Mortgage advice to shared Equity

To help buyers get onto the property ladder, many New Home Builders and Housing Associations now offer shared equity schemes, allowing more people to purchase their own home with only a 5% deposit. With shared equity schemes the Builder or Housing Association provides an equity loan (often interest free for the first 5 years) between 10% -25%, meaning you only need to raise a mortgage of between 90% - 75%, while getting 100% ownership of your home; and, because you’ll have a smaller mortgage than you would have needed otherwise, your mortgage repayments will be lower too. An example of how Shared Equity works:

You purchase a new build home where the builder is offering Shared Equity on an 85/15 split
The full price of the home is £100,000
You require a 5% deposit (£5,000) to qualify for the scheme
The builder provides an “equity loan” of 15% (£15,000)
You then need a mortgage for 80% of the full purchase price (£80,000)
Often you will pay no interest on the equity 15% equity loan for between 5 and 10 years
You will own 100% of the property and can pay back the builder when you sell the home
You can pay back the equity loan at any time without penalty

Shared equity mortgages you are buying a share of your home. Some developers will sell 100% share, some developers will sell only a portion of 100% you need to understand the long term risk before entering this type of mortgages.