Shared Ownership and Shared Equity - buying a share of a house

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

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