Mortgage Guide

Shared Appreciation Mortgages

Shared appreciation mortgages are relatively new and made a debut in 2006.  They  are no longer called shared appreciation in the industry, but now fall under the shared equity umberella and very few such products are available.    

The main features of a shared appreciation/equity mortgage, is that the borrower takes out a normal mortgage and a low cost loan in addition. This way you can borrow more, possibly making the property of your dreams possible.

Typically these mortgages are aimed at first time home buyers but  they are by no means limited  to first timers, but you need to take mortgage advice first.  

In exchange for making 2 loans, one of which is a mortgage, the lender requires a pro-rata share of any increase in equity of the property when you sell up. The interest on the ‘top up' loan may be zero for a certain amount of years or may be set at a very low level.  The shared equity or shared appreciation mortgage works on a shared appreciation basis thus: you put down a deposit, which could be as little as 3%. The loan is then divided between a conventional mortgage and a residential ownerhisp loan which is set at between 15% to 35% of the property's value. When you come to sell, the mortgage lender takes a share in any increase or decrease in the property's value, in the same proportion as the residential ownership or top-up loan. This means that if the property rockets in value during your occupation, you will not be able to keep all of that increase to yourself.

The private version of this mortgage which was available to non-key-workers has been withdrawn from the market-place.

The Government's Open Market HomeBuy scheme, aimed predominantly at key workers is based on shared appreciation but it is actually described instead as ‘Shared Equity'.