How do shared equity mortgages work?
Shared equity is when you borrow money, known as an equity loan, to help form part of your deposit when you buy a new home.
You then take out a shared equity mortgage to cover the remaining purchase price of the property you want to buy.
You will still need to provide some of the deposit yourself, usually at least 5%. Use the comparison above to find a shared equity mortgage that suits your needs.
How do you get an equity loan?
Through an equity share scheme, which can be offered by:
House builders
Local authorities
Government initiatives
You can apply for the government Help to Buy scheme, which offers buyers an equity loan of up to 20% of the purchase price on new build properties.
You can find out more about how the Help to Buy scheme works here.
A shared equity example
If you bought a home that cost £300,000 you could:
Pay a 5% deposit of £15,000 from your own savings
Get a 20% equity loan of £60,000
Apply for a mortgage for the remaining 75%, which would be £225,000
Most schemes allow you to pay back the equity loan as a lump sum, usually when you sell your home.
The amount you repay will be based on the market value at the time. So if your home has gone up in value to £400,000 when you want to pay back the loan, you would need to repay 20% of this amount, which would be £80,000.
How to find the right shared equity mortgage
To find a shared equity mortgage:
Work out your total deposit: This is your savings plus the equity loan. For example if you have 5% and the loan is 20%, you have a 25% deposit and will need a mortgage with an LTV of at least 75%.
Think about what term you want: Most shared equity mortgage come with a fixed initial rate term of 2 or 5 years.
Use our comparison to find a low rate: Compare mortgages that offer the term you want and with a low enough LTV for the deposit you have.