Is Shared Equity better than renting?

Deciding whether to rent or take advantage of Shared Equity in Scotland is one of the biggest decisions you’re likely to make, so it’s important you’re armed with the facts.

A lot will depend on your individual circumstances and aspirations, but once you’re familiar with what Shared Equity is, whether you’re eligible and how the scheme stacks up against renting, you’ll soon discover what’s going to be the best option for you.

In this article, we take a closer look at this Scotland-based scheme, weigh the pros and cons of Shared Equity versus renting and help you determine your next move. 

In this section:

• What is Shared Equity? 
• Who is eligible for Shared Equity?
• Shared Equity versus renting – how they compare
• The pros and cons of renting versus Shared Equity
• Is Shared Equity worth it?
• Frequently asked questions

What is Shared Equity?

Shared Equity is a scheme in Scotland that lets home buyers own 100% of their new home while paying 60-80% of the property value. Places for People (PfP) and the Scottish Government hold an equity stake on the remaining percentage  There’s no rent to pay, your mortgage is lower, and your deposit starts from just 5% of the property price (or in some cases, 5% of the equity share).

You can increase your share of the property later if you wish – a process known as staircasing. The bigger share you own, the less you’ll need to repay when you sell.

With PfP’s scheme – known as New Supply Shared Equity (NSSE) - you can move in from as little as £129 per week*. If you’re a first-time buyer dreaming of your own place but put off by the thought of a hefty deposit and mortgage, Shared Equity can be the perfect way forward. 

Who is eligible for Shared Equity? 

To qualify for NSSE, your annual household income needs to be under £58,000 and you must be unable to afford to buy a suitable home with a standard deposit and mortgage. 

Eligible groups include first-time buyers, those over 60, social housing residents, ex-veterans, and those with varying needs. Non-homeowners who can’t afford to step on the housing ladder and existing homeowners whose homes no longer suit their needs can also apply. 

Shared Equity versus renting – how they compare

Ownership and equity growth

The great thing about Shared Equity is that you own 100% of the property from day one. You also have the opportunity to build wealth as your home rises in value and as you increase your equity share through staircasing. 

With renting, there’s no ownership and no equity. The monthly payments you make contribute to your landlord’s wealth, not your own. 

Costs and affordability

In terms of costs, Shared Equity typically requires more of an initial outlay than renting. This is because you will need to pay your deposit, starting from 5% of the full property value (or in some cases, 5% of the equity share) – whereas with renting, you can expect to pay one to two months’ rent, as well as a security deposit of up to six weeks’ rent. Buying rather than renting means having to pay for legal and conveyancing fees, and possibly Land and Buildings Transaction Tax (LBTT) as well.

If you do buy with Shared Equity, after you’ve paid your deposit and moved in is when you could start to see the balance swing in your favour, since your monthly mortgage and service charge repayments are likely to be more affordable than renting a similar property privately. It’s true that as a property owner you will need to cover everyday repairs and maintenance (that you wouldn’t be liable for if you were renting), but it’s safe to assume that your new-build home isn’t going to need working on anytime soon. 

So, does Shared Equity save money? Why not try our Shared Equity Calculator for an indication of the likely costs when you buy?

Security and stability

Buying with Shared Equity typically offers much more stability than renting and the security that comes with owning your own home – in other words, you can’t be evicted! You can also enjoy all the benefits of buying new, including having the freedom to put your own stamp on the place, while observing the scheme’s rules obviously.

But renting isn’t without its benefits either. It gives you the flexibility to be move around more freely, without the longer-term commitment of being a homeowner – albeit without the potential for long-term equity growth!

The pros and cons of renting versus Shared Equity

Pros of renting

• Flexibility – If you need to, you can move more easily and quickly
• Less responsibility – It’s usually your landlord who organises and funds any property repairs and maintenance, not you.
• Lower upfront costs – In general, rental deposits are lower than mortgage deposits and you don’t need to pay legal or conveyancing fees, or LBTT.

Cons of renting

• No equity growth – You’re investing in someone else’s future as opposed to your own.
• Cost hikes – Private rents may increase each time you renew your contract.
• Less control – You’re usually restricted as to how you customise your living space and you don’t have the long-term security that comes with home ownership.

Pros of Shared Equity

• Property ownership – You immediately own your home, and your equity stake has the potential to grow over time.
• Lower monthly costs – Your monthly repayments tend to be less than renting privately, because your mortgage is based on a 60-80% share, not the full property price. 
• No rent – There’s no rent to pay because the property is 100% yours. 
• Staircasing – Being able to increase your share over time means there’s less to repay when you come to sell.
• More control – You’re free (within the scheme rules) to customise your home as you like and you have the stability that comes with owning a place of your own. 

Cons of Shared Equity

• Owner responsibilities – You’re responsible for everyday maintenance and repairs as well as organising and paying for building insurance.
• Service charges – You need to pay a monthly service charge that covers the upkeep of communal areas where you live.
• Higher upfront costs – As well as your deposit, you need to pay legal and conveyancing fees, and possibly LBTT as well.
• Staircasing costs – Increasing your share (while reducing the amount you need to repay in the long run) will increase your mortgage repayments, more so if house prices rise.

Is Shared Equity worth it?

Whether or not Shared Equity is worth it is something only you can decide. But for first-time buyers and those looking for a helping hand onto the property ladder, the Shared Equity scheme is a great way to own a brand-new property for less. 

When you consider the costs of renting versus Shared Equity, Shared Equity does involve higher costs upfront but with some savvy saving you will soon be able to make the move to a place of your own. Choosing Shared Equity means there’s no more rent to pay – instead, you’re investing in a secure home for your future, with the freedom to live life the way you want to.

We’d love to answer any questions or concerns you might have. Our team of friendly experts will guide you through the entire process of buying your Shared Equity home, and can recommend independent financial advisors who are Shared Equity specialists, so why not talk to us today?

Find your new home.

*’Starting from’ costs will vary based on property price and development.

Frequently Asked Questions