Shared Equity

A mortgage scheme 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 UK`s Open Market HomeBuy Scheme. This is open to key workers, other selected buyers and first time buyers with household incomes of £60,000 or less.

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 he comes to sell however, he does have to forfeit some of his equity that he has in the property.

Under the Open Market HomeBuy shared equity scheme you buy 75% of a property, taking a mortgage from a select number of lenders - the remaining 25% is provided via equity loans from the mortgage lender and the Government. You can choose a property being offered on the open market subject to Homebuy Agent’s approval of the property. After 5 years, interest (at a reduced rate) is payable on the lender’s equity loan – both equity loans are fully repayable when you sell the property.

The Government also offers a 17.5% Government Equity Loan which purchasers will be able to use in conjunction with a Mortgage.

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