Renovate, upgrade or start fresh: How to achieve your next property goals
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Wherever you are in your life's property journey, it's likely there's a next step that you're dreaming about — and some hurdles you're dreading.
Whether you're looking for a bigger home, staying put and thinking about making some much-needed improvements, or moving suddenly due to life changes, a Shared Equity Agreement (SEA) could be the ticket to making the next phase a reality.
Find out how SEAs are changing the homeownership landscape for upgraders, renovators, and new buyers.
Using Shared Equity to upsize
You may be one of the many Australians who has outgrown their current home, desperately seeking an extra bedroom, a larger backyard, or better access to public transport, schools and amenities.
The current market can be tricky to navigate as a buyer, even if you already have a property to sell at the same time.
Record high property prices and strong buyer competition mean it can be a challenge to find a new home that fits your situation and budget.
The high interest rate environment can also present a hurdle when it comes to accessing finance for your next purchase.
A SEA is one avenue that could make that out-of-reach dream home suddenly become a reality.
Those who qualify could enter into an agreement with a private provider to potentially boost their savings by hundreds of thousands of dollars in exchange for a portion of equity in the property, empowering them to compete for homes you may otherwise not have been in the running for.
Using Shared Equity to renovate
Perhaps you're already in a comfortable location and you're looking to build on the foundation you have now.
Investing in your current home by renovating can be a great way to tailor things to your needs and maximise the real estate you've got while ensuring a more attractive offering when you do eventually sell.
With the high price of materials and trades in today's market, though, saving or borrowing enough cash to do the job right can be a daunting proposition.
One potential solution could be to tap into the equity you've already built up in your home by leveraging a SEA.
By offering a portion of equity in your home in exchange for a cash lump sum, you can get on with making the improvements and expansions you're dreaming of without having to wait.
A SEA allows you to avoid taking on additional debt and instead opt to pay that money back in your own time or when you sell the property later down the track.
Using Shared Equity to buy after a divorce
Having to find a new property to buy and live in a short timeframe is stressful enough as it is in today's highly competitive market.
But factoring in the other challenges that come with a relationship split like potential financial conflicts and emotional distress can make buying a new home and getting a fresh start on a single income feel like an insurmountable hurdle.
This is where a SEA can make a world of difference, and there are a couple of scenarios to consider.
In one, a SEA could be leveraged to unlock equity in the family home for one partner to use for a deposit on a new property without the need to sell the existing home.
Another avenue could be for one partner to boost their purchasing power by entering into a SEA and sharing a portion of equity on a new property.
Coming to the market with additional funds in your pocket could mean the difference between securing an appropriate home in the right area and missing out, so every additional dollar counts.
Then, after rebuilding a strong foundation, that equity share can be bought back at any time or the SEA can be settled upon the eventual sale of the property.
How does Shared Equity work?
Aussie homeowners are increasingly house-rich and cash-poor, often with hundreds of thousands of dollars tied up in their properties while struggling to handle day-to-day expenses or save the necessary cash to make necessary next steps.
SEAs can offer a leg-up in this situation, allowing homeowners to tap into the equity they've built in their own property.
Shared Equity can also be leveraged without having equity in a property to begin with.
In this case, an investment company can assist in boosting a buyer's deposit in exchange for a portion of equity in the new home purchase.
The agreement is a financial arrangement between a property owner or buyer and an investment company that effectively buys into the property and shares a portion of ownership without any further day-to-day involvement.
It differs from home equity loans and lines of credit as it doesn't involve monthly debt or interest payments.
