Help to get onto the property ladder for first time buyers
7 November 2011
For many first time buyers, getting into the housing market could seem like an unrealisable dream at the moment, with banks being reluctant to lend and looking for larger and larger deposits. Prices north of the border have not yet taken the tumble that some may have predicted at the outset of the financial crisis, but the need for a large deposit is still a major issue for many.
But there are alternatives. One option is shared ownership schemes, or shared equity, where a buyer will typically purchase 60-80% of the property with the remainder of the cost being met by a registered social landlord. The Scottish Government initiative is known as the LIFT scheme (Low-cost Initiative for First-Time Buyers). When the property is sold on, the proceeds are apportioned accordingly. The added advantage is that these will ordinarily be new-build, purpose-build homes that will be fully guaranteed and NCHB registered, and more often than not, efficient to run. This particular scheme is known as the New Supply Shared Equity Scheme, and the properties may be built by a housing association, or a developer.
Alternatively, another scheme exists where assistance can be given for existing homes on the open market. This is known as the Open Market Shared Equity Scheme. There is a ceiling limit to the value of a property that can be purchased under this scheme depending on area. The equity can in some cases be increased but depending on the property and the agreement, the Scottish Government may have the right to retain a share of the property; however in some cases, the homeowner may be able to purchase the property outright. The minimum equity stake that buyers need to take in a property is 60% with the maximum equity stake being 90%.
There are drawbacks to the schemes, like having to seek permission to let out the property, and also being 100% responsible for the property and its condition even if your percentage equity is less than this. Furthermore, the loans must be repaid within a fixed time period, so if you still wished to live in the property at the end of the term of the loan, further finance would be needed to repay the original loan.
In rural areas, where the issue is not only affordability but availability, building a home has often been the only way to enter the housing market. It can also be a financially shrewd move with property costing far less to build than to buy, and almost always being worth significantly more on completion, giving you financial piece of mind and the chance to tailor the design to suit your needs. The Rural Home Ownership Grant allows you to receive a grant to put towards plot purchase and construction or towards an existing house (if you can find one for sale). However, the provision for this grant is under review and no funds are available for this financial year (2011/12).
However, if you are a tenant of a croft, or an owner-occupier who has acquired the croft within the last seven years, the Croft House Grant Scheme (CHGS) will be able to provide a certain amount of financial help assist you to build your home. The amount you can apply for depends on the area you live in; those in the high priority category can receive up to £22,000, standard category receive £17,000 and low £11,500. There are certain requirements to be eligible for the scheme and responsibilities that you must undertake to meet once your home is completed.
When deciding on these options and whether to purchase a property – whether with one of these schemes, or any joint property purchase with a third party, independent legal and financial advice should always be sought so you are fully aware of any potential issues that may arise during the sale and into ownership. Inksters are highly experienced and well regarded when it comes to residential conveyancing and can help guide you through taking your first steps into the world of home ownership.