Should you buy into shared equity schemes?

Sharing is caring – but even your home price gains?

Shared equity schemes help you get on the property ladder - but you must know a few things.

A shared equity scheme is soon to be trialled for first home buyers looking to buy new-build houses in Auckland. If successful, the lender offering the scheme intends to expand nationwide, so here’s an overview of how they are expected to work.

What is a shared equity scheme?

Shared equity schemes allow home buyers to purchase property with a smaller deposit by sharing some of the purchase cost with a shared equity partner.

For example, if a buyer has a 10% deposit, a shared equity partner can contribute an additional 10%, while a standard mortgage covers the remaining 80% of the purchase price.

Who will the shared equity partner be?

The partner is yet to be named, however shared equity partners could possibly range from private investors, not-for-profits, or even the government.

What’s the catch?

Shared equity schemes are not always straightforward, so you should understand the terms of the deal and read the fine print. A few things to consider include:

• The shared equity scheme could have a monthly fee which would add to outgoings.

• If the property is sold, the shared equity partner would receive a share of any increase in the property value.

• An ownership agreement sets out everyone’s rights which may include the shared equity partner’s ability to sell the property if the buyer experiences financial hardship.

What should you do?

Participating in a shared equity scheme needs careful consideration. If you have a low deposit and want to buy property, talk to a Mike Pero Adviser to understand all your options.

With the Reserve Bank recently relaxing deposit requirements, first homebuyers have more options than before.

Mike Pero Advisers have access to a range of lenders that accept low, gifted and even borrowed deposits.

For good advice, reach out to a Mike Pero Adviser today.

 

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