Back in the day, “Shared Equity” was considered a little down market, perhaps where one might go as a step up from renting – a helping hand onto the housing ladder.
Nowadays, Shared Equity has undergone a face lift and is now offered by an Investment Bank as well as through your local Housing Association.
Basically, the client sticks in a 10% deposit and the investment bank adds a further 20%, leaving only 70% to be mortgaged.
This not only enable those struggling to get on the ladder to take their first steps into the housing market but also enables families to make an extra jump when moving up market.
We have also found that in areas where house prices are on the increase, some applicants are using this as an investment opportunity.
Using simple numbers, here’s how it works:
Purchase Price £100,000, Client Deposit £10,000, Equity Share £20,000 and a Mortgage of £70,000 (fixed for 3 years at 2.99%!)
The client makes his mortgage payments for 25 years (and pays nothing on the Equity Share – in return they hand over 40% of any profit at the end of the term).
At the end of 25 years, assuming the house is now worth £200,000 and all mortgage payments have been met, the house is divvied up as follows:
| Investment Bank | Borrower | |
| Deposit | £0 | £10,000 |
| Equity Share | £20,000 | £0 |
| Mortgage | £0 | £70,000 (paid down) |
| Share of £100,000 price increase | £40,000 | £60,000 |
| Total Share | £60,000 | £140,000 |
Interestingly, this new twist on the traditional Shared Equity theme has proved rather popular at the upper end of the market. Many owners who are “equity rich / cash poor” have taken out their 20% equity to spend on all manner of things from school fees to Buy to Let deposits.
My verdict: for the right client – it’s worth a look!
For more information speak to a mortgage advisor on 01628 507477.
Recent posts
Decorating Tips for Selling Your Property
17 days ago
Selling up? It’s important to make your house as appealing as possible to potential buyers. Good decorating can help with first impressions, and increase the perceived value of your property.
20 Budget-Friendly Activities
25 Aug 2023
With the cost of living affecting so many of us, we have made a list of budget-friendly activities and ideas for you.
Moving and Packing Tips for a Stress-Free Move
21 Jul 2023
Moving soon? It's never too early to get organised! Be prepared and avoid unwanted stress by checking out our list of tips to get you ready for moving day.
What is the UK Inflation Rate?
27 Jun 2023
Inflation simply put, is the increase in the price of something over time. The Office for National Statistics (ONS) tracks the prices of hundreds of everyday items and these items are updated to reflect shopping trends.
Debt Consolidation into a Mortgage
20 Jun 2023
We are often asked if it's good advice to consolidate “unsecured” debt (credit cards and loans etc) into your mortgage, the answer is, sometimes.
Parking Rules Explained
16 Jun 2023
When you’re looking to buy a home, and you own a car, you ideally want to know the rules on parking in the area. Parking rules can be confusing, even for the most experienced of drivers! This is why we have written this blog to help you.
Sources of Deposit to Buy a Property
6 Jun 2023
There are several potential sources you can consider when it comes to getting together a deposit to buy a property. Providing proof of the source of your deposit is a key requirement in the application process and will need to be given to both the lender and the solicitor.
More information
Trusted by
