What is a shared equity loan?

Proportunity offers a shared equity loan, just like Help to Buy, to top up mortgages and remove the constraints of borrowing from a traditional lender. But what exactly is a shared equity loan and what makes Proportunity a better option?

How does a shared equity loan work?

A shared equity loan allows you to buy with a 5% deposit and borrow at the proportion of the home's value while your main mortgage covers the rest.

Despite having 'shared' in its name, rest assured, your home is 100% yours unlike shared ownership.

An equity loan will be for a percentage of the property’s value. If the property rises in price you may have to repay more than you originally borrowed. If the property falls in price, you could end up repaying less.

For example, if you buy a £200,000 property using an equity loan of 20%, it will equate to £40,000. If the property rises in value to £300,000, you’ll owe £60,000 (20% of £300,000). If the property value falls to £150,000, you’ll owe £30,000 (20% of £150,000).

You will need to repay the equity loan at some point. This might be:

  • At the end of the mortgage term
  • When you move house
  • When you remortgage
  • When you have adequate savings to do so

Once the mortgage term ends, you will be required to repay the equity loan in full, if it’s not paid-off already. The typical time period for the mortgage term is 25 years. The amount you pay back will be proportionate to the value of the property at the 25-year mark. This means you could end up paying back more than you borrowed, depending on the housing market at that time.

How can you benefit from a shared equity loan?

  • You can access a much bigger budget that you wouldn't otherwise have access to with just a main mortgage lender
  • Unlike shared ownership, own 100% of your property
  • Your repayment is the proportion of the change in value of your home. Which means if the value of your home goes down, the amount you pay back will also go down. To ensure you have the best chance of having positive returns on your home purchase, we use our machine learning technology to identify undervalued homes
  • You only need a 5% deposit to be able to borrow up to £125,000 more to top up your mortgage
  • Since the Proportunity mortgage booster tops up your deposit, you may be able to take out a mortgage that you wouldn't have otherwise gotten without a boost
  • A Proportunity mortgage booster could potentially mean you don't have to take out a costly 95% LTV mortgage

What happens if my home value goes down?

  • If the value of your home goes down upon repayment, the amount you pay back will also go down. This is because repayment is a proportion to the change in the value of the home.
  • Simply put, we only win if you do too. We're investing with you and by using our Proportunity Home Index, we can mitigate risk and help you find undervalued homes so you can buy smarter!

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SSM One Limited (trading as Proportunity Loans) is an intermediary only lender authorised and regulated by the Financial Conduct Authority (with firm reference number 716565). SSM One Limited is registered in the UK at Companies House with reference number 09273700, with its registered office at GG 405, Metal Box Factory, 30 Great Guildford St, London SE1 0HS, United Kingdom.
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