What Is a Shared Equity Mortgage?

Shared responsibilities - what is a shared equity mortgage

Buying a home is an increasingly challenging task, particularly for first-time buyers navigating high property prices and strict loan conditions. For those finding it hard to afford a substantial down payment, shared equity mortgages offer a promising solution. But what exactly is a shared equity mortgage, and how can it assist you in purchasing your dream home? Let’s go over the details to see if it’s the right choice for you.

What Are Shared Equity Mortgages?

Shared equity mortgages provide a unique way for first-time buyers to enter the housing market. Essentially, these are agreements where another party provides funds that help with your down payment, reducing the amount you need to borrow. This isn’t a typical loan; there’s no interest to pay back. Instead, the lender gets a percentage of the equity of your home when you sell it or after a certain period.

How Do Shared Equity Mortgages Work?

In shared equity mortgage arrangements, the buyer covers part of the home purchase price with their down payment, while a lender contributes additional funds. This helps meet the 20% down payment threshold, allowing buyers to avoid private mortgage insurance and secure lower interest rates. The catch? The lender will own a share of your home’s equity. When you sell your home or refinance, you will need to share the profits proportionally with the lender based on their contribution.

Ownership and Control

While you’ll hold the title and full control over your home, the lender’s investment ties them to your property’s financial future. They benefit if the home’s value increases and bear part of the loss if it decreases. This relationship demands careful consideration and understanding before entering into a shared equity mortgage.

Benefits of a Shared Equity Mortgage

  1. Accessibility: Makes homeownership accessible by boosting your down payment, reducing the amount you need to borrow.
  2. Financial Relief: You can avoid private mortgage insurance and potentially secure a better mortgage rate due to the higher down payment.
  3. No Interest Payments: Unlike traditional loans, there’s no interest charged on the money provided by the lender.

Potential Downsides

  1. Profit Sharing: If your home appreciates significantly in value, you will need to share a substantial part of that profit with the lender.
  2. Long-term Commitment: These mortgages are designed for long-term arrangements, and selling your home early might incur penalties or reduce your expected gains.
  3. Limited Availability: Finding lenders that offer shared equity mortgages can be challenging, and the terms can vary significantly.

Is a Shared Equity Mortgage Right for You?

Opting for a shared equity mortgage is a significant decision that requires a detailed evaluation of your financial situation and housing market conditions. This mortgage type can offer a pathway to homeownership with potentially lower upfront costs but requires sharing the future financial gains of your property. As with any financial decision, it’s crucial to consult with a financial advisor to understand fully how a shared equity mortgage might impact your financial goals.


Shared equity mortgages can be a viable option for those struggling to save for a down payment but come with unique considerations. Whether this approach fits your home buying strategy depends on your financial circumstances and long-term housing goals. Consider all angles and potential future market conditions before deciding if a shared equity mortgage is the best path for your homeownership journey.

Contact RE/MAX for Further Guidance

If you’re considering a shared equity mortgage or any other real estate financial arrangements, contact a professional at RE/MAX. Our experts can provide you with the insights and assistance you need to make informed decisions in the real estate market.

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