Shared equity and shared ownership schemes are different. A shared equity scheme means you own the whole property, but that you have a loan on a part of your deposit.
Shared equity works by providing you, the buyer, with an equity loan which will form part of your deposit for a property. Loan amounts may vary from scheme to scheme. You would then take out a mortgage on the remaining part of the property's value and will need a deposit of at least 5 percent. For example:
- the property value is £150,000
- with a 20 percent equity loan of £30,000
- and 5 percent deposit of £7,500
- you'll need a mortgage of £112,500.
An independent financial advisor will assess your finances to make sure that you are eligible and that your re-payments are affordable, based upon your financial circumstances.
You will own the property and there are no rental payments, although some providers may charge interest on the equity loan. Some schemes allow you to repay the loan at any time during the term of the mortgage but, you will have to re-pay the loan in full if you sell the property before the end of the mortgage term. The equity loan will be a second charge on your property, representing a percentage of the value. Therefore, when you pay back the loan, you will pay it back as a percentage of the current market value of your home.
Shared equity eligibility
Shared equity schemes may contain specific eligibility criteria, which may include:
- not owning any other property in England or any other country
- applications from home owners are accepted if they can demonstrate that they are in the process of selling their current home
- agreeing to use the property as their own or main home throughout ownership
- agreeing to not rent the property out
- being registered with the Affordable Housing Scheme
- being in permanent employment
- having a household income of less than £80,000 per year
- having a local connection to the Bury area.