What does shared equity mean?
Asked on Dec 6 2012,
House Prices in Airdrie |
As part of a shared equity scheme you will be given a loan to form part of the deposit for a property, leaving you to take out a mortgage for the remainder of the price of the home.
The idea is that because the loan counts towards your deposit, you should have more chance to access a mortgage than before. Shared equity schemes remove the need to save up a massive deposit, but it might work out to be a more expensive way of purchasing in the long-term as you will need to pay a fee on the loan after the first five years.
This fee is currently 1.75 per cent, rising every year by the retail price index (RPI) plus one per cent.
When it comes to paying back the loan in full after 25 years this will be judged on the property's value, rather than a fixed figure agreed at the time of deal.
Therefore, if property prices go up then you will have to pay back a higher figure.
It is worth checking out the two shared equity schemes which are run by the government: FirstBuy and HomeBuy Direct.
Answered on Dec 11 2012,
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