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
Delayed Start Mortgage from Skipton
Yesterday
Skipton Building Society launches ‘Delayed Start’ mortgage meaning first time buyers won’t be required to make repayments for the first three months.
According to a survey by Skipton, first time buyers who bought their home in the last five years found that in the first three months of living there, they were spending upwards of £30,000.
Gardening Tips for Beginners
6 days ago
If you have recently moved into a property with a garden that requires a little TLC, or you’d like to get on top of your current green space, check out our tips.
The Family-Backed Mortgage from NatWest
9 days ago
High street lender, NatWest, have launched a new product to help first-time buyers purchase a property with assistance from a family member or friend to get them on the property ladder sooner.
The Impact of Klarna on Mortgage Applications
10 days ago
‘Buy Now, Pay Later’ (BNPL) schemes, such as ‘Klarna’ are short-term loans that allow shoppers to make a purchase, but delay paying for it for an agreed amount of time.
Klarna is one of the most popular BNPL services with 18 million customers in the UK alone, and offers interest-free payment options which is appealing to shoppers. However, does it affect a mortgage application?
Buy to Let mortgages: what's happening?
15 days ago
We look at how to get the best Buy to Let mortgage rate, what's in store going forward, and options as a landlord with increasing costs.
UK mortgage rates following Trump’s Tariffs
24 days ago
Throughout this past week, lenders have continued to reduce their mortgage rates giving borrowers in the UK some welcome news following the change in global tariffs under US President, Donald Trump.
Effective ways to relieve stress
24 days ago
Did you know that buying a house, or relocating is in the top 10 most stressful life events?
Stress of course is an unavoidable part of life and there are many reasons why people experience stress, not just buying a house!
There are lots of effective ways to manage and reduce stress, check out our tips to help you.
With the stamp duty relief ending in England and Northern Ireland, we have listed the top 10 cheapest areas for first-time buyers as published by Rightmove.
More information
Trusted by
