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Shared equity is similar to shared ownership: it is a form of affordable housing to help first time buyers, key workers and others on to the property ladder. However, there are important differences between shared equity and the main shared ownership scheme.
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With first buy the maximum equity loan is 20%. However, taken together with the customer’s own deposit of just 5%, this still gives total equity of 25% and means that the client can access potentially attractive 75% loan to value mortgages despite putting down a small deposit. There are also shared equity schemes where the Government is not involved where, for example, the developer provides all of the equity loan for the share you do not initially purchase. Most ofl the major developers have Shared Equity schemes of their own, shared equity and equity loan schemes.
The difference between Shared Equity and Shared Ownership
The differences between shared equity and shared ownership are complex, but generally, with shared equity you purchase ALL of a property and legally own ALL the property. However, the key point is that your deposit comprises a generally sizable equity loan making up the difference between the mortgage and purchase price.. In contrast, shared ownership schemes are usually undertaken whereby you only own a specific share as a lease on a shared ownership property, and you can only achieve 100% ownership by purchasing the balance of the share in the property.. With shared equity there is generally a requirement to clear the equity loan within a typical period of 5 to 10 years. Shared equity is generally provided by developers and shared ownership by housing associations..
Shared Ownership or Shared Equity
Your own personal deposit contribution in a shared equity property purchase can be small (often as little as 5%, and whilst you can obtain shared ownership mortgages with a 5% deposit, these are not offered by as many lenders as in shared equity.
Shared equity plans normally relate to houses rather than flats, and you are therefore less likely to have to pay service charges
Most importantly, rates tend to be better on shared equity mortgages rather than shared ownership home loans because the lenders in a shared equity case will treat the ‘loan to value’ as being based on your share divided by the whole market price – so you could find yourself putting down as little as 5% of your own money as deposit but obtaining a mortgage rate put aside for a 25% deposit!
Lenders in general prefer shared ownership and you have a much wider choice of property to purchase, it does not have to be new build.
Costs up front would favour shared ownership and it is run normally by a housing association it is not run by the government and subject to the whims of who is in power.
Want to know more call Michael J Alexander on 03452 605506, we are Independent Mortgage Advisers with access to the whole of the market and we just hate to say no.