First home buyer grants and schemes tend to be widely talked about. If you would like to have more information, take a look at this post where I take a looker look at this in detail.
There are other established national schemes and incentives available, such as First Home Guarantee (FHBG), Regional First Home Buyer Guarantee (RFHBG) and Family Home Guarantee (FHG). These programs have been supporting buyers to enter the housing market. Have you heard about the latest government’s Shared Equity Scheme?
If you want to own your own home but struggling with that initial deposit then the shared equity scheme might be just the solution you have been waiting for.
Tell me more….
The Shared Equity Scheme is where the government would own part of your home. Eligible applicants can receive a government loan, covering either 30% (existing dwelling) or 40% (new build) of the purchase price. This means your bank loan will be 60% or 70%, so your loan is smaller than what it could have been, which also means your repayments will be less too. AND you only need a 2% deposit of the total home purchase. This can mean tens of thousands saved, if not hundreds of thousands! Not to mention you can also avoid lenders’ mortgage insurance (LMI)*.
Marlowe lives in Melbourne and would like to purchase her first home. She set her eyes on an existing property that’s $500,000 that ticks many of her boxes. She earns $80,000 a year and have a $10,000 deposit to put towards the purchase. This is a rough guide of what it could look like:
| Without Shared Equity Scheme | With Shared Equity Scheme | |
| Deposit | $10,000 + other upfront fees (e.g legal fees) | |
| Loan amount | $490,000 (if she’s able to find a lender that would give her a loan with 2% deposit) | $340,000 (30% contribution from the government) |
| LMI | $16,870 | N/A |
| Estimated monthly loan repayments (Principle and interest loan @ 6% interest rate) | $2,938 1057680 | $2,039 734040 |
| Loan repayments over a year | $35,256 | $24,468 (A saving of $323,640 over 30 years!) |
As you can see, this can be the difference of being able to buy a property and potentially hundreds of thousands of dollars of savings over the life of the loan.
Am I eligible?
Like any other schemes and grants, there are eligibility criteria to consider. It is limited to 10,000 applicants per year for four years. There are caps on the property purchase price (location dependent) and capped by geographical location. Some of the early announcement include:
- You must be an Australian citizen and at least 18 years old
- You must earn less than $90,000 or less $120,000 as a couple
- You must live in the property you will purchase and not own any other land or property in Australia
- You have at least 2% deposit, be able to pay the other upfront fees and be able to get a loan for the remaining amount through a mortgage lender
How do I pay it back?
You can make repayments so you can increase your equity share in the house. or if your income is higher than the threshold for two years in a row, then you may be likely to be asked to pay the government back.
And if I want to sell the property?
If you happen to sell it, the government will get their share through the amount of equity they have. So if the property increases in value at the time of sale, the government will also get more money than they originally put in.
While this is a national scheme, the states and territories do have their own shared equity schemes – NSW, Victoria, Queensland, SA, TAS, ACT and WA, take a look to see if you qualify.
There you have it, a quick overview on the latest shared equity scheme from the federal government. Keep an eye out for updates on this scheme so you can see how you can benefit.
If you’re interested in buying a property, then don’t forget to take a look at the free property buying calculator at https://shecanfinance.com/resources/
* Lenders mortgage insurance (LMI) is an one off payment made at settlement, if you are borrowing more than 80% of your home’s value. The amount can vary between the size of your deposit and who your lender is.