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Shared equity allows a borrower to purchase a new property in partnership with the builder. Often the builder will allow the borrower to purchase say 90 or 95% of the property now and pay the balance off say in 5 years time.
The builder will register a second charge on the property until this balance has been paid. The 5 or 10% owing maybe interest free; or interest may be allowed to roll up and added to the debt. Obviously this can benefit some borrowers but the consequences of not being able to take on the additional debt in the future are serious. Financial advice must be undertaken before proceeding with this type of mortgage.
Last Updated: June 2007 © Moneyextra.com
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