The Australian Shared Equity Scheme Explained

These days, it’s not easy to break into the property market. That’s especially true for young and first-time homebuyers who encounter several obstacles, especially amidst rising inflation and interest rates. But don’t fret because there are ways to make homeownership more accessible and affordable. One of which is shared equity. The Australian shared equity scheme called ‘Help to Buy’ could be the key to helping buyers get their first homes sooner—and we’ll talk about this in detail today. 

A Quick Rundown: What Is the ‘Help to Buy’ Scheme?

The ‘Help to Buy’ scheme is a federal government initiative that makes homeownership more accessible for low and middle-income Australians, including young couples and first-time buyers. Here are the key points of the scheme:

• The government contributes up to 40% of the purchase price for new homes and 30% for existing homes, essentially reducing the home loan to 60 or 70%.
• When you enter this shared equity scheme, the Australian government owns part of the equity in your house. You have to repay that part either when you sell the house or over the time you live in it.
• This shared equity scheme aims to get more people approved for a mortgage faster than they might have been without the government’s help.
• The amount of money needed to borrow from a lender is reduced with this scheme. That could lead to smaller and more manageable home loan repayments.
• Applicants need only a 2% home loan deposit to participate. Plus, they can avoid taking out the costly Lenders’ Mortgage Insurance.
• This Australian government shared equity scheme is only available to 10,000 eligible applicants per year over four years. 
• You can apply even if you’ve owned a home in the past. This scheme recognises that certain life circumstances can force people back into the rental market or insecure housing. The vital rule here is you can’t own another property while applying for this scheme.
• Note the income caps: $90,000 for singles and $120,000 for couples.
• Property price caps vary by location, ranging from $450,000 to $950,000.

Is There Anything to Watch Out For?

The ‘Help to Buy’ scheme operates as a shared equity arrangement. Here’s how it essentially works: You pay a minimum 2% deposit. The government provides 30-40% of the purchase price. Then, you secure a home loan for the remaining amount.

While this shared equity scheme in Australia can significantly lower initial home purchase costs & ongoing mortgage payments, there are some considerations:

• The government will own a share of your property.
• You must repay the government’s contribution when you sell or refinance your home.
• Any capital gains will be shared proportionally with the government.

When and How Do You Pay the Government Back?

With ‘Help to Buy,’ you don’t make regular payments on the government’s equity share. Instead, you can:

• Buy out the government’s share over time (after the first two years).
• Repay the government’s contribution when you sell the property.
• Refinance to buy out the government’s share.

The amount you repay will be based on the property’s value at the time of repayment or sale, meaning the government shares in any capital gains or losses.

What About State-Specific Shared Equity Schemes? How Does it Work in Tasmania?

While the federal government’s shared equity scheme looks promising, state-specific shared equity schemes are also available to give you a leg up when buying a home. Tasmania offers its shared equity scheme called ‘MyHome.’ Here’s how it differs:

• Through the support of Homes Tasmania, ‘MyHome’ is available to low-income Tasmanians, including first-home buyers and non-first-home buyers.
• The Tasmanian government contributes up to $200,000 or 40% of the purchase price (whichever is the lesser amount) of new homes or house & land packages. The assistance is up to $150,000 or 30% of the purchase price of existing homes (whichever is the lesser amount). 
• You can pay Homes Tasmania’s share of the property within 30 years, either by selling the house or purchasing Homes Tasmania’s share. 
• You will have the ability to buy out the government’s share over time.
• There’s a property value cap of $600,000 for existing homes.

The ‘MyHome’ is open to eligible homebuyers in Tasmania. Key eligibility requirements include having assets less than $113,100 and having income under certain limits (depending on your household type or number of children you have). Check out the updated income and asset legibility limits for more information. 

To put it simply, the ‘MyHome’ aims to help Tasmanians who may not qualify for the federal ‘Help to Buy’ program due to its specific eligibility criteria and limited slots.

Maximise Your Opportunities with Expert Guidance

Maximising shared equity schemes like ‘Help to Buy’ & ‘MyHome’ can be complex, but the potential benefits are significant. Seek expert advice to make the most of these opportunities and secure the most suitable financing option.

At Deltos Finance, we specialise in helping first-time home buyers. Our team can guide you through different available financing methods and government grants & assistance. We’ll help you explore the eligibility requirements, application process, and long-term financial implications of participating in shared equity schemes.

Contact our team today. Our mortgage brokers in Launceston, Hobart, Richmond and other parts of Tasmania are ready to point you in the right direction. The path to homeownership may be closer than you think—you just have to get started today!