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Shared equity mortgages explained

When you’re buying your very first home, it can be difficult to save up the large deposit required to get a foot on the property ladder. That’s where a Shared Equity scheme can help. Recently the most common type of shared equity mortgage has been the Help to Buy Scheme, which enabled you to buy a home using a small deposit combined with an equity loan from the government, however this scheme closed to new applications on the 31st October 2022 and all buyers using the scheme must complete their purchase by 31st March 2023.

Shared equity mortgages sometimes allow you to take out an interest-free loan. This is because the amount you pay back is usually tied to the property’s value, so it doesn’t accrue interest - and where interest is payable, you don’t typically have to pay it back for the first few years of your mortgage term (it was 5 years for Help to Buy). That gives you a bit of breathing space to save more money and enjoy your new home. Be aware though, that if your property grows in value over time, your equity loan will also increase – so you'll be giving up a proportion of any future equity growth.

Shared Equity Mortgages Process

Several lenders offer shared equity mortgages, and as with other mortgages, rates will vary depending on which type of mortgage you choose and which lender you go with. As a mortgage broker, we can help you to find the best mortgage deal and guide you through the application process. Get in touch with L&C and we can help find the best shared equity mortgage lenders to suit your needs.

Shared Equity Scheme Eligibility Criteria

There are several criteria you must meet to qualify for a shared equity mortgage to get help with the cost of buying a new home as a first time buyer. You must be 18 or older, usually be a first-time buyer and able to afford the fees and interest payments on your mortgage. You can apply on your own or with other people, but if you’re submitting a joint application, all applicants must meet the eligibility criteria - and if you’re married, in a civil partnership or cohabiting with your partner, it’s essential that you submit a joint application.

Finding the best Shared Equity Mortgage Deal

To get a shared equity mortgage, you must ensure you meet the eligibility criteria as outlined above. Once you’ve settled on your dream home, get in touch with L&C, and our experts will help you to secure the best deal. There's no charge for our service, and we will guide you through the process from start to finish.

As with any mortgage application, there are a few things you can do to increase your chances of getting accepted:

  • Check your credit score and ensure any errors or omissions are rectified
  • Register to vote on the electoral roll
  • Ensure you have all of your paperwork in place, including proof of income which lenders will want to see to show you can afford repayments

Shared Equity Mortgage Repayment Strategy

If you’ve already bought your home with the Help to Buy scheme, you don’t have to pay any interest on your equity loan for the first five years, and the loan only needs to be repaid when your property is sold, or at the end of your mortgage term - whichever happens first.

However, you can pay off the equity loan whenever you want. You may be keen to switch to a standard mortgage that allows you to raise money to repay the equity loan, either due to a change in your personal circumstances, or due to fluctuating property prices. If you’re keeping the equity loan but looking to remortgage to a better deal not all lenders will accept customers with a Help to Buy loan in place. L&C can advise which ones are likely to lend to you.

If you do want to start paying off the equity loan you don’t need to pay the full amount in one go, but you do need to pay off at least 10% of the property’s current value. Whether you are paying it all back or part of it, you’ll first need to have the property independently valued by a surveyor.

When paying off your equity loan, you’ll need to enlist the services of a solicitor to handle your conveyancing, and there may also be an administration fee to pay, so you should factor this into your budget when considering your repayment strategy.

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Apply for a shared equity mortgage with L&C

If you’re looking for a shared equity mortgage, L&C is here to help.

You can use our online Mortgage Finder tool to see all the shared equity deals you’ll be eligible for. Our expert advisers are on hand to provide you with all the help and support you’ll need, and once we’ve found you the best deal, you can apply online.

After you’ve applied for your shared equity mortgage, you’ll be able to track your application online 24/7. So get in touch with L&C today so we can find you the best possible shared equity mortgage deal.

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Frequently asked questions

How can I get a shared equity mortgage?

Usually, most high street lenders offer shared equity mortgages and rates will vary depending on which type of mortgage you choose and which provider you go to.

What is a shared equity mortgage?

A shared equity mortgage is a type of mortgage that enables you to buy a home with a small deposit, combined with an equity loan which could be from a housing association, developer or the government. Recently, the most common of these schemes has been the Help to Buy Equity loan, but this closed to new applications on the 31st October 2022.

Can you switch from a shared equity mortgage to a standard mortgage?

You can pay off the equity loan whenever you want, and as property prices and circumstances change you may be able to remortgage to a standard mortgage that allows you to repay the equity loan. If you’re keeping the equity loan, not all lenders will accept customers with a shared equity loan in place. L&C can advise which ones are likely to lend to you.

What’s the difference between shared ownership and shared equity?

Although they have similar names, shared ownership and shared equity are two different schemes. Shared ownership works by allowing first-time buyers to buy a share of between 25% and 75% of a property. They then pay rent to a housing association on the remaining share, so they only own a portion of their home. If you use the shared equity scheme, you own all of the property, but have a loan as well as a mortgage to repay.