Shared ownership and shared equity arrangements are available to first time buyers who are unbale to obtain a mortgage on the open market.
What is shared equity?
With shared equity you purchase all of a property and legally own all of the property. However, your deposit is reduced because you buy with a large equity loan that reduces the amount you have to borrow but is attached to your property and will need to be repaid at a later date.
With shared equity there is generally a requirement to clear the equity loan within a typical period of five to 10 years. Shared equity is generally provided by house builders and shared ownership by housing associations, but there are some housing associations with allocations for the Help to Buy: Equity Loan scheme.
What is shared ownership?
In contrast, shared ownership schemes are usually undertaken whereby you only own a specific share as a lease on a shared ownership property (normally owned by a housing association), and you can only achieve 100% ownership by “staircasing” up to full ownership. You will pay rent on the part of your home you don’t own yet and will also be liable for maintenance and insurance charges. With some leasehold apartments sold under the shared ownership scheme you may also have to pay ground rent on top of the rent on the share you don’t own.
The above article is for guidance only and does not constitute legal advice. Relevant law applicable as at date of publication only.