Shared Equity

What is Shared Equity?

Shared Equity Mortgages are part of a scheme aimed at first time homeowners, where the borrower purchases part of a property and the other part is purchased by a third party, such as a housing association.

This differs from Shared Ownership in that no rent is paid to the third party for their share. Any future increase in the property value is shared between both parties in proportion to their share.

Shared Equity Mortgages are associated with the Government’s Help to Buy scheme. This is open to key workers, other selected buyers and first time buyers with looking to buy a house valued below £600,000.

Despite the terminology the equity is not shared and the (typically first time buyer) owner does not initially share the equity with any other body but does obtain financing from various quarters. When the homeowner comes to sell however, they have to forfeit some of the equity from the property.

Under the Help to Buy shared equity scheme you provide a 5% deposit and buy 75% of a property, taking a mortgage from a select number of lenders. The remaining 20% is provided via equity loans from the mortgage lender and the Government. After 5 years, you’ll be charged interest at 1.75% of the value of the loan, increasing in-line with inflation plus an additional 1%. Both equity loans are fully repayable when you sell the property.


Q: Are shared equity mortgages easier to get?

A: In a sense it can be easier to get a Shared Equity Mortgage, because the deposit is typically lower than with other types of mortgage. They are intended to help first time buyers primarily, but there are other circumstances that apply that you could also get a shared ownership mortgage under. In short, they can be easier or harder to get, depending on your circumstances.

Q: Is it just open to first time buyers?

A: No. The scheme can also be used for people that have owned homes in the past but are currently in rented accommodation.

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