Legal Definitions - Shared equity mortgage

Shared equity mortgage is a type of mortgage where the lender keeps a portion, normally half, of the equity in the house. This means that when a house is sold, the lender will be paid all of the loan plus their portion of the profits.

Shared equity mortgages are designed to help lower income individuals receive mortgages because the lender has more security by owning part of the property. However, shared equities may come with other requirements like limiting who can purchase the home or limit the sale price later on because shared equity lenders are often trying to limit housing costs for low income individuals.

Let's say you want to buy a house for $200,000 but you only have $20,000 for a down payment. You could get a shared equity mortgage where the lender puts up the other $80,000 for the down payment. In return, the lender would own half of the equity in the house.

Now, let's say you sell the house for $300,000. The lender would get their original $80,000 back plus half of the $100,000 profit, which would be $50,000. You would get the other $170,000.

This type of mortgage can be helpful for people who don't have a lot of money for a down payment but still want to buy a house. It can also be helpful for lenders because they have more security by owning part of the property.