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
Can I get a mortgage without a deposit?
7 days ago
If you are struggling to get over the hurdle of saving enough deposit due to being in a rental property, but wish to purchase your own home, you may be able to with a 100% mortgage. You will need to meet certain requirements and be financially stable.
Reasons to Remortgage your Home
19 Mar 2024
If you are looking at remortgaging your property but you are unsure whether it’s the right decision, we have listed five reasons why it might be for you.
Debt Awareness Week | Consolidating Debts
12 Mar 2024
As the cost-of-living crisis continues, many people across the UK are struggling financially, many of whom are finding it hard to get debt-free.
According to research by StepChange, there are five common reasons people don’t seek help and advice with debt concerns.
Friyay Rate Reviews
6 Feb 2024
Every Friday our experts search the market for the latest rates from every lender saving our clients some serious £'s!
Looking to Extend?
2 Feb 2024
Are you looking to extend your property? There are many benefits to adding an extension to your existing home, here are a few.
Why should you consider Equity Release?
30 Jan 2024
Put simply, Equity Release is where you can release equity (money) tied up in your home for any purpose you like. In this short article, we share some reasons why you may want to consider Equity Release.
How to cut your food shopping bill
17 Jan 2024
The team at Mortgage Required may not be able to lower the prices in your local supermarket, but we have come up with a list of tips to help you lower your food shopping bill.
Energy Saving Advice to Help Protect your Pocket
14 Jan 2024
Every year Big Energy Saving Week takes place to raise awareness about energy efficiency, reducing energy bills, and combating fuel poverty. Below are some ways you can get involved and hopefully make a saving!
More information
Trusted by
