Shared equity mortgages

What is shared equity?

Shared equity is when you borrow additional money, known as an equity loan, to help form part of your deposit for a new home.

This reduces the loan-to-value (LTV) of your main mortgage, which can give you access to better interest rates. It’s a different product from equity release, which lets existing homeowners, usually those aged 55 and over, unlock cash from a property they already own outright; shared equity is a way to buy a home in the first place.

Which lenders offer shared equity mortgages?

There isn’t a single “shared equity mortgage” product sold by one lender. Instead, two things happen alongside each other: you take out a standard repayment mortgage with a mainstream lender, and a separate equity loan, usually from a government scheme or the housebuilder, covers part of your deposit.

For Help to Buy – Wales specifically, the equity loan is provided by the Welsh Government, but you still need your own repayment mortgage from one of the scheme's registered lenders. These currently include Halifax, Nationwide, Lloyds Bank, TSB, Principality Building Society, Leeds Building Society and Skipton Building Society, alongside several smaller regional building societies and specialist lenders. The equity loan itself typically comes from one of three sources:

• A government scheme, such as Help to Buy – Wales or Scotland's Open Market Shared Equity (LIFT) scheme

• The housebuilder, on selected new-build developments — terms and availability vary by developer and site, so always check directly with the builder or your broker

• A specialist shared equity provider, in a smaller number of cases

Because the list of registered lenders can change, it's worth checking the current list with a broker like Mojo, or on the scheme's own website, rather than assuming any specific lender is still participating.

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.

Shared equity schemes in Scotland and Northern Ireland

Help to Buy – Wales only covers new-build homes in Wales. Scotland and Northern Ireland have their own, separate arrangements.

In Scotland, the Scottish Government runs the Open Market Shared Equity (OMSE), also called LIFT, scheme. It works in a similar way to Help to Buy – Wales - the government takes an equity share, typically between 10% and 40% of the property’s value, and you repay that share (not a fixed amount) when you sell or buy them out.

Unlike Help to Buy – Wales, it can apply to homes already on the open market, not just new-build, and it’s aimed at first-time buyers along with priority groups such as social tenants, people aged 60 and over, and members of the armed forces. Price thresholds vary by local council area and property size, so check the current thresholds for your area before assuming you’re eligible.

Northern Ireland’s equivalent, run by the Co-Ownership Housing Association, is shared ownership rather than shared equity: you buy a share of between 50% and 90% of a home and pay rent on the rest, rather than taking out an equity loan on top of a full-ownership mortgage. It’s a similar idea but a different legal structure.

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.

These two terms are often confused, but they’re different products. With shared equity, you take out a mortgage and an equity loan to buy 100% of your home outright. You own all of it from day one, and the loan is just another form of borrowing alongside your mortgage. With shared ownership, you buy a percentage of your home, often starting between 25% and 75%, and pay rent to a housing association on the share you don’t own. You can usually buy further shares over time, known as staircasing, until you own the home outright.

The practical difference shows up when you come to sell or remortgage: as a shared equity owner, you’re selling a home you fully own (subject to repaying the loan); as a shared ownership leaseholder, you’re selling a lease on a percentage share, which can take longer and involves the housing association.

Can I sell or rent out a shared equity home?

Yes to both, but you’ll usually need the scheme provider’s permission first, and you’ll need to repay your share of the equity loan when you sell.

If you rent out the property, most schemes only allow this if you’ve already repaid the equity loan in full, or with the provider’s written consent. Check your specific scheme’s terms, as this varies.

What happens to the equity loan if I die?

The equity loan doesn’t disappear, it becomes part of your estate. Whoever inherits the property usually needs to repay the outstanding share, either by selling the home, remortgaging, or paying it off from other funds, in the same way they’d need to deal with any outstanding mortgage. It’s worth mentioning this to whoever you’d expect to inherit the property, so it isn’t a surprise.