Releasing equity from your shared ownership home

What is shared ownership and can you release equity with it?

If you have a shared ownership property, equity release could help you own 100% of your home and be free of those monthly payments to your scheme provider.

Shared ownership schemes have successfully helped many people get on to or move up the property ladder. If you’re a homeowner aged 55+ with a shared ownership home, you may be looking at your options to fully buy your home. Equity release is one option, so read on to discover the following:

• What is equity release?
• What is shared ownership?
• Can you release equity from a shared ownership property?
• Check your eligibility: can I release equity from my shared ownership home?
• Equity release with other types of ownerships:

1. Can I do equity release on a leasehold property?
2. Can I arrange equity release on a jointly owned property?
3. Can I do equity release if more than two people own the property?
4. Shared equity schemes and equity release

If you are interested in equity release, we hope this guide will help. However, equity release on shared ownership properties really does need to be considered on a case-by-case basis. That’s why we recommend talking to our selected advisers, who specialise in equity release and other forms of later life lending. Just call us on 0808 178 3055 or request a call back and we’ll arrange a no-obligation appointment for you.

What is equity release?

Thinking about arranging equity release on a shared ownership property? If so, the first step is to make sure you understand how equity release works.

With equity release, over-55s can unlock tax-free cash from their homes without having to sell or move house. There are typically no monthly repayments to make as the interest can be rolled-up and added to the total loan each month. If you don’t want your loan to grow in size over time, then you can choose to make voluntary regular interest payments.

The loan and interest is typically paid back through the sale of the property when you pass away or move into long-term care.

Wondering what you can use equity release money for? The money you unlock can be spent however you wish, once any outstanding mortgage or secured loans are settled. This can include a shared ownership transfer of equity to buy out your landlord.

To arrange a plan you do need to own 100% of your home once your plan completes. So, to do equity release on a shared ownership property, you may already need to own a large percentage of your home to be eligible.

Due to the complexities involved, equity release providers look at these types of applications on a case-by-case basis. The good news is, we can help. If you plan to do equity release on a shared ownership property, our selected advisers know which providers are best to approach and will explain everything to you. They can guide you through the application to give you the best chance of being accepted.

Find out if you could be eligible for a plan by calling our friendly team on 0808 178 3055 or request a free callback today.

What is shared ownership?

Shared ownership is an alternative home ownership scheme. It allows you to purchase a percentage of a property with a view to buying a bigger amount, or all of it, over time. A scheme could help you to get on or move up the property ladder if you cannot raise the full deposit or afford the monthly payments needed for the home you want.

These are also called shared ownership schemes, shared ownership mortgages or shared ownership houses.

Shared ownership schemes are usually run by housing associations, local councils, house builders and some other organisations. When you buy a shared ownership house, you:

• Purchase your share of typically between 25-75% of the property’s market value. Sometimes you can purchase as little as 10% of the property, though this is less common.
• Pay rent to your landlord or provider for the share they own.
• Have the option to buy a larger percentage, or all, of your home in the future.
• May pay monthly ground rent and service charges which may be used for the maintenance of communal areas.

To purchase a shared ownership house you will usually need a deposit of at least 5%. Once arranged, you can buy more shares in your home to progressively own more of it. This is called ‘staircasing’ and means you will pay less rent as you own more of your home. Once you have bought 100% of your home you will no longer pay rent and the scheme will end.

Can you release equity from a shared ownership property?

One way you could possibly release equity from a shared ownership property is with equity release. However, the amount of equity you have in the property must be enough to purchase the remaining share from your landlord or provider. This is because you must own 100% of your home in order to have an equity release plan in place.

For example, say after some years of living there you now own 70% of your shared ownership house. You would need to purchase the remaining 30% from the scheme provider or person that owns the remaining 30%. As long as you can unlock at least 30% of your home’s value to do this, then a plan could be possible.

Check your eligibility: can I release equity from my shared ownership home?

If you have been wondering ‘can I release equity from my shared ownership home?’ then you’ll first need to check whether you meet eligibility criteria for an equity release plan. The criteria differs depending on the provider you use, but typically:

• You must be at least 55 years old.
• Your property must be worth at least £70,000 – potentially more if it’s a flat.
• You should have enough equity in your home to purchase the share that you don’t currently own.

Example of shared ownership equity release

A typical 71-year-old man finds out he can unlock up to 50% of his home’s value. He lives in a shared ownership house and owns 80% of his property. On completion of his plan, he uses some of the money he receives to purchase the remaining share of his home. He can spend any money left over however he wishes, so he buys a reliable car to help him enjoy his retirement more. He also gives some money to his daughter to help her finally get onto the property ladder.

Of course, you don’t have to release the maximum amount available to you. You might choose to unlock just enough to take full ownership of your property. 

Could equity release help you with your financial situation? To find out how much you could borrow, check here or talk to one of our friendly consultants by calling 0808 178 3055 or request a call back.

Equity release with other types of ownerships

In addition to shared ownership schemes, there are other home ownership types that could mean you’re eligible for an equity release plan. Whether you are looking to boost your finances, pay off a loan, or buy somebody out whose name is on your title deeds, equity release may be able to help. In this section we will be covering:

• Equity release on leasehold properties
• Equity release on jointly owned properties
• Shared equity schemes and equity release
• Equity release if more than two people own the property

Equity release on leasehold properties

It may be possible to unlock money from a leasehold property depending on how many years are left on your lease. The figure differs between lenders but generally you need to have a minimum of 90–120 years to be eligible. 

When you apply, your lender will carry out some checks regarding your leasehold property. These might include:

• The amount of time you have left on your lease.
• How much ground rent you pay, and if you are liable for any service charges.
• If there are any terms and conditions in your lease that might cause issues.

By asking a few simple questions, our selected equity release advisers will be able to tell you if you could be eligible. Find out today by calling our friendly team on 0808 178 3055 or request a free callback here. They’ll be able to put you through to one of our selected advisers who are specialists in their field.

Can I arrange equity release on a jointly owned property?

Some people mistake shared ownership equity release for joint ownership equity release. However, joint ownership is very common and simply means having a second name on your title deeds, usually your spouse or partner.  

You can typically do equity release on a jointly owned property, providing the youngest applicant is 55 or over. Please see our guide for more information: Can you take out equity release on a jointly owned property?

Can I do equity release if more than two people own the property?

An equity release plan can only be arranged on a property that is owned in single or joint names. If more than two people own your property then you will have to remove the extra name/s from the title deeds with their agreement. Until this happens, you won’t currently be able to arrange an equity release plan on your property. 

Did you know? If you need to remove someone from the deeds of your home then they can be changed during the equity release application process by your chosen equity release solicitor.

Shared equity schemes and equity release

Another scheme available to help prospective buyers get on or move up the  property ladder is a shared equity scheme. This is a loan to help you purchase your home, usually to increase the size of your deposit.

Say for example you can only put down a 5% deposit of a property’s value when you decide to buy it. You could use a shared equity scheme to raise a further 20%, so you have a 25% deposit in total. A shared equity loan is typically between 5-25% of your home’s value but varies between lenders. 

The loan is typically repaid through instalments over an agreed number of years, or when you eventually sell your home. Remember, the loan is a percentage of your home’s value, say 20%, rather than a fixed sum such as £20,000. It means the shared equity loan amount will fluctuate – so the amount you pay will depend on the value of the property.

Did you know? The government’s Help to Buy scheme was one of the more common examples of a shared equity scheme. This scheme stopped taking applications in October 2022.

If you are over-55 with a small amount of your shared equity scheme left to pay off, call us to find out if you are eligible for equity release. By clearing your loan with a plan, you could enjoy a tax-free cash lump sum and a bigger disposable income every month. Call 0808 178 3055 or request a free callback here. now to find out more.

How Equity Release Wise can help

Whether you have a shared ownership mortgage, a shared equity mortgage or a different scheme entirely, you may be able to unlock some money to boost your finances. 

Speaking to an adviser is essential to check your eligibility and decide if a plan could work for you. Providers look at these sorts of applications individually as they are less common, so you’ll want an adviser who understands the complexities involved. Our selected advisers can recommend the best providers and plans to choose from to make the process as smooth as possible.

To find out more, why not speak to our friendly team today? We can put you in touch with our selected advisers who can answer all your questions, explain the pros and cons of a plan, and confirm if you’re eligible and how much you could unlock. Call us today on 0808 178 3055 or request a free callback to get the help you need.

FAQS

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

There are key differences between these two similar sounding schemes. A shared equity scheme is where you own 100% of the property, but in addition to arranging a mortgage, you also arrange an equity loan to raise a bigger deposit. So, for example, you might put 5% down and your equity scheme loans you the rest of your deposit, say a further 20%.

A shared ownership scheme, on the other hand, is a part-buy part-rent scheme. You own a percentage of your home whilst renting the rest, with the chance to buy back more shares of your home over time, known as ‘staircasing’. 

Which is better: shared ownership or shared equity?

As with any financial product, it depends on your current financial situation and your future goals as to which option might work best for you. When weighing up shared ownership vs shared equity, it’s worth taking the time to research the pros and cons of each.

For instance, a shared ownership scheme might help you to achieve your goal of home ownership more quickly, as you only need a deposit for the share of the home that you are buying, rather than the full market value. So, if you purchase a 40% share of your property, your deposit only needs to be say 10% of that share. 

However, with a shared ownership scheme you’ll have to rent the remaining share until you can afford to buy more of the property from the landlord. 

A key difference between shared ownership and shared equity is that shared equity enables you to own 100% of your home straight away. This may align better with your financial goals – providing you can afford at least a 5% deposit of the full market value.

To be sure, you might wish to consult a broker or consider financial advice to find out what schemes are available near you and which would suit your needs best.