently reduce your debt, you can turn it down. You then has the option of applying to the mortgage to rent scheme.
Accepting the offer
If you accepts the offer, your solicitor will work with Scottish Government lawyers to draw up the legal documentation required. You must also arrange with your lender a new mortgage for the newer, smaller stake in your property.
If your application is successful, you cannot apply to the scheme again.
Buying back the property
Once you are in a position to do so, you will be able to buy back all or part of the stake owned by the Scottish Government.
Selling the property
If you decide to sell the property, the Scottish Government will take its share of the sale price.
Where can I get more information
You can get more information from the Are you in danger of losing your home information leaflet from the Scottish Government website.