Shared-Equity Scheme
The Shared-Equity Scheme is a new initiative by the Australian Federal Government designed to assist first-time homebuyers in entering the property market with just a 2% deposit. Many aspiring homeowners find it difficult to save the substantial deposit required to secure a property. This innovative scheme is tailored to help those struggling by offering shared equity, allowing eligible buyers to co-own their home with the government. Under this program, participants can access up to 30% equity for an existing home or 40% for a new build, significantly reducing the amount they need to borrow from the bank.
By borrowing less, homebuyers may also avoid costly Lender’s Mortgage Insurance (LMI), which can be a major financial hurdle. Additionally, the reduced borrowing amount makes it easier for applicants to demonstrate loan affordability, further simplifying the home-buying process. The scheme will have specific caps on the property values depending on the city or region, ensuring it's available to those in need across various locations. However, there will be a limited number of places in the scheme, with just 10,000 new spots available each year, and participants will need to meet income eligibility criteria. For individuals, the annual income cap is $90,000, while for couples, it is $120,000.
To qualify, applicants must contribute 2% of the home’s purchase price, covering all upfront costs as well. With the scheme launching in 2024, up to 40,000 equity loans will be available over time. If you're a first-time buyer looking to fast-track your way into the property market, Shared-Equity Scheme could be the ideal solution. Here's everything you need to know about this exciting opportunity to secure your first home sooner.
How will the Shared-Equity Scheme work?
The Shared-Equity Scheme offers eligible buyers the opportunity to secure a home with a deposit as low as 2%. Under this scheme, the government acts as an 'equity partner', contributing 30-40% of the property’s value. This partnership means you won’t be required to pay Lender’s Mortgage Insurance (LMI), a significant financial burden for many homebuyers.
Shared-Equity Scheme
2% Deposit - (genuine savings)
30% - 40% - Government equity
68% - 58% - Home Loan
While you won’t need to pay rent on the government’s share of the property, you will be expected to repay the government's contribution, along with its share of any profits, when you sell the home.
The Shared-Equity Scheme helps make homeownership more affordable by lowering upfront costs and increasing your buying power, allowing you to enter the property market sooner with reduced financial pressure.
Who is eligible for the Shared-Equity Scheme?
To be eligible for the Shared-Equity Scheme, applicants must:
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Be an Australian citizen aged 18 years or older.
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Earn less than $90,000 per year for singles, or $120,000 per year for couples.
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Intend to live in the purchased home.
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Not currently own a home or land in Australia or overseas (although you can have owned property in the past).
Eligible participants will need to provide a 2% deposit, cover upfront costs such as stamp duty, and finance the remainder of the loan.
While the government assists with the equity portion, you will be responsible for ongoing property costs, including bills and maintenance.
Each year, 10,000 spots will be available in the scheme, with the total reaching 40,000 over four years.
Shared-Equity Scheme Property Price Caps
The Shared-Equity Scheme will have property price caps based on the median house price in the area where you're purchasing. These caps ensure the scheme remains accessible to a wide range of buyers across different regions.
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New South Wales: $950,000 in Sydney and regional centers, $750,000 in the rest of the state
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Victoria: $850,000 in Melbourne and Geelong, $650,000 in the rest of the state
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Queensland: $700,000 in Brisbane, the Gold Coast, and the Sunshine Coast, $550,000 in the rest of the state
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Western Australia: $600,000 in the capital city, $450,000 in the rest of the state
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South Australia: $600,000 in the capital city, $450,000 in the rest of the state
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Tasmania: $600,000 in the capital city, $450,000 in the rest of the state
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Australian Capital Territory: $750,000
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Northern Territory: $600,000
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Jervis Bay Territory and Norfolk Island: $550,000
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Christmas Island and Cocos (Keeling) Islands: $400,000
How much can I save with Shared-Equity Scheme?
With the Shared-Equity Scheme, you could potentially save up to $380,000 based on a 40% equity contribution to the highest property cap. However, it's important to remember that you will need to repay the government's equity share, along with any potential share of the profits when you sell the property.
For example, if you sell a property where the government holds a 30% equity share for $1,000,000, they will take $300,000 from the sale, assuming you haven’t repurchased any of the equity.
One of the key advantages of shared equity is that you won’t need to pay rent or interest on the government's share of the loan, making it more affordable. Additionally, there are significant upfront savings, including the absence of Lender’s Mortgage Insurance (LMI) and a reduced deposit requirement, helping you get into your own home sooner.
Advantages of the Shared-Equity Scheme?
Shared equity schemes offer a solution by allowing buyers to enter the market sooner. These schemes reduce upfront costs and boost borrowing power, making homeownership more accessible. With a deposit as low as 2% and the waiver of Lender’s Mortgage Insurance (LMI), participants can secure their homes faster and more affordably.
In addition, shared equity mortgage repayments will be lower compared to a loan with no shared equity, as the government's contribution reduces the overall loan balance.
FAQs About Shared-Equity Scheme
Are There Any Alternatives to Shared Equity Schemes?
Yes, there are several alternatives to shared equity schemes that may help you get into the property market sooner:
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Guarantor loans: With a guarantor loan, you can borrow 100% of the property value without needing a deposit.
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No-deposit home loans: Some lenders offer no-deposit home loan options, allowing you to purchase a home with no upfront deposit.
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Low-deposit home loans: If you have a smaller deposit, there are low-deposit home loan options that let you buy with a deposit as low as 5%.
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First-home buyer grants and schemes: If you’ve saved at least 5% of the property value, you may be eligible for first-home buyer grants and schemes that can assist with your purchase.
Is Shared Equity Right for Me?
A shared-equity scheme is a great option if you’re looking to buy a home sooner without needing to save a larger deposit. However, with many schemes and loan options available, it can be challenging to determine the best choice for your circumstances.
That’s why it’s essential to seek expert advice. At Avenstone, our mortgage brokers are up to date with the latest homebuyer schemes and can help guide you through the process. Call us at (03) 9566 7247 or book a free 30-minute discovery call today to see how we can help.
Years Experience
20+
in Residential & Commercial Banking