Shared Equity Schemes - A Solution To A Developer's Balance Sheet?

Originally published on 25th November 2009.

Shared equity in the UK is on the increase and seen by some as a useful way of getting on to the property ladder. It was the basis for the Government's 'Open Market HomeBuy' scheme which has now been scrapped. It is also the basis of the 'Government's HomeBuy Direct' scheme for buying new homes.

With shared equity, the buyer does not own the property in conjunction with any other party (unlike shared ownership) but instead takes out more than one loan for the property. A mortgage (usually from a bank or building society) and an 'equity loan' (often from the developer). The purchaser is the only person on the deeds. There is no co-owner. However, at a set future date or when the property is sold, the purchaser has to repay the loans and a proportion of any increase in equity of the property to the party making the 'equity loan'.