Paying for a New Supply Shared Equity property
You will probably need to take out a mortgage to buy a share in a New Supply Shared Equity property, and you'll have to find a solicitor to help you with the legal work involved. This page explains the buying process, and what you can do if you want to buy an additional stake in the property, or sell your stake. It also looks at what you can do if you're having problems paying your mortgage.
Will I need to take out a mortgage?
Unless you have a large sum of money in savings or equity in your current home, you'll probably need to get a mortgage to pay for your stake. You will need to buy a 51 per cent or greater share in the house. If you are buying your share with other people, you may need to take out a joint mortgage. If you have a disability, need to move to a more suitable house and receive income support, you may be able to repay the interest on your mortgage through your benefits. Read the page on getting a mortgage if you're disabled to find out more.
Getting information and advice
You can get information and advice about mortgages from an intermediary or direct from a lender, such as a bank or building society. An intermediary could be:
an independent financial adviser (IFA)
an estate agent
a mortgage broker
Get advice from an organisation with knowledge of benefit entitlements if you are considering taking out a mortgage based on benefits income. Your housing association may be able to assist you with this or you can contact Housing Options Scotland or your local Citizens Advice.
Working out your finances
When you're working out how much you can afford to borrow, bear in mind that you will be expected to take out the maximum mortgage you can afford in order to purchase a Shared Equity property. According to Scottish Government guidance, this is normally around three times the income of an individual applicant and 2.5 times the income of a joint application.
You'll also need to take into account the other costs of buying a home, including:
a deposit - in most cases you'll need to provide at least five per cent of your share upfront from your own funds
surveyor's fees, if applicable
Land and Building Transaction Tax, if applicable
You'll also need to consider other housing costs, such as:
buildings and contents insurance
service and factoring charges
other living expenses.
Finding a mortgage lender
If you're thinking about buying a home through New Supply Shared Equity, it's a good idea to talk to a mortgage lender or adviser early on in the process, especially if your mortgage will be repaid through your benefits. You can then decide which bank or building society you want to go with. This means that if your application is accepted by the housing association, you'll be able to move the process forward more quickly.
The housing association may have a list of lenders who can help you.
Will I need a solicitor?
Yes, you'll need to find a solicitor to give you advice and carry out the legal work involved in buying a home (called conveyancing). Your solicitor can also:
offer you advice about your legal agreement with the housing association and what your obligations will be
help you arrange your mortgage
help you arrange a survey of the property.
How does the buying process work?
The section on buying a home takes you step by step through the buying process.
Can I increase my share?
After two years, you may be able to increase your share in the property to 80 per cent or beyond by buying a further share. If you live in an area where there is a shortage of affordable housing, or if your home has been specially adapted, the housing association may have the right to keep a 20 per cent share, called a 'golden share'. If this is the case, it will be made clear to you before you purchase your initial share. A year after you have increased your share to 80 per cent, you can buy the remaining shares, so you own the whole property.
What do I need to do?
If you're thinking about buying an additional share, you'll need to contact:
the housing association, to find out the procedure you need to follow
your mortgage lender, to see if your mortgage can be increased so you can afford the extra share (unless you have a lump sum of money you can use)
your solicitor, for advice and help with the legal work involved.
How much will it cost?
The cost of the extra share will be calculated according to the current market value of the property, not the value when you bought your first share. The value may have gone up or down, but is more likely to have gone up. An independent valuer will look at your home to see how much it's worth.
You'll also need to pay any costs involved, such as legal fees.
What happens if I want to sell the property?
You can sell your home whenever you like. The selling price will be divided between you and the housing association, depending on your share. For example, if you own 80 per cent of the home, you will receive 80 per cent of the sale price when you sell, and the housing association will receive the remaining 20 per cent. The value of your home may have gone up or down since you bought it.
Bear in mind that you won't receive separate reimbursement for any improvements you've made to the property, even if they have increased the value.
How much will it cost?
You will be responsible for paying your legal fees, as well as the other costs of selling, such as cleaning and decorating expenses, moving costs and any fees involved in transferring or paying off your mortgage. Bear in mind that you may be charged a large redemption penalty if you sell up and pay off your mortgage early, so talk to your lender about this and make sure you know exactly how much you'll have to pay before you decide to sell. If the penalties only apply for a certain amount of time, you may find it cheaper to wait a while.
What if I can't keep up with my mortgage payments?
Always prioritise your mortgage above all other debts. If you fall behind with your mortgage payments, you may be in danger of losing your home, so it's very important that you take action straightaway.
The section on mortgage arrears looks at what you can do if you are having problems paying your mortgage. You may be able to reduce your monthly payments by increasing the term of your mortgage or making interest only payments, or you may be able to make an arrangement with your lender to pay off the arrears in instalments. If you get income support, jobseeker's allowance or pension credit, you may be eligible for income support mortgage interest (ISMI) to help with the interest payments on your mortgage.
You won't be able to reduce your share in the home if you are having problems paying your mortgage.
Last updated: 13 March 2017
Housing laws differ between Scotland and England.
This content applies to Scotland only.