Property Buying Guide

Shared Equity

Shared Equity in the UK is on the increase.  It was the basis for the Government's Open Market HomeBuy scheme which has now been scrapped. It is also the basis of the Government's HomeBuy Direct scheme for buying new homes. There are few private alternatives except through the new house-builders. and your HomeBuy Agent If you are interested in shared equity as a solution, you will need to partner up with a mortgage advisor and a local conveyancing/property solicitor to accompany on your travels towards owning your own home. Then you should approach house-builders and local HomeBuy Agent.

Shared  Equity in a nutshell:

• You own the property and there are no rental payments
• Usually offered by your local housing association under HomeBuy Direct (household income must be under £60,000pa) or through a house-builder ( these schemes can vary)
• You must be a first time buyer, key worker, housing association or council tenant or be in housing need
• The Housing Association will provide wyou with a top up low or no cost 'equity loan' providing the lion's share of the deposit, usually up to 30% of the purchase proce and the remainder is financed by your deposit and mortgage
• You are normally entitled to repay all or some of the equity loan at and point bu you would need to check the terms of your particular scheme
• Currently you will need at least a 5% deposit
• When you sell the property you will need to replay the equity loan remaining and a proportion of the equity growth that reflects rhe proportion of the equity loan remaining
• Restricted to new build properties which are lovely but command a premium
  

With shared equity, the first time buyer does not own the property in conjunction with any other party (unlike shared ownership) but takes out more than one loan for the property. A mortgage and an ‘equity loan'. You are the only person on the deeds. There is no co-owner.  However, when the property is sold, the ‘first time buyer' has to repay the loans AND a proportion of any increase in equity of the property to the party making the ‘equity loan'.

The Open Market HomeBuy shared equity initiative allows the qualifying buyer to choose any property on the open market within their price range.   It is available to key public sector workers, social tenants or those on a council waiting list and other priority first time buyers (as deemed by the regional housing board and communicated through the local HomeBuy agent) including first time buyers with a household income of £60,000 or less.  

A mortgage advisor will be able to offer mortgage advice on a shared equity mortgage and which one would be right for you. You will also need to take a local conveyancing/property solicitor on your exciting journey.

The two main options within the Open Market HomeBuy initiative offer key workers and other first time buyers access to an equity loan of up to 50% of the property's value.  Eligible applicants have a choice between finding their own mortgage or picking a competitive deal through The Co-Operative Bank. These new services replace the former Open Market HomeBuy shared equity schemes.

Ownhome (no longer available) is provided by a partnership between Places for People and The Co-operative Bank.  Ownhome gives people the chance to take up to 40% of the value of the property in an equity loan from Places for People.  They would pay nothing at all for the first five yearson the equity loan.   After these five years, a low rate would be paid on the sum – starting at a fixed rate of just 1.75% interest per year for the next five years,  and then increasing to 3.75% interest per year from year eleven.      The remainder would be funded through a conventional mortgage with The Co-operative Bank.  There will be no premium or extra charges on the mortgage, and customers can choose from a range of competitive deals including fixed rate and tracker options.   Customers can apply for Ownhome through their local HomeBuy Agent, or directly on the Ownhome telephone line 0845 607 0110.

MyChoice HomeBuy (no longer available) enables applicants to apply for a mortgage with any lender they choose.  The scheme would provide them with up to 50% of the value of the property as an equity loan.  The remainder would be funded through a conventional mortgage with a Financial Services Authority regulated lender.   They would pay a lowrate of 1.75% per annum on the equity loan funded by one of eight housing associations who are acting as equity loan providers*.  The rate they pay on the standard mortgage would depend on the deal selected through the mortgage providers.   

With both products, no deposit is required, but is allowed.   When the property is sold, the equity loan provider will be entitled to a share of any increase in the value of the property.

Although mortgage rates are still low, rising house prices and the decline of first time buyer-specific mortgages has put pressure on people buying their first home – particularly key workers.

This means a household with an income of £32,000 could afford a house of £200,000, paying £760 each month – as opposed to £1,350 without the scheme.

A £1500 grant to help with moving in costs is also available to selected applicants.

Applicants will need to contact their HomeBuy agent - a one-stop-shop providing affordable housing options across the UK - or phone the Ownhome information line on 0845 607 011 .

HomeBuy Direct, shared equity for a new home. With this scheme, if you are eligible, you could get an ‘equity loan' of up to 30 per cent on the cost of a property. You will need to cover a minimum of 70 per cent of the cost of a home you are buying through a mortgage from a qualified lender who is regulated by the Financial Services Authority and any deposit you will need to repay the equity loan when you sell your new home. You will need to take a mortgage advisor along with you on this journey. You can choose to repay some or all of the loan sooner, by buying additional equity shares in the property (at the market rate)

To find out more about schemes in your area, contact your HomeBuy Agent. 

Find out More About Shared Equity in our shared equity guide:

Open Market HomeBuy shared equity UK scheme l  What is a key worker and how to apply? l  What help is on offer for key workers? l HomeBuy Agents

Useful websites: 

www.communities.gov.uk – the government's main site with information about housing
www.direct.gov.uk – offers a range of government information and services, including for housing
www.homesandcommunities.co.uk – for more information about housing associations and shared equity and for your HomeBuy Agent
www.nhs.uk/accommodation – information about accommodation for NHS staff
www.teachersupport.org.uk – support and advice for teachers   

Some local Shared Equity Open Market HomeBuy agents:

Search UK Shared Equity HomeBuy Agents for shared equity anywhere in the UK.

Most useful and most popular pages on this site:

Look for your First Property l Seek First Time Buyer Mortgage Advice l See our Best First Mortgages Comparison Table l Find out about First Time Buyer Mortgages l Find out How to Buy a House l Learn all about The First Time Buyer Mortgage l Shared Ownership