What is Shared Equity?

For many People, getting onto the property ladder can feel like an uphill struggle. Rising houses prices, higher living costs and stricter lending criteria mean that saving a large deposit and securing a mortgage is not always straightforward. That’s where Shared Equity government schemes come in.

But what exactly is Shared Equity, and how does it work? In this guide, we’ll take you through the essentials, explain who’s eligible, and weigh up the pros and cons so you can decide if it’s right for you.

In this section:

• What is Shared Equity?
• How does Shared Equity work?
• Shared Equity pros and cons
• Shared Equity versus renting
• Shared Equity eligibility – how to check you qualify
• How to know if you can afford a Shared Equity home
• How to find Shared Equity properties in the area you want to live
• The Shared Equity application process
• Final thoughts
• Frequently asked questions

What is Shared Equity?

Shared Equity is a scheme that allows buyers to purchase a home for less with the help of a partner lender or government scheme. Instead of borrowing the entire purchase price through a traditional mortgage, you take out a smaller mortgage for part of the property’s value while a third party covers the remaining share. 

Unlike other schemes, with Shared Equity you own 100% of the property. The third party simply holds a stake in the property’s value, which you can buy into further down the line. Alternatively, this stake can simply be repaid when you sell the property.

In Scotland, eligible Customers can access New Supply Shared Equity (NSSE) to purchase a brand-new Places for People (PfP) home at participating developments, using a smaller deposit and mortgage than they’d need if they were to buy in the standard way. 

NSSE is the Shared Equity scheme we’ll be referring to for the rest of this article.

How does Shared Equity work?

NSSE is exclusive to PfP in Scotland and if you’re eligible you can apply for the Shared Equity property that you’d like to buy. You purchase a share of between 60-80% of your new home, using your deposit and a mortgage, while PfP and the Scottish Government hold an equity stake on the remaining percentage. 

You will own 100% of your home with the option (if you wish) to buy more shares in your property later, a process known as ‘staircasing’. 

With Shared Equity, the lower deposit and mortgage repayments help People get onto the property ladder sooner rather than later. Your Shared Equity deposit starts from 5% of the full property value, or in some cases 5% of the equity share. 

Depending on your chosen home and development, you could move in from as little as £129 a week!*

Shared Equity pros and cons

Like any route to home ownership, Shared Equity comes with advantages and considerations. We’ve outlined the main ones below.

Pros

• You can buy with a lower deposit and mortgage. 
• It’s an opportunity to step onto the housing ladder sooner.
• You can increase your share over time, meaning you pay less when you sell.
• You own 100% of your home from the start.
• There’s no rent to pay.

Cons

• You only benefit from the property value increase on the share you own – the housing provider or government retains their share.
• Selling a Shared Equity home can be more complex than selling other types of homes.
• You cannot rent out a room in a Shared Equity property.
• You will need permission to make any significant changes to the property.
• Increasing your share will increase your mortgage repayments.

Shared Equity versus renting

Many People wonder – is Shared Equity better than renting? Here’s what to consider…

With Shared Equity, you own your home outright from day one, meaning there’s no landlord and fewer restrictions. As your home’s value rises (and as you buy more shares over time), you’re the one building wealth.

Renting on the other hand means paying towards someone else’s investment. Although you don’t pay as much upfront – typically a few weeks’ rent and a deposit – your monthly payments won’t give you anything back.

Buying through Shared Equity can mean paying more initially, but your ongoing costs are usually lower than renting a similar place privately. Plus, you get stability, the freedom to make your home your own, and peace of mind from knowing you can’t be evicted.

Renting might offer more flexibility and less responsibility for maintenance, but it doesn’t provide the long-term financial benefits that come with owning your own home.

Shared Equity eligibility – how to check you qualify

In Scotland, the main Shared Equity eligibility requirements include having a household income of under £58,000 a year and not being able to afford a suitable home with a standard deposit and mortgage.

First-time buyers, those over 60, social housing residents, ex-veterans, and those with varying needs are all considered eligible. 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. 

How to know if you can afford a Shared Equity home

If you’re thinking about buying a new Shared Equity home, it helps to run the numbers in advance. Try our free Shared Equity calculator for an indication of the deposit amount you’ll need, along with an estimate of your monthly mortgage repayments. 

The calculator is a quick and easy way to work out what it’s likely to cost when you purchase your chosen home with Shared Equity. You can then decide whether this is going to be the best option for you. 

How to find Shared Equity properties in the area you want to live

If you’re looking for a new-build property through Shared Equity, you’ll be pleased to know we build homes in desirable Communities right across Scotland, from Black Isle View just ten minutes from Inverness city centre to our award-winning Chapelton development, offering modern country living near Aberdeen. 

Even if homes here have sold out, you can continue your search at one of our other developments - we’re creating new Communities all the time. 

The Shared Equity application process

Buying through Shared Equity is easy – and at PfP, we’ll support you every step of the way. Here’s a five-step guide to how the process works:

1. Get started - Reach out to our Sales team to chat about the Shared Equity process and check your eligibility for the scheme.
2. Sort your finances – If you’re not a cash buyer, you’ll need a Mortgage Agreement in Principle. We can put you in touch with an independent financial adviser who specialises in Shared Equity to help you find the right deal.
3. Apply and reserve your home – Once your finances are in place, you can apply for Shared Equity and reserve your new home with us.
4. Do the legal bits – Appoint a conveyancing solicitor to manage the paperwork and contracts. Once everything’s signed and sealed, it’s official!
5. Get your keys and move in – When the legal side is complete, you’ll get your keys, move in and start your new chapter as a homeowner.

Final thoughts

So, what is Shared Equity? 

Essentially, it’s a scheme that makes home ownership in Scotland more achievable for first-time buyers and others who might be struggling to step on the housing ladder. And when you buy your Shared Equity home with PfP, you could move in from as little as £129 a week!*

However, it’s important to weigh up the Shared Equity pros and cons, check your eligibility, and work out whether you can afford it before committing. The key is to do your research and plan ahead.

In the meantime, we’d love to answer any questions or concerns you might have. Our expert team will guide you through the Shared Equity buying process, and recommend specialist independent financial advisors, so why not talk to us today?

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*T&Cs apply.

Frequently Asked Questions