Shared Equity Schemes

Shared Equity and Shared Ownership 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%).

Restricted Sale Covenants

Shared Equity Enquiries     Name E-Mail Telephone Loan amount Deposit Salary Category Choose First Time Buyer Home Mover Re-Mortgage Commercial Buy to Let: Purchase Buy to Let: Re-Mortgage

You may come across the term 'Restricted Sale Covenant'. This is a clause that restricts the future sale price of a property to a percentage of its value. For example, a Housing Association might offer a property with a 20% discount off its true value but impose a 'restricted covenent' which forces the buyer to offer the property for 80% of its future value when they come to sell; this ensures that the property retains its affordable status for future buyers. Most lenders will not consider mortgaging such a property since arestricted covenant may reduce the appera to buyers; less appear means smaller market and this could affect the value of the property by more than the covenant. This compromises the property as suitable security for the lender. F5rom time to time lending criteria chnages, if you come across such a property please feel free to contact us for the latest position on lender's criteria.

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, you will forgoe a percntage of the future growth should the property rise in value.