A guide to help you understand the basics of shared equity
- What is shared equity?
- How does shared equity make buying a home more affordable?
- How does it work?
- Shared equity schemes available
What is shared equity?
‘Shared equity’ can cover the gap between what you can afford and the cost of a property, so you can boost your borrowing power and buy your own home sooner.
For example, with shared equity you may only need to make repayments on 75 per cent of the loan, with the remainder being held by a lender.
A lender could be a bank, financial institution, or the government.
How does shared equity make buying a home more affordable?
Shared equity has a significant impact on affordability because homebuyers only needed to afford repayments on the portion of a home’s purchase price not covered by shared equity, typically 75 per cent (but it can be a higher or lower percentage).
Rising rents, interest rates and house prices, coupled with growing cost of living pressures, mean that more South Australians are stuck in a cycle of paying much higher rents, while not being able to move into home ownership.
The wider benefit of getting more South Australians into home ownership through schemes like shared equity can pull more South Australians out of renting and into their own home, freeing up more rental properties which are in high demand.
Shared equity is unlocking home ownership for many renters, often without paying any more in loan repayments than they were paying in rent.
How does it work?
At the South Australian Government’s housing financing company, HomeStart Finance, the Shared Equity Option allows people to partner with HomeStart to get into the housing market, with HomeStart contributing up to 25% of the purchase price.
Repayments are based on borrowings for the remaining 75% of the purchase price and not the shared equity component.
HomeStart acts as a silent partner which will share in the profit or loss when the house is sold.
Shared equity schemes available
Most states in Australia have shared equity programs available.
In South Australia, the HomeSeeker SA website managed by SA Housing Authority has a range of properties available for purchase with shared equity through HomeStart.
Look for text in the listing that tells you it is available with “shared equity”.
South Australia – HomeStart Finance Shared Equity Option
HomeStart has been writing shared equity loans since 2007 and is one of Australia’s most experienced shared equity providers, providing a boost for thousands of South Australians so they can buy the right home, when they need it.