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Shared Ownership Equity Release – Overview & More

shared ownership equity release

For free and impartial money advice and guidance, visit MoneyHelper, to help you make the most of your money.

What is shared ownership equity release and is it even possible? There is some confusion relating to what classifies as shared ownership equity release – and we’re here to bust the myths. 

If you have a genuine shared ownership property and want to know if a lifetime mortgage or other equity release plan is available to you, you need to hear this! 

What is shared ownership?

Shared ownership is when you buy a percentage of a property with another party owning the remaining percentage of the property. It is often the case that one party lives in the property and is required to pay rent on the percentage of the property they do not own. For example, if you have 50% ownership of a property, you may live in the property but pay rent at a rate of 50% of what the rent would normally be.

How does equity work with shared ownership?

If you have shared ownership of a property, your home equity is calculated by working out the value of your percentage of the property and then subtracting any debts attached to the property in your name. 

For example, you may own 50% of a property currently worth £200,000. But you might have taken out a £50,000 mortgage to help buy your 50% stake in the property. Therefore, the amount for equity you have in the property at the start is £50,000. This is calculated by working out 50% of £200,000 and then subtracting the £50,000 mortgage debt. 

The amount of home equity you have should increase as the mortgage gets paid off, providing that the value of the property does not decrease. 

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What is equity release?

Equity release is a method to borrow money when you own a home outright and are at least 55 years old. It refers to two types of financial products called a home reversion plan and lifetime mortgage, although lifetime mortgages tend to be more popular. 

When you take out a lifetime mortgage, you receive a loan as a lump sum or as a drawdown facility based on your available home equity. This loan does not require the homeowner to pay some of the loan and interest back each month, and it is not subject to any tax.

So, how does a lifetime mortgage get repaid? Well, when the homeowner either dies or moves into long-term care, their property will be sold and the money raised from the sale is used to repay the equity release provider. Any remaining money will be left to you if you moved into care, or be part of your estate inherited by loved ones. 

Equity release can be an expensive borrowing method, but that becomes largely irrelevant if you only repay after death and have nobody of significance to leave your estate to. But if you have children and family relying on a sizable inheritance, it will make equity release a tough decision. 

Who qualifies for equity release?

To qualify for equity release you must be at least 55 years old. Some equity release companies do not apply a maximum age restriction, but others could cap applications at 85 years old, such as Nationwide. Equity release can only be used on properties you habitually live at, so you will not be able to use an equity release plan on a property that is not your main residence. Moreover, the property must have no outstanding debts secured against it – such as a mortgage – and it might need to meet a minimum valuation. 

The above just allows you to apply for equity release. The lender will then carry out checks on your property to determine whether you can be approved for a plan. 

Can you use equity release on jointly owned properties?

Equity release can be used on jointly owned properties, such as a married couple who own their home together deciding to use an equity release plan. However, both homeowners must meet the age requirement. If one homeowner is older than 55 and the other is younger than 55, they will not be able to apply just yet. 

Some people may consider this as “shared ownership equity release” because both individuals have shared ownership of the property. But this is not exactly the correct terminology, because as we explained earlier, shared ownership means something slightly different. 

Can you release equity from a shared ownership property?

It is not possible to take out an equity release plan on a shared ownership property. Equity release is only available on 100% of properties, meaning anybody who does not own all of their property outright will not qualify for equity release. 

It might be possible for two individuals who own a percentage of the same property to take out an equity release plan together as long as they both qualify to apply. But this would be extremely rare and is pretty much unheard of. 

Why is shared ownership equity release not available?

Equity release is only available to an individual or individuals who own 100% of a property with no debts attached. With shared ownership, each party owns a percentage of the property. The reason it is essential that the equity release applicant owns 100% is that the lender will force the sale of the property in the future, which may not be possible if another party owns a percentage of the property. 

In a nutshell, equity release on a shared ownership property could get very messy.  

Can you use equity release on leasehold properties?

A leasehold property is a property where the owner owns the property but does not own the land that the property is built on. A prime example of a leasehold property could be a flat within a block of flats. The flat owner may own the flat but they do not own the land that it is built on, or any of the flats built below their flat. 

These properties have a lease on the land, which is what heavily determines whether or not you can get equity release on your leasehold property. Most equity release providers will only consider providing equity release on leasehold properties with a minimum of 90 years left on the lease, some may require as many as 120 years on the lease. If you have below the required years on the lease, then you will need to apply to extend the lease first.

Related shared ownership FAQs

Can I remortgage on shared ownership?
You can remortgage your existing loan on a shared ownership home just like any other property, and you can even remortgage to increase your stake in the property up to a 100% share. The process of remortgaging to own more of the property is called shared ownership staircasing.  If you managed to remortgage to own 100% of the property, and subsequently cleared that mortgage over time, you could then apply for equity release on the property now that you own all of the property. But you will also need to meet the other application criteria, such as the age requirement.
Can you be kicked out of shared ownership?
You may be in a situation where you have shared ownership of a property and are paying rent on the remaining percentage of the property to live there. This rent may be being paid to a housing authority or to a private landlord that owns the rest of the flat or house. If you fail to pay the rent on the remainder of the property, you can still be evicted from the property. Just because you own some of the property does not mean you can stop paying the rent you owe. This is one of the hidden dangers of shared ownership properties.

Need further equity loan information?

If you’re seeking additional information on equity release and shared ownership housing, do not hesitate to search the MoneyNerd website. Our site is packed with plenty of articles and discussion posts on everything to do with these topics. Use our website search bar to find the most relevant articles and answers to your questions.