What is Shared Equity and what are Shared Equity Purchases?
24/07/2019
494
5 min read
The vast majority of would-be first time buyers are still finding it well-nigh impossible to take their first steps onto the property ladder: could it be that joining a shared equity scheme might provide the power to get you onto that oh-so-critical first rung?
This article looks at:
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Looking for a Shared Equity Mortgage?
Then our independent mortgage brokers can wade through the tens of thousands of products out there and find the perfect one for your means - don't settle for second best!
And we offer a free initial consultation - you really have nothing to lose and so much to gain.
* Access to whole of the market – Available Outside of Work Hours – No need for face-to-face meeting with mortgage advisor - Terms Apply
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How does Shared Equity work?
When you're looking to buy a home, you can get a shared equity loan to help you by forming part of the deposit of your desired house. Then, as you would normally, you take out a shared equity mortgage to cover the remaining part of the property's value.
The name itself suggests that you are sharing your property purchase with someone else although your home does, in fact, belong to you entirely.
The shared equity part indicates that you are taking out an equity loan which counts towards your deposit and having this bigger deposit enables you to get access to much cheaper mortgage deals which you wouldn't otherwise be able to qualify for.
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Help to Buy Equity Loan Scheme
This is perhaps the best-known shared equity scheme and its popularity has warranted a 2nd extension: this time the scheme is due to shut around 2023.
We have extensively covered this topic in SAM Conveyancing and so other than to say you'll need at least a 5% deposit and a good credit history to gain a mortgage, you should read this article:
NB You can’t use the scheme to buy a property you are then planning to rent out.
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Other Shared Equity schemes
The Government is not the only organisation you can join forces with to get an equity loan. Sometimes property developers offer their own shared equity schemes, as it helps them sell the homes they have built.
Terms and conditions of developers' own shared equity schemes will vary so make sure you know what you are getting in to. The schemes may only be available in limited areas and on certain property developments within those areas.
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What Pros does shared equity ownership have?
- It can take decades otherwise to save up for a standard deposit for your first home if you're on a modest income and you're always vulnerable to house and general price rises even while you're doing your best to save.
- As a general rule you only need a 5% deposit minimum (half the standard 10%) deposit to apply to these schemes.
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What Cons does shared equity ownership have?
- Should house prices rise rapidly, your loan portion will increase in size too: in the longer term, you might end up having to pay more under a shared equity scheme, than if you were just to save up a bigger deposit and get a standard mortgage. It may of course be one of or even the only option/s for you.
- You might also run into problems remortgaging if you have a Help to Buy loan in place. Although many lenders will offer you a mortgage if you’re buying using Help to Buy, only a relatively small number also offer remortgage products if the Help to Buy loan remains in place (i.e. you haven’t paid it off).
Interested parties might wish to read:
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How does shared equity and shared ownership differ?
Shared equity and shared ownership schemes are very different. With a shared equity scheme you own all of the property, albeit you have a loan on a part of your deposit – whereas with a shared ownership scheme you only own a portion of your home with the chance to buy back more from the housing association when you can. Click to read more about shared ownership schemes here.
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How do you apply for a shared equity scheme?
Find your local Help to Buy agent operating in your area. The agent will then talk you through the options available to you and help you establish out what you can afford.
The next step is to find a developer who is offering Help to Buy equity loans. Your Help to Buy agent may be able to help you do this, but you can also do your own research by contacting local developers to see if they belong to the scheme – or even have any of their own. You can also find out more from us by clicking on Help to Buy Mortgage
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Where can you get a shared equity mortgage from?
Whenever you are looking to get a mortgage, you'll always gain by at least investigating what an independent mortgage broker can offer you and what extra choices they can give you, rather than merely going with your own current or deposit account lender. Independent mortgage brokers are independent and they have access to the whole of the market - there are literally 10s of 1,000s of mortgages - and they can find mortgages which are not publicly advertised which might suit your needs best.
Looking for a Shared Equity Mortgage?
Then our independent mortgage brokers can wade through the tens of thousands of products out there and find the perfect one for your means - don't settle for second best!
And We offer a free initial consultation - you really have nothing to lose and so much to gain.
* Access to whole of the market – Available Outside of Work Hours – No need for face-to-face meeting with mortgage advisor - Terms Apply
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