Amidst jokes about expensive skim lattes and avocado on sourdough, home ownership rates have been steadily declining year upon year.
The key groups with lowest rates of home ownership are younger generations, and those with lower incomes who have struggled financially to enter the housing market. The New South Wales government has taken steps to address this by introducing a number of schemes to stimulate home ownership. One of these schemes, scheduled to start in January 2023, is the Shared Equity Scheme, which is designed to assist single parents, older singles and key worker first home buyers.
What is the Shared Equity Scheme?
The idea behind the scheme is that the government assists an eligible purchaser by paying a proportion of their purchase price, capped at 40% for new dwellings and 30% for existing dwellings. In return for this, the government will be registered on title as owning an equivalent share of the property.
The purchaser must have a minimum deposit of 2% of the purchase price. A purchaser won’t have to take out lenders mortgage insurance, which is normally charged by a bank when a purchaser has a deposit of less than 20% of the purchase price, added on top of your loan.
Who is eligible for this scheme?
The scheme is open to single parents of children under the age of 18; a single person over the age of 50 or First Home Buyers who are key workers such as nurses, teachers or police.
To be eligible, a purchaser must:
- Have a gross income of no more than $90,000.00 for singles or $120,000.00 for a couple.
- Buying a house for less than $950,000.00 in Sydney and major regional centres such as Newcastle and Lake Macquarie or $600,000 in other regional areas.
- Be an Australian or New Zealand citizen or a permanent Australian resident.
- Have a minimum deposit of 2% of the purchase price.
- Occupy the property as their principal place of residence.
- Not own any other interest in any land in Australia or overseas at the time of purchase.
- Need the government equity contribution in order to obtain a loan with a participating lender.
What are the obligations of the scheme?
Whilst an eligible participant, a purchaser will not be required to repay the contribution nor will they have to pay rent or interest. A purchaser can make voluntary payments to progress to full ownership of the property.
A purchaser is responsible for their legal costs for the purchase, including stamp duty. First Home Buyer Grants and concessions are still also open to eligible First Home Buyers. A participant has to maintain eligibility and will be required to annually produce documents to ensure their continued eligibility.
A participant is required to maintain their property, and will need to seek the government’s approval before undertaking certain renovations.
A participant will also remain responsible for the usual ongoing costs of owning a property including: Council and water rates, strata fees, insurance and home loan repayments.