If you are worried about housing affordability and searching for alternative ways to enter the property market, then the Shared Equity Option of South Australia will interest you. This shared-equity scheme targets homebuyers with lower income, allowing them to share the cost of purchasing a home with an equity partner for a smaller deposit and lower mortgage repayments.
What Is The HomeStart Finance Shared Equity Option?
It is a secondary loan from your equity partner or lender, South Australia’s HomeStart Finance. You can get a home loan of up to 25% of the purchase price or property valuation, whichever is lower. It is capped at $200,000 and cannot exceed your primary home loan. Your repayments will be calculated on the remaining portion of the purchase price – at least 75%. Instead of charging interest, your equity partner will share your gains and losses when you sell your home. Alternatively, you can pay off the shared-equity portion of your loan and own full equity in it, by making lump-sum payments of $10,000 or more.
This arrangement is also known as a shared appreciation loan. That’s because if you sell or refinance the home, or buy out the lender’s share of the equity, you will be sharing the increased value of your home with the lender. If your home value decreases, the lender will share losses only if you sell it.
How Does SA’s Shared-Equity Option Make Homes More Affordable?
It has become difficult for South Australians to buy a home due to rising interest rates, high rents and other cost-of-living expenses.
The Shared Equity Option decreases your loan repayments and increases your borrowing power, making a home more affordable. Homebuyers are required to make monthly repayments on only a portion of the purchase price – generally 75% of it. Moreover, no interest is charged on the lender’s equity; instead, the other equity holder shares profits or losses upon the selling of the property.
What Are The Main Features Of The Shared Equity Option?
The main features of this scheme are:
- You can borrow a maximum of 25% of the purchase price.
- You don’t need to pay interest on the lender’s portion of the loan.
- You won’t need to make monthly repayments on the lender’s portion of the loan.
- Your lender, HomeStart Finance, will share gains or losses upon selling the property.
Who Is The Homebuyer’s Purchasing Partner?
The South Australian Government’s housing financing company, HomeStart Finance, provides the shared-equity loans to homebuyers.
Am I Eligible For The Shared Equity Option?
To become eligible for the Shared Equity Option, you must
- Buy or construct a home to live in within South Australia
- Be an Australian citizen or permanent resident or have skilled migrant status
- Be 18 years old or above with a clear credit history
- Have a monthly rent payment that is the same or greater than the proposed monthly loan repayment amount
Frequently Asked Questions About SA’s Shared Equity Option
1. Do I Own The Home?
Yes, the home will be registered in your name, and you will be responsible for maintaining it and paying all rates, taxes, and levies. You need to maintain a building insurance policy on your home, too.
2. Can I Make Improvements To My Home?
You can make improvements to your home at any time. However, there won’t be any adjustment to your loan amount or percentage of equity under this scheme to reflect the increase in the property value after the improvements.
3. Can I Use My Home As Investment Property?
No, you cannot use your home as an investment property. The property you buy under SA’s Shared Equity Option must be your primary residence. If you rent it or use it to operate a business from your home, then you need to inform your lender and pay the Shared Equity Option loan in full.
4. What Will My Final Payment Include?
The final payment will include the loan balance plus the portion of profit or loss when the property sells off. In the case of refinancing, a lender will only share the gain, not the loss.
5. Can I Make A Voluntary Payment With The Shared Equity Option?
Yes, You can make a voluntary payment for a minimum of $10,000 on your shared-equity loan, but a valuation is required. The calculated value will be used to determine the impact of the voluntary payment on the lender’s share.
6. When Should I Pay Out The Shared Equity Option?
You pay out the Shared Equity Option if:
- You sell your home
- You refinance your loan with another lender
- Your home isn’t your primary residence any longer
We Are Here To Help!
Wondering if you are eligible to apply for this scheme? Contact us at 1300 889 743 or complete our free online assessment form today to discuss your situation with one of Home Loan Experts’ experienced mortgage brokers.
Our specialist mortgage brokers will help you apply for this scheme and simplify the processes involved. If you do not qualify for the scheme, we can assist you in finding another program that suits your needs.