5 ways Shared Equity can help you unlock your property goals
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The property market is becoming more and more difficult for many Australians to navigate as prices surge and competition remains heated.
Wherever you are in your property journey, there may be a way that Shared Equity can help you take your next step faster.
From making that first home purchase all the way to upgrading to the property of your dreams, here are five ways Shared Equity can make it happen sooner.
1. Upsizing your home
A home that suited you at one stage of your life may not be adequate for your situation today. Many Australians are seeking that extra bedroom, backyard space or garage, but it can be challenging to bridge the financial gap.
Property prices are at or near record highs in most parts of the country, and high interest rates are only making things harder.
A Shared Equity Agreement (SEA) can help shrink the distance between you and your new home by boosting your buying power and enabling you to compete in a heated market.
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 the future capital growth of the property, empowering them to bid for homes for which they may otherwise not have been in the running.
By heading to the market with more to spend, that next dream home could be within much easier reach.
2. Buying your first home
If upgrading in the current market seems difficult, the prospect of saving a 20 per cent deposit and buying without any existing equity can be downright daunting.
While Federal Government initiatives like the Help to Buy scheme are in place to aid first home buyers in their search, places are limited and they only apply to homes under $900k in NSW and $800k in Victoria.
As an alternative, seeking out a SEA privately means you can boost your deposit now, in exchange for a portion of the future capital growth of that property.
In such a ruthless market where affordability is an ever-growing issue, every dollar counts for first home buyers. Time is critical too — the longer you wait, the more chance there is that home values will continue to rise, pricing buyers out of more and more properties.
Opting for a SEA to boost your buying potential could be the ticket to getting onto the property ladder sooner so you can enjoy the security of home ownership and begin building equity for what comes next.
3. Helping your children buy a home
The 'Bank of Mum and Dad' has become a major force in Australian property — so much so that it's now considered to be one of the country's biggest lenders.
Many parents wish to help their children out with entering the property market, but not everybody is in a position to hand over hundreds of thousands of dollars that aren't already accounted for.
For those parents or family who do wish to offer support in the home-buying process but don't have the savings to do so, Shared Equity is one avenue worth considering.
A SEA allows homeowners to access some of the equity they've built up over time and receive a lump sum payment in exchange for a proportion of future capital growth of that property.
Essentially, parents could tap into that equity as a means of coming up with a significant contribution towards a new property for their children without needing to dig into personal savings.
This would enable children to get into the property market sooner at a time when every year of delay can make a major difference.
4. Renovating your home
Improving your property situation doesn't necessarily mean having to buy —choosing to renovate can be a fantastic way to adapt what you already have to fit your changing needs.
Of course, renovating costs, and with trades in short supply and materials being hit hard by inflation, any major works will likely require some significant cash to get done.
If you don't have substantial savings on hand and would rather not accrue more debt with a bank loan, tapping into your home's equity with a SEA could be an ideal solution.
By offering a portion of future capital growth 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.
Then, those funds can either be paid back directly in your own time, or it can be settled when you eventually decide to sell your home.
5. Buying after a divorce
Going through a relationship split is one of the most stressful life events a person can go through. Having to find a new place to live in a short timeframe on top of that while on a single income can seem near impossible.
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 future capital growth 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.
Learn more about how Shared Equity works
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 future capital growth 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 equity 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.
