Mortgages.scot

The Open Marke Shared Equity Scheme (OMSES) is a scheme that supports the purchase of a home without having to fund the entire cost of it. Essentially you pay the majority of between 60% and 90% of the purchase price and the Scottish Government will pay the remainder.

Throughout the period of ownership, the Scottish Government holds the remaining share they contributed under a shared equity agreement. As the purchaser, you own the home and the property is in your name on the title documents. The Scottish Government will be noted on the title as having a mortgage to protect their share.

How do you qualify?

There are rules as you would expect. This is not a scheme open to everyone. No real surprise there. Even if you fit into the scheme's required categories, there is one over-arching requirement. That being you must be able to demonstrate you could not afford to buy the property without the support of the scheme.

There are some priority access groups which are:

• Over 60 age group
• Disabled
• Those who currently rent from a council or housing association
• Serving members of the armed forces or those who have left within the last 2 years
• Widows/widowers/partners of armed forces personnel who lost their lives whilst serving in the past two years

If you already own a home you will not qualify at all. You will not be able to rent or sublet the property.

The Scheme is operated on a local basis, access will depend on the priorities of the operator of the scheme in your area.

Are there any downsides to the scheme?

To be honest, the Scheme is quite good, assuming you qualify. There are of course requirements you have to meet on an on-going basis in relation to the property but nothing you wouldn't expect if you could buy without the help of the scheme.

The mortgage you get from a lender for your contribution to the purchase must be paid, and the property needs to be insured, maintained and generally kept in good order. No surprises there.

For all intents and purposes, you wouldn't know the Scottish Government was involved.

How much is the OMSES contribution going to cost you?

Let's say for ease of calculation you purchase a property for £100,000. This is funded by a £75,000 mortgage you obtain from a mortgage lender and the Scottish government pays the remaining £25,000.

All you have to pay are the monthly mortgage payments on the £75,000. There are no payments made on the £25,000 provided by the government.

How does the Scottish government get their money back and profit out of this?

It all comes down to the sale of the property. In the above example, the Scottish government has a 25% share and that will always be the value of their interest, not the amount they contributed.

For example, if you sell the property in 20 years for £200,000 then you must give the government 25% of that, so £50,000. For giving you an interest-free loan for 20 years they get their initial contribution and another £25,000. Not unreasonable.

In the event, the property was to sell for less than originally paid and the government gets less than its original contribution, you will not have to repay any shortfall.

Some additional points to consider

It is possible to increase your share over time. Sticking with the previous example where £25,000 or 25% is contributed by the government. You could repay some of that to increase your share and decrease theirs. The minimum amount you can increase in a year is 5%. In most cases, you can increase your share to 100%. But, in areas where there are few affordable homes there may be a 'golden share' clause that states you can only increase your share to a maximum of 90%.

There are maximum price thresholds that create limits on the value of the home you can purchase using the scheme. A table showing these for each region can be found here. The amounts can vary quite significantly. The maximum property price for a 2-bed property in Falkirk is £55,000 whilst, in Edinburgh, it is £150,000.

Summary

If you qualify this is a good scheme with no real downside. You could purchase a property with limited financial means, and the mortgage will be far cheaper than it would normally be for most. No payments to make on the shared equity element until the property is sold and you can increase your share over time if your circumstances allow.