Shared equity mortgages

What is shared equity?

Shared equity is when you use an additional loan (known as an equity loan) alongside your main mortgage to boost your deposit when buying a home. You’ll usually still need to contribute some of the deposit yourself, typically at least 5%.

You then take out a shared equity mortgage to cover the rest of the property price. This means you’ll have two loans running at the same time, but because the equity loan increases your deposit, the mortgage you need is smaller. A higher deposit reduces your loan-to-value (LTV), which can help you access better mortgage interest rates.

There are various shared equity schemes, but one of the most well-known was the government’s Help to Buy scheme. This scheme has closed to new applicants in England and elsewhere, but in Wales the Help to Buy Wales shared equity scheme has been extended and will continue accepting new applications until September 2026

How do shared equity mortgages work?

A shared equity mortgage loan is usually, though not always, provided by a different lender or by a government-backed scheme.

Its purpose is to top up your deposit, making it easier to secure a mortgage or qualify for a better rate. This can be particularly helpful for first-time buyers who are struggling to save a large enough deposit for the type of property they want or need.

How and when you repay an equity loan depends on the specific scheme. Some loans are repaid through monthly instalments, while others are repaid when you sell your home or remortgage.

Certain schemes, such as Help to Buy, have offered an initial interest-free period. However, in most shared equity arrangements, you’ll eventually pay interest or fees unless you repay the loan within a set time frame.

Am I eligible for the shared equity scheme?

Eligibility depends on the specific shared equity scheme you apply for, each has its own criteria.

The main government-backed shared equity loan currently available in Wales is the Help to Buy – Wales scheme, and it has the following requirements:

Help to Buy – Wales eligibility

To qualify, you must:

• Be buying a new-build home in Wales with a maximum purchase price of £300,000.

• Be able to fund at least 80% of the property price through a combination of a repayment mortgage and a minimum 5% cash deposit.

• Take out a first-charge repayment mortgage with a qualifying lender to cover the remaining purchase cost after the equity loan.

• Not sub-let any part of the home you’re buying with the scheme.

• Not be renting out your existing home while buying a second home through the scheme (the property must be your only residence).

Some additional points to bear in mind:

• The scheme is only available for your primary residence - you can’t use it for buy-to-let or second homes.

• You must have access to the required 5% deposit in cash before the equity loan is applied.

Mortgage lender affordability checks still apply, and you must be able to take on the mortgage alongside the equity loan.

How to get a shared equity loan

Equity loan schemes are offered by the following:

• Property development companies

• Local authorities

• Government initiatives 

Information about the Welsh Government’s shared equity scheme is here

Each scheme will have a set of eligibility criteria to meet and these will usually require that you earn below a certain minimum income, don’t own any other properties, and will only apply to the purchase of specific properties.  

Each scheme will also have its own terms and conditions, so make sure you fully understand the benefits and downsides of each.

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

Quick comparison:

• Shared equity - You own 100% of the home from day one, have one home with two loans, and no rent is involved.

• Shared ownership - You own a share, pay rent on the rest, and increase ownership through staircasing.

With shared equity, you take out an equity loan that boosts your deposit and reduces the size of the mortgage you need. You still own 100% of the property, and the equity loan is repaid either monthly or when you sell or remortgage. Because the loan increases your deposit, it can help you access better mortgage rates.

With shared ownership, you buy a portion of a property (usually between 10% and 75%) and pay rent on the remaining share to a housing association or developer. Over time, you can usually buy more shares through a process called staircasing, which increases your ownership percentage. You don’t own the whole property until you purchase all the shares.