More Help for First Home Buyers but do you want to share your home with the Government? - New Shared Equity Scheme

The NSW Government has announced the commencement of a two-year trial shared equity housing scheme (Scheme). From January 2023, the Scheme is intended to assist single parents, older singles and key worker first home buyers to get into the housing market.

Intention of the shared equity scheme?

In accordance with the Scheme, the NSW Government will contribute a portion of the property’s purchase price in return for an equivalent ownership stake in the property. The NSW Government may contribute up to 40% of the purchase price of a new home and up to 30% of the purchase price of an existing home in the form of equity.

Provided the purchaser remains qualified for the Scheme, there are no equity contribution payback obligations, and no rent or interest will be assessed. The purchaser can progress to full ownership of their property by making voluntary payments.

Eligibility

The NSW Government has stated that there will only be 3,000 places available per financial year. Accordingly, to be considered for the Scheme, purchaser must satisfy the following requirements:

1. The purchaser must have a minimum deposit of 2% of the purchase price, with no lenders mortgage insurance required.
2. The purchaser is:
   1. a single parent of a child or children under 18 years of age
   2. a single person 50 years of age or above, or
   3. a first home buyer key worker, being a nurse, teacher or police.
3. Applicants cannot have a household gross income greater than $90,000 for singles and $120,000 for couples
4. The purchaser must be buying a home as their principal place of residence with a property price of less than $950,000 in Sydney and major regional centres (Newcastle, Lake Macquarie, Illawarra, Central Coast, and North Coast of NSW) or less than $600,000 in other regional areas.

Standard government scheme eligibility criteria will apply, including:

1. Applicants must be 18-years old;
2. Applicants must be Australian or New Zealand citizens, or permanent Australian residents.
3. Applicants must occupy the property as the principal place of residence (no investors); and
4. Applicants must demonstrate they cannot service a mortgage without the shared equity scheme but are still able to service the mortgage for the life of the loan.

Ongoing obligations

A purchaser will need to maintain eligibility for the Scheme and the ongoing obligations include:

1. Annual review – in order to confirm eligibility for the Scheme, the purchaser is required to undergo an annual review. The purchaser will be required to supply documentation which confirms their eligibility.
2. Maintenance and improvement of property – it is an obligation under the Scheme that the purchaser maintains the property. Further, certain modifications or renovations need to be approved by the Government. This requirement, ensures that any value changes to the property are accounted for in the eventual sale of the property.
3. Responsibility for property costs – it is the responsibility of the purchaser to pay the following costs, council rates, body corporate fees, water and home loan repayments.

Should a purchaser becomes no longer eligible for the Scheme, the purchaser will be required to begin repayment of the Government’s equity contribution.

Applying for the Scheme

Prior to the Schemes anticipated start in January 2023, the procedure for applying for the Scheme will be outlined on the website of the authorised lending partner. Once the scheme is in operation, the purchaser will be able to apply on the website of an authorised lending partner.

Impact on Stamp Duty

The Scheme does not impact upon the existing tax arrangements for first homebuyers. Therefore, a stamp duty exemption or concession which is currently available to first homebuyers would remain available to the purchaser under this scheme.

If the purchaser is not eligible for any exemptions or concessions, the purchaser will be subject to all other existing duty obligations.

Disadvantages of the Scheme

Whilst the scheme allows first homebuyers to get into the property market, there are some disadvantages that a purchaser should consider:

1. Not all lenders offer mortgages for shared ownership;
2. if the purchaser’s circumstances improve, they will begin repayments of the government equity contribution on top of the mortgage;
3. The purchaser is required to pay 100% of the property costs regardless of their share of the property;
4. Generally shared ownership arrangements are sold on a leasehold basis; and
5. There may be restriction on what home improvements the purchaser can do on the property.

Concluding Comments

The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. If you have any questions or queries, please feel free to get in touch with Marsdens Law Group on (02) 4626 5077.

The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. Specific legal advice should always be sought separately before taking any action based on this publication.