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shared equity for first home buyer

Is Shared Equity a Good Idea for First Home Buyers?

No wonder Australian home buyers are looking at smarter, more cost-effective options to get onto the property ladder.

In the middle of an affordability crisis, Australia’s property market is ever harder to access due to escalating house prices.

Even when you finally raise the 20% deposit, you start your home-buying journey stretched, with savings depleted.

Australian Government statistics for September 2023, from the Australian Institute of Health and Welfare (AIHW), reveal households that spend more than 30% of income on housing.

These include 37.4% of owners with a mortgage, and 41.8% of one-parent families with dependent children. Yet a hefty 58% of private renters also fall into this category.

The challenge to save a first home buyer deposit

It’s tough right now on the rental market. Too many potential home buyers are stuck in a vicious cycle, despite being able to service a loan and having a sound record of rent repayments.

There are household bills to meet, and unexpected expenses. It’s even harder for single parents on one income.

How can you save a 20% first home buyer deposit when property prices are soaring?

No matter how hard you work, or how many extra jobs you take on, your property remains out of reach.

You spend years working and saving for that elusive deposit, while house prices go on rising. This locks you out of the property market.

Why miss the boat? Shared equity may offer a shortcut to get you into your own home sooner.

What is shared equity?

Shared equity is an exciting way for property buyers to access small deposit home loans.

Widely used overseas, this innovative option allows you to buy a property with a deposit as low as 2.5%. You will be 100% owner, with your name on the deed.

It works like this. An investor puts funds into a designated public property trust. The sponsor can be parents, a friend, colleague, community group, or employer. Then you share the equity with other participating members of the trust.

The First Homeowner Grant can also be put towards your deposit.

The trust boosts your small deposit to 20%. By capping your borrowing at 80% of the property’s value, you avoid costly lender’s mortgage insurance.

Benefits include:

  • Boosted deposit and increased loan serviceability.
  • Repayments of 3.25% fixed interest on the shared equity portion of the loan, for the first five years; the first three years of which are funded.
  • Option to boost the HAS shared equity portion to 37.5%, so your loan is easier to service.
  • Avoid wasting up to a decade of your life saving for a hefty deposit!

What are the loan deposit options for first home buyers?

There are several ways for first home buyers without a large deposit to enter the property market.

1. Guarantor

Mums and dads can act as guarantors via a family guarantee. This means they can offer their children equity from their family home to assist with the deposit.

This sounds great, but it has its pitfalls. It could place mortgage stress back on the parents, just when they thought they could rest a little easier.

2. The bank of mum and dad

This is the traditional way for parents to help their children onto the property ladder. They give a non-refundable ‘gift’ or an interest-free loan.

When money is outstanding, however, it places a real strain on family relationships. Siblings may also expect parents to ‘gift’ them a house too, which is tricky if there are several children!

3. Shared equity

Shared equity avoids some of these issues. By acting as a sponsor, parents remain at arm’s length, minimising their own risk and earning a return on investment at the same time.

Access to first home buyer shared equity through HAS

Today’s home buyers need real solutions to the housing affordability crisis. HAS offers first home buyer shared equity to help you enter the market and secure the property you dream of.

Ideal for people who can’t afford a conventional deposit, shared equity can help you purchase a home of your own and start building your future.

It’s a flexible way for parents, family, friends, or community groups to pool funds and make it happen.

Want to know if shared equity will work for you? Use our eligibility checker to see exactly how we can help you jump on the property ladder.

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