Shared Equity Issue

Jaynay

Hi everyone, first post here so be gentle.

I've searched and read quite a few posts which have similar issues but my situation is a little unusual.

I have an apartment that was bought through a shared equity scheme with Bellway Homes. Bellway have a second charge on the property and its not a loan as such and I don't have to pay anything for it, however come sale time they're entitled to 25% of the sale price.

The property, like many in the last few years has depreciated in value. If sold, it would clear the mortgage but not the second charge meaning I can't sell. And as its not a loan as such, there's not really scope to ask Bellway to repay the difference by other means.

Me and my girlfriend are looking to buy somewhere together, this will save us an absolute fortune in the long run.

My girlfriend has £40k equity in her property, this would be put down on the new property we would be buying together. As this equity is made up originally from a gift from her father, if we were to buy together it would be written in that she would be entitled to this back when selling (providing the new house had sufficient equity of course) which is all fine!

We earn a reasonable wage each and could comfortably get the mortgage required for a new place.

I feel a bit stuck and I'm looking for a few options on my side of things. From what I've found out so far I think my options are:

- My girlfriend could get the mortgage and buy the place on her own. I could then rent my place out (Halifax seem quite open about this). I'd then sit on the property hoping it will regain value, the trouble is I don't think it will! Plus there's the potential hassle of renting my place out.

- I get a loan and buy back the equity from Bellway at market value which I can do which then allows me to sell.

- We get a mortgage together and see if we could still get one despite me having another mortgage and then borrow extra to buy the equity in my apartment and then free it up to sell.

Thoughts?

kingstreet

Shared equity is a loan. It's an interest-free loan, normally for a limited period, secured by a second charge over the property.

The loan is predicated on a percentage of the purchase price and repayable as a percentage of the eventual sale price.

ie - If you borrow 20% to buy, you repay 20% of the sale proceeds.

If you need to sell at a loss, you need to ask the second charge holder what arrangements it can offer for the repayment of any shortfall.

Jaynay

Thank you for your reply.

I've spoken to them briefly today, they've just said you either pay the money or you don't sell.

Which I accept, but they have no other option. So the problem then becomes how/should I repay and buy back the equity.

kingstreet

They can refuse to lift the charge, preventing your solicitor giving your buyer unencumbered title. This means you would be unable to sell at the agreed price.

All I can suggest is you have a means of covering any shortfall, however you choose, which best suits your circumstances.