Shared equity mortgages: What do they mean?

16-May-2013

Published by Helen Adams.

With recent research suggesting that more and more potential borrowers are wanting new and creative ways to buy their dream home, lenders are advising towards shared equity mortgages. But what exactly are they?

A shared equity mortgage will allow you to buy a property, like any other loan, but this loan will act as part of the deposit paid, and so you can borrow on a lower loan-to-value mortgage. This essentially means that you do not need a large deposit to buy a home, because you can use a loan in order to pay part of such a deposit.

This equity loan that would pay for your deposit would be interest free for a period of time. This period will vary on the lender but under the coalition's new flagship Help-to-Buy scheme, the period lasts five years. It is important to note however that at least five per cent of the deposit has to be paid by yourself.

After a year, you can then choose to start repaying back the equity loan, until a set time limit when you have to pay back the outstanding balance in full. The equity loan will always be proportionate to the value of your property, rather than a fixed figure, so the property value will of course affect the time you have to fully repay back the loan. Either way, know that under a shared equity scheme, you will own 100 per cent of the property.

Keith Osborne, editor of WhatHouse, has pushed for new inventive equity schemes: "Many homebuyers don't think lenders are doing enough to help people to buy a property. While recent government announcements such as the Help-to-Buy scheme may provide greater opportunity for potential house buyers, the onus is clearly very much on lenders to innovate with new products."

If large deposits are getting you down, consider a shared equity mortgage.

2013: Sep | Aug | Jul | Jun | May | Apr | Mar | Feb | Jan

2012: Dec | Nov | Oct | Sep | Aug | Jul | Jun | May | Apr | Mar | Feb | Jan

2011: Dec | Nov | Oct | Sep | Aug | Jul | Jun | May | Apr | Mar | Feb | Jan

2010: Dec | Nov | Oct | Sep | Aug | Jul | Jun | May | Apr | Mar | Feb | Jan

2009: Dec | Nov | Oct | Sep | Aug | Jul | Jun | May | Apr | Mar | Feb | Jan

2008: Dec | Nov | Oct | Sep | Aug | Jul | Jun | May | Apr | Mar | Feb | Jan

2007: Dec | Nov | Oct | Sep | Aug | Jul | Jun | May | Apr | Mar | Feb | Jan

2006: Dec | Nov | Oct | Sep | Aug | Jul | Jun | May | Apr | Mar | Feb | Jan

2005: Dec | Nov | Oct | Sep | Aug | Jul | Jun | May | Apr | Mar