30 Apr 2013

A Helpful “LIFT” on to the Property Ladder

A Helpful “LIFT” on to the Property Ladder

Laura Considine, Conveyancing Partner, looks at the latest funding announcement regarding the popular LIFT Scheme and it’s advantages for First Time Buyers.

Laura Considine, Conveyancing Partner, looks at the latest funding announcement regarding the popular LIFT Scheme and it’s advantages for First Time Buyers.

The Scottish Government has now confirmed that funding for the popular LIFT scheme will be made available for the financial year 2013/14 providing a much needed boost for first time buyers.  

The LIFT scheme (Low-cost Initiative for First Time Buyers) was introduced to help those on low to moderate incomes buy homes they would otherwise be unable to afford.  The scheme operates on a shared equity basis and allows the buyer to purchase a majority share in the property (usually between 60 and 90%) while the Scottish Government funds the remaining share. 

There are three types of LIFT shared equity schemes. Two of these assist with the purchase of new build properties but arguably the most popular is the “Open Market Shared Equity Scheme” which allows buyers to purchase a second hand property on the open market.

In order to qualify for the Open Market Scheme, the buyer should be on a low to moderate income and purchasing a property for the first time.  When applying, the buyer will be required to provide financial information along with three decisions in principal from mortgage lenders. With this in mind, it is recommended that the buyer seeks independent financial advice at an early stage in the application process.

Once approved for the scheme, the buyer will receive a “passport letter” confirming that they are free to start looking for a property on the open market. Lasting for a period of 12 weeks, the letter confirms the maximum price the buyer can pay for a home as well as the maximum of property they are permitted to purchase.  The maximum price thresholds set by the scheme vary depending on the of the property and the area of Scotland in which the property is situated. By way of example, the prices for one and two bedroom properties in Aberdeen, Perth, Edinburgh and Glasgow are included in the table below. The maximum price thresholds are set to ensure that only “starter” properties can be purchased.

The amount of equity contributed by a buyer will depend on their personal finances but normally the buyer will contribute the maximum mortgage they can reasonably obtain together with any personal contribution they can afford.  Most lenders will insist on the buyer putting forward a small deposit but there is at least one lender currently in the market place offering a 100% mortgage for LIFT open market scheme purchases.  This is a great help to first time buyers and explains why the scheme has proven so popular in recent years.

When buying through the LIFT open market scheme the buyer becomes the legal owner of the whole property making this scheme different from other shared ownership schemes. The purchaser pays for their share together with the normal legal fees and outlays.  In addition, and as is the case with most other homes, the buyer will be responsible for the maintenance, insurance and repair costs. The main difference with the LIFT shared equity scheme is that the Scottish Government will insist on the buyer entering into an agreement and granting a security in respect of the proportion they have funded.  The agreement will contain certain conditions of ownership and will normally also permit a buyer to increase their stake in the property during the period of their ownership. On a sale the agreement provides that the Scottish Government will receive the value of their remaining percentage share. 

In summary, the LIFT open market scheme can be of great assistance to first time buyers and is to be recommended particularly in the current economic climate.  Funding for the scheme is however limited and in previous years has been exhausted within a matter of months. It is therefore vital that potential applicants move quickly to submit their application forms. The scheme can be complex and in order to ensure the application form is submitted correctly and that the applicant understands the scheme in detail, it is recommended they seek independent legal and financial advice at the earliest possibly opportunity. Interested buyers should contact their local office of Aberdein Considine where the resident solicitor and financial advisor will be delighted to guide them through the application process.

Maximum price thresholds:

Area

Price for 1 Bedroom Property

Price for 2 bedroom Property

Aberdeen
£95,000
£125,000
Perth
£90,000
£100,000
Edinburgh
£110,000
£120,000
Glasgow
£75,000
£95,000

Laura Considine, Partner


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