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 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