homestart-shared-equity-graduate-loans

This page is part of our Ultimate Guide to HomeStart Finance. HomeStart’s reputation rests on a handful of clever bolt on products that the major banks simply do not offer. Used well, they are the difference between buying this year and waiting another three. Used without understanding the long term effect, the Shared Equity Option in particular can cost you. Here is exactly how each one works.

How does the HomeStart Shared Equity Option work?

The HomeStart Shared Equity Option is an interest free and repayment free secondary loan of up to 25 percent of the property value, taken alongside your main HomeStart loan. It rises or falls with your property value and is settled when you sell, refinance, or make voluntary repayments.

The appeal is obvious. The Shared Equity Option lets you control a more expensive, often more suitable home without lifting your monthly repayments, because no interest or repayments apply to that portion while it is in place. The catch, and there is one, is that this portion shares in your capital growth. When you sell or refinance, you repay the original amount plus HomeStart’s agreed percentage of the home’s increased value.

Important

Because the Shared Equity Option moves with your property value, a strong market means you hand back more dollars than you borrowed. It is a genuine help to get in the door, but it is best treated as a temporary boost you plan to pay out, not a permanent feature. Run the long term numbers before you commit.

The 2 percent deposit Graduate Loan

The Graduate Loan is HomeStart’s standout product for younger buyers. It lets eligible South Australians buy or build an owner occupied home with a deposit as low as 2 percent, and like other HomeStart loans it charges no Lenders Mortgage Insurance.

To qualify you generally need a Certificate III or IV, a Diploma, a Bachelor degree or a higher qualification. It is available across metropolitan Adelaide and selected regional areas, and the property must be your primary residence.

Key point

On a typical purchase, dropping from a 3 percent to a 2 percent deposit can mean thousands of dollars less to save before you buy. On a 400,000 dollar home that single percentage point is roughly 4,000 dollars, which for many savers is months off the timeline.

Overcoming upfront costs: the Starter Loan

Even with a small deposit sorted, the upfront costs of buying, things like conveyancing and government fees, can stop a deal in its tracks. The Starter Loan is designed for this. It provides up to 10,000 dollars that is interest free and repayment free for up to seven years to help eligible lower income buyers cover those costs.

At the end of the seven year period, any outstanding balance is repaid or rolled into your main home loan. It is a smart bridge over the upfront cost hump, provided you go in understanding that the bill arrives later rather than disappearing.

Buying versus building: low deposit construction

The deposit rules shift when you build rather than buy an established home. Construction lending is released in stages against building milestones, and lenders generally want a slightly larger buffer to absorb variations during the build. If you are building, expect tighter verification and a fixed price contract with a registered builder.

Trying to work out which combination of these products gets you in with the least cash, and the smallest long term cost? That is exactly the kind of structuring a broker maps out for you.

Speak With An Accredited HomeStart Broker

Before you lock in the Shared Equity Option, it is worth understanding the wider mechanics of the loan, including the charge that replaces LMI. See our guide to HomeStart rates, calculators and the Repayment Safeguard.

About the author

Ross McFarlane • Licensed Mortgage Broker

Ross is an Adelaide based mortgage broker who has helped South Australians into their first home for nearly 7 years, including through HomeStart Finance low deposit pathways. His focus is making low deposit lending clear and straightforward, so you understand exactly how these loans work before you commit to one.

Credit Representative Number 526725, authorised under Australian Associated Advisers Pty Ltd trading as Keylend, Australian Credit Licence 392169.

Frequently asked questions

Can I use a gifted deposit with HomeStart Finance?

Gifted deposits from family can often be accepted, typically supported by a statutory declaration confirming the money is a genuine, non repayable gift. The exact rules and paperwork vary, so confirm the current requirements with HomeStart or your broker before relying on a gift.

Can I buy a block of land only with HomeStart?

HomeStart is focused on owner occupied homes, so land is generally expected to be tied to a building plan rather than financed on its own indefinitely. If you are buying land to build, talk through the construction pathway with HomeStart or a broker.

Who is eligible for the HomeStart Graduate Loan?

The Graduate Loan is for South Australian residents holding a Certificate III or IV, a Diploma, a Bachelor degree or a higher qualification, buying or building an owner occupied home as their primary residence. It allows a deposit from as little as 2 percent with no Lenders Mortgage Insurance.

HomeStart Shared Equity, Graduate and Starter Loans Explained