Shared Equity Schemes
Shared Ownership and Shared Equity are the two main types of low-cost
home ownership schemes run by the Government to help people who cannot
afford to buy on the open market to purchase their own homes.
What is Shared Ownership?
Shared Ownership schemes have been devised by the Government to assist
key workers and individuals who are considered in need of assistance
with housing. You would need to contact your local Housing Association
to identify whether you qualify for Shared Ownership in your area.
The term Shared Ownership means owning part of your property in
conjunction with a co-owner; which is typically a Housing Association.
You take out a mortgage for the part that you own (you are able to buy a
25%, 50% or 75% share in your home) and pay rent to the Housing
Association for the remaining share of the property that you do not own.
The bigger the share that you purchase, the less rent you have to pay.
When you can afford to do so, you can buy more shares (known as
staircasing) until you own your home outright. Many Housing Associations
require that you to have a Shared Ownership mortgage agreed in principle
so that they can offer you a property.
Shared Ownership Mortgages
There are only a limited number of lenders in the mortgage market who
will lend for this type of arrangement – some lending the full 100% of
the share. We have access to all the mortgage lenders in the Shared
Ownership market, including those with adverse credit, and will be happy
to help with these purchases. Shared Ownership mortgage lenders will
need to gauge that you are able to afford both the mortgage payment and
the rental payment (for the rented share of the property) when
calculating your affordability.
What is Shared Equity?
Shared Equity means that you buy a given equity share in a property with
the aid of a mortgage – for example 75%; however, while the developer
and/or Government own the remaining share you do not pay rent on it.
When the property is eventually sold the developer and/or Government
will be entitled to receive their share of the value (equity) of the
property. For example, if a property was originally purchased for
£100,000 and you initially raised a loan for £75,000 (therefore having a
75% share) then the developer and/or Government would own a 25% of the
value of the property. Sometime later, when you wish to sell, and the
property was now worth, for example £150,000, then you would receive
£112,500 (75%) of the sale price, and the developer and/or Government
would be entitled to receive the remaining £37,500 (25%).
What is the Difference between Shared
Equity and Shared Ownership?
The main difference is that with Shared Equity you buy a given equity
share in a property but do not pay rent on the remaining share; however,
with Shared Ownership you pay rent on the equity share that the Housing
Association retains. What is Share to Buy? Share to Buy refers to buying
a property with family or friends. It is still a form of Shared Equity
in that you do not own the whole property but have a share in it. The
significant difference is that you are sharing the ownership of the
property with other private individuals as opposed to the Government