All your questions about HomeStart's Shared Equity answered
Monday, 11 July 2022
With the current housing market environment, there has been significant talk lately about shared equity loans, and how lenders can help more Australians enter the property market. Recognising the value of shared equity, our Chief Executive Officer, Andrew Mills, spoke to FIVEaa about the benefits of shared equity and how it can help people into their own homes, sooner.
But what is shared equity, and how can it assist people wanting to purchase their own home?
Shared equity can cover the gap between what you can afford and the cost of a property, so you can buy your own home sooner. It allows you to boost your buying power without increasing your repayments.
HomeStart has been offering its Shared Equity Option (SEO) since 2007 and allows home buyers to borrow up to 25 per cent of the purchase price as an interest-free and repayment-free loan. We have put together some factors to consider when weighing up the benefits of our Shared Equity Option.
Be clear about what you need in a home
Before you look for a home, it is important to consider what you need, and then compare that to what you can afford. Have you found the right suburb, considered proximity to schools, public transport, parks, shops or employment? Are you looking for your forever home, or a first home to help you step onto the property ladder? Knowing what you want, or will need in the near future, means that you can properly assess how much you are willing to spend and if bridging the gap with the Shared Equity Option is a good opportunity.
Helping you get into the market sooner
A shared equity loan can help you buy the home you need at the price you can afford. For example, if your budget only allows you to buy a home for $400,000, but a home valued at $500,000 would better suit your needs, shared equity can cover the difference without increasing your repayments. Your lender becomes your ‘silent partner’ for the remaining $100,000.
Can I still use the Shared Equity Option if I want to build?
HomeStart has recently introduced the Shared Equity Option for construction. If there is a house and land package that you thought was out of reach, the Shared Equity Option might enable you to step up.
When do I pay for the shared equity portion?
With HomeStart’s Shared Equity Option, you do not have to make payments on the shared equity portion of the loan. Instead, when you sell or refinance your home the shared equity portion is repaid, and then HomeStart shares in any gain or loss at that time. You will however, have the option of making voluntary repayments to the Shared Equity Option.
Can you buy out the shared equity portion?
As your circumstances change, whether it be a promotion at work, you find a new life partner or you share your house with a mate, HomeStart allows you to buy out the shared equity portion of your loan. However, it is important to note that this is not the same with all lenders, therefore it is essential to check the conditions when applying.
How will interest rate rises affect your shared equity loan?
Interest rate rises could occur at any time over the next 12 to 24 months, with the Reserve Bank of Australia (RBA) indicating more are likely. An interest rate rise will impact most loans, however at HomeStart, we will only adjust repayments annually based on inflation rather than lifting your instalment whenever rates go up. This means you know exactly what your repayments will be for the next year, and don’t have to worry about the effect of interest rate rises on your home loan repayment. For more information on HomeStart’s Repayment Safeguard, look at this short video.
Paying out your shared equity loan
As HomeStart is partnering with you in the purchase of your property, there are some things to note when paying out the Shared Equity Option. If the value of your home rises, that increase will be reflected in how much you will pay out when you discharge your loan. If your property falls in value, then the loss will be shared if you choose to sell. Ensure that you always check the conditions of your loan prior to signing and seek advice if necessary, as this can differ from lender to lender.
How do I apply?
We know that it is tough for home buyers searching the market for their own home. If you think that you are ready to begin the home buying journey or make a fresh start, Apply Now with HomeStart and a team member will be in touch. If you would like to learn more about our Shared Equity Option, or how you can access our unique range of loans, contact HomeStart today. Home ownership could be closer than you think.
For those who already have a pre-approval with HomeStart but are struggling to find a property within your price range, the Shared Equity Option may help boost your borrowing power. Contact HomeStart on 8203 4081 or email myloan@homestart.com.au
But what is shared equity, and how can it assist people wanting to purchase their own home?
Shared equity can cover the gap between what you can afford and the cost of a property, so you can buy your own home sooner. It allows you to boost your buying power without increasing your repayments.
HomeStart has been offering its Shared Equity Option (SEO) since 2007 and allows home buyers to borrow up to 25 per cent of the purchase price as an interest-free and repayment-free loan. We have put together some factors to consider when weighing up the benefits of our Shared Equity Option.
Be clear about what you need in a home
Before you look for a home, it is important to consider what you need, and then compare that to what you can afford. Have you found the right suburb, considered proximity to schools, public transport, parks, shops or employment? Are you looking for your forever home, or a first home to help you step onto the property ladder? Knowing what you want, or will need in the near future, means that you can properly assess how much you are willing to spend and if bridging the gap with the Shared Equity Option is a good opportunity.
Helping you get into the market sooner
A shared equity loan can help you buy the home you need at the price you can afford. For example, if your budget only allows you to buy a home for $400,000, but a home valued at $500,000 would better suit your needs, shared equity can cover the difference without increasing your repayments. Your lender becomes your ‘silent partner’ for the remaining $100,000.
Can I still use the Shared Equity Option if I want to build?
HomeStart has recently introduced the Shared Equity Option for construction. If there is a house and land package that you thought was out of reach, the Shared Equity Option might enable you to step up.
When do I pay for the shared equity portion?
With HomeStart’s Shared Equity Option, you do not have to make payments on the shared equity portion of the loan. Instead, when you sell or refinance your home the shared equity portion is repaid, and then HomeStart shares in any gain or loss at that time. You will however, have the option of making voluntary repayments to the Shared Equity Option.
Can you buy out the shared equity portion?
As your circumstances change, whether it be a promotion at work, you find a new life partner or you share your house with a mate, HomeStart allows you to buy out the shared equity portion of your loan. However, it is important to note that this is not the same with all lenders, therefore it is essential to check the conditions when applying.
How will interest rate rises affect your shared equity loan?
Interest rate rises could occur at any time over the next 12 to 24 months, with the Reserve Bank of Australia (RBA) indicating more are likely. An interest rate rise will impact most loans, however at HomeStart, we will only adjust repayments annually based on inflation rather than lifting your instalment whenever rates go up. This means you know exactly what your repayments will be for the next year, and don’t have to worry about the effect of interest rate rises on your home loan repayment. For more information on HomeStart’s Repayment Safeguard, look at this short video.
Paying out your shared equity loan
As HomeStart is partnering with you in the purchase of your property, there are some things to note when paying out the Shared Equity Option. If the value of your home rises, that increase will be reflected in how much you will pay out when you discharge your loan. If your property falls in value, then the loss will be shared if you choose to sell. Ensure that you always check the conditions of your loan prior to signing and seek advice if necessary, as this can differ from lender to lender.
How do I apply?
We know that it is tough for home buyers searching the market for their own home. If you think that you are ready to begin the home buying journey or make a fresh start, Apply Now with HomeStart and a team member will be in touch. If you would like to learn more about our Shared Equity Option, or how you can access our unique range of loans, contact HomeStart today. Home ownership could be closer than you think.
For those who already have a pre-approval with HomeStart but are struggling to find a property within your price range, the Shared Equity Option may help boost your borrowing power. Contact HomeStart on 8203 4081 or email myloan@homestart.com.au
