Shared Equity Scheme
What Is A Shared Equity Scheme?
A shared-equity scheme or arrangement is when an equity partner acts as both the lender and investor in a property. The equity partner can be the lender or a third-party investor, such as the government.
In most shared-equity schemes, the equity partner contributes a portion of the purchase price of the property in exchange for an interest in the property. However, these schemes can operate under different arrangements:
- A homebuyer takes out a loan for a portion (usually 70%) of the full cost of the property, while the equity partner provides the remaining capital.
- Tenants under a shared-equity scheme can buy a portion of the property upfront, and pay off the remaining portion with the equity partner.
Shared-equity schemes and programs offered by the government are designed to help homebuyers with low- to medium-sized incomes own property.
Which Shared-Equity Scheme In Australia Should I Get?
The shared equity scheme calculator is an excellent tool for anyone purchasing a property through one of the schemes. It helps you understand which shared-equity scheme is available per your requirements.
What Shared Equity Schemes Are Available In Australia?
We’ve divided the shared-equity schemes available in Australia into three different categories:
- Nationwide schemes
- State and territory-wide schemes
- Schemes lenders offer
| Nationwide Schemes | State And Territory-Wide Schemes |
|---|---|
|
|
Help To Buy
Help To Buy is the only nationwide shared-equity scheme available in Australia.
Under this scheme, the government contributes 40% for new builds and 30% for existing properties.
| Help To Buy Scheme | Details |
|---|---|
| Who Is It For? | Low- to middle-income earners, who don’t own property |
| When Is It Available? | From July 2023 |
| How Many Places Are Available? | 10,000 places each year |
| What Is The Minimum Deposit Required? | 2% of the purchase price |
| What Is The Income Cap? | $90,000 for singles and $120,000 for couples |
| What Is The Maximum Allowable Value Of The Property? | The maximum value of the property depends on the state and territory where you are buying. |
Read our page on the Help To Buy Scheme to find out if you’re eligible and the maximum value of the property you can buy.
NSW’s Shared Equity Home Buyer Helper
The NSW Government will contribute a portion of the purchase price in exchange for an equivalent interest in the property. The contribution is up to 40% for new homes and 30% for existing homes.
| Shared Equity Home Buyer Helper | Details |
|---|---|
| Who Is It For? |
|
| When Is It Available? | From 23 January 2023 |
| How Many Places Are Available? | 3,000 places each year |
| What Is The Minimum Deposit Required? | 2% of the purchase price |
| What Is The Income Cap? | $90,000 for singles and $120,000 for couples |
| What Is The Maximum Value Of The Property? |
|
Read our page NSW’s Shared Equity Home Buyer Helper for more information.
Victorian Homebuyer Fund
This scheme helps Victorians buy a home in exchange for a share of the equity in the property. The participant can buy back the share over time.
| Victorian Homebuyer Fund | Details |
|---|---|
| Who Is It For? | Australian citizens or permanent residents who do not have an interest in the property at the time of purchase |
| When Is It Available? | It was launched in October 2021 |
| How Many Places Are Available? | The scheme will help up to 3,000 households |
| What Is The Minimum Deposit Required? | For Aboriginal and Torres Strait Islander participants, a minimum deposit of 3.5% is required. For everyone else, 5%. |
| What Is The Income Cap? |
|
Read our page on the Victorian Homebuyer Fund to get more information.
Queensland’s Pathways Shared Equity Loan
The Pathways Shared Equity Loan assists tenants in purchasing a share in the property they’re currently renting. The tenants are obliged to buy at least 60% of the property they are renting. The size of the share you buy depends on the following factors:
- Current and expected future income
- Current costs of living
- Size of your deposit
- Current interest rates
- Current market value of your rental property
The property the tenant is renting must be from the Department of Communities, Housing and Digital Economy.
| Pathways Shared Equity Loan | Details |
|---|---|
| Who Is It For? | A permanent resident of Australia who is a tenant in a government-owned property that is available for purchase. |
| What Property Can Be Bought? | The shared equity loan is available only on properties currently being rented from the department. It is not available for other departmental properties or properties not for sale in the private market. |
| What Is The Minimum Deposit Required? | You require a deposit of $2,000 on your loan. This deposit must be paid from your own cash savings. Money borrowed or gifted will not be accepted. |
| Do I Have To Pay Rent On The Government’s Share Of The Property? | No, you do not need to pay rent on the government’s share of the property. You will need to pay the full cost of owning the property. |
| What Is The Minimum Income Required? | There is no minimum income requirement. Your before-tax income will be used to calculate the initial share you can afford. The monthly repayments will not exceed 35% of your gross monthly income. |
South Australia’s HomeStart Finance Shared Equity Option
South Australia’s scheme allows homebuyers to borrow up to 25% of the property value as an interest-free and repayment-free loan. It is a secondary loan taken out with a primary HomeStart loan. You can pay off the Shared Equity Option by making voluntary repayments of $10,000 or more on top of the minimum requirements on your primary loan.
HomeStart Finance is the South Australian Government’s housing financing company.
| HomeStart Finance Shared Equity Option | Details |
|---|---|
| When Is It Available? | HomeStart has been writing shared-equity loans since 2007 |
| Who Is It For? | An Australian citizen, permanent resident or skilled migrant buying or building a home in South Australia. |
| How Much Deposit Is Required | The deposit can be as low as 5% to buy an established home or 8% to build a home. |
| What Is The Maximum Loan For The Shared Equity Option? | The loan cannot be greater than your primary loan and it is capped at $200,000. |
| How Much Is The Interest? | There is no interest charged on the Shared-Equity option loan. Instead, HomeStart Finance will share in a portion of any gain or loss in the property when you sell your home. |
Western Australia’s Shared Home Ownership
The Shared Home Ownership initiative is aimed at making home ownership affordable for Western Australians.
Western Australia’s Housing Authority will fund a maximum of 30% of the purchase price. The Housing Authority co-owns a share of the property with you, acting as a silent equity partner to help you buy your home sooner. The state government has a list of homes available through the initiative.
| Shared Home Ownership | Details |
|---|---|
| When Is It Available? | The initiative was launched in 2011. |
| Who Is It For? | First-home buyers purchasing a home in Western Australia |
| How Much Deposit Is Required? | You can apply for a deposit as low as 2% of the property value. |
| What Is The Maximum Income Allowed? | Singles earning $700,00 and couples with a combined annual income of $90,000; above the 26th parallel, $110,000 |
| What Is The Maximum Value Of The Property? | There is no maximum property purchase value. However, there is a maximum loan size:
*Applicants must work, purchase and live in these locations. |
Read our page on Shared Home Ownership WA to get more information.
Tasmania’s MyHome Shared Equity Scheme
MyHome is an initiative by the Tasmanian Government to help people buy or build a home to live in. An eligible homebuyer will be jointly purchasing a home with Housing Tasmania.
MyHome will provide a maximum contribution of $200,000 or 40% of the purchase price (whichever is lower) of a new home and a maximum contribution of $150,000 or 30% of the price (whichever is lower) for an existing home.
| MyHome Shared Equity Scheme | Details |
|---|---|
| What Is The Minimum Deposit Required? | You need a minimum deposit of 2% of the purchase price. If you are eligible for the First Home Owner Grant, you can use this as a deposit. |
| Who Is It For? | An Australian citizen or permanent resident buying a home in Tasmania |
| What Is The Maximum Income Allowed? | A single person with a gross income of less than $87,509 ($1,683 each week) or a couple with a gross income of less than $100,636 (or $1,935 each week) |
| What Are The Property Price Caps? | If you are buying an existing home, there is a price cap of $600,000. |
Go to our MyHome page to know more about this initiative.
ACT’s Shared Equity Scheme
ACT’s Shared Equity Scheme aims to provide a home ownership opportunity to public housing tenants. You will have to pay 70% of the price of the property upfront, and you enter into a loan agreement with Housing ACT to pay the remaining 30% over a period of 15 years.
| Shared Equity Scheme | Details |
|---|---|
| Who Is It For? |
|
| Do I still pay rent? | No, you do not pay rent. You only pay rent two weeks before the settlement date. |
For more information on this scheme and how it works, check out our page on ACT Shared Equity Scheme.
Are Shared Equity Schemes A Good Idea?
Shared-equity schemes can be a great help for eligible homebuyers who cannot save for a deposit.
To help you make an informed decision, let’s go through the pros and cons of shared-equity schemes in Australia.
Pros Of Shared-Equity Schemes
- They increase borrowing power, as homebuyers can look for more expensive properties without raising their monthly costs.
- They are a viable option for low- and middle-income borrowers who struggle to afford to own a home due to high property costs or the need for a large deposit.
- The borrowers only need to evidence servicing capacity on the portion of the shared equity to which they are entitled.
- You can buy a property with a smaller deposit without paying Lenders Mortgage Insurance (LMI).
- Borrowers can reduce their overall loan amount and their monthly mortgage repayments.
Cons Of Shared Equity Schemes
- There are only a few lenders that offer the schemes. For states and territories, scheme availability is only through a handful of lenders.
- Your equity partner has a stake in the property; so the gains from selling your home will have to be shared with the equity partner.
- The homebuyer still has to bear the costs of owning a home.
- Certain government schemes have strict eligibility criteria that do not cater to most potential homebuyers.
Frequently Asked Questions About Shared Equity Schemes In Australia
Can I Sell My Shared Equity Home?
Yes, you can sell your shared equity home. However, any gains from the proceeds will be shared with your equity partner.
Do You Pay Rent On Shared Equity?
Do You Need A Deposit For The Shared-Equity Scheme?
Do You Pay Stamp Duty On Shared Equity
Are There Any Alternatives To Shared Equity Schemes?
- Opt for a guarantor loan and borrow 100% of the property value.
- You can apply for various no-deposit home loan options.
- You can apply for various low-deposit home loan options.
- There are first-home buyer grants and schemes available that help you buy a home if you’ve saved a deposit of at least 5% of the property value
Is Shared Equity Right For Me?
A shared-equity scheme is one of the many ways you buy a home sooner without saving a larger deposit. However, with the plethora of schemes and options available, choosing the right one can be difficult.
That’s why you should take the help of an expert. At Home Loan Experts, our mortgage brokers are updated with the latest schemes available for homebuyers. Call us at 1300 889 743 or enquire for free online to discuss your options today!