What is the Difference Between Shared Equity Schemes and Shared Ownership?

Shared Ownership is the mortgage scheme that you pay rent on the share of the equity you do not own.

Shared Equity is when you purchase a share of the property i.e. 85% and the other share i.e. 15% is retained by the builder and/or Government and the main difference is that you do not pay rent on this share.

What is the difference between Shared Equity Schemes and Share to Buy?

Shared Equity is when you purchase a share of the property i.e. 85% and the other 15% share is retained by the builder and/or Government and you don’t pay rent on this share.

A share to buy mortgage is when 2 or more friends or families members are buying a property together. What happens is that no one owns the property outright you all have a share in it. The main difference is that you are sharing the ownership of the property with other private individuals rather than a housing association or builder.

In other words, you still have a form of shared equity in that you do not own the whole property but have a share in it. The main difference is that you are sharing the joint ownership of the property with other private individuals rather than the Government.

So, what is a Shared Ownership Mortgage?

A Shared Ownership Mortgage Scheme is used when a property is part owned and part rented by you.

These schemes are becoming very popular for first time buyers with a small deposit as you only pay the deposit on the share you own.

How is the rent calculated?

The housing association to whom you will pay your rent will give you the calculations and they will ask your mortgage broker/lender to assess your affordability.

The client I have just helped their rent was 2.75% of the share owned by the housing association. The share was £70,000 and the rent was £211.25.

Are mortgage products the same if I buy a shared equity/ownership house?

No, not all lenders will consider lending on shared ownership/equity homes. It is recommended you find out what is available before you start looking for your dream home.

Do I earn too much to qualify for a shared ownership?

Take care when looking at shared ownership properties as sometimes there is a limit to how much you can borrow. Always ask, as I have had clients paid non refundable mortgage booking fees only to find out they earn too much!

How much deposit I would need?

The deposit you need is based on the part of the property you purchase Not on the total purchase price. The amount of deposit required can vary.

Shared ownership mortgage schemes vary from lender to lender with some lending up to 95% of loan to value on the share you purchase.

For example, if you bought a 25% share of a property valued at £210,000 then you would need a minimum deposit based on £2625 your share of £52,500.

If you wanted to buy 50% then your share would be £105000 and you would therefore need a minimum deposit of £5250.

Are these types of mortgages easy to obtain?

In theory yes, as long as you and the property you wish to purchase meets the lenders criteria

Like all mortgages these days each one is assessed against the lender criteria which your broker should be aware of.

In theory getting a loan should be straightforward enough. Unfortunately the theory doesn’t quite work in practice. Lenders often have very individual requirements when it comes to arranging a loan or advance.
We have a legal requirement to include the folllowing:- Your home may be at risk if you do not keep up repayments on your mortgage.

This is the first in a series of home and mortgage related articles which I hope will help you.

Vivienne Connery is a qualified mortgage broker who has her own buy to let property portfolio. Her team are based in the UK and can provide access to all types of mortgages. You can find out more and access a free mortgage how to guide - Insiders Mortgage Guide