Spoke · Exit Strategy
How to Refinance Away From HomeStart
If your equity has grown and your rate is higher than the rest of the market, here is how to refinance out of HomeStart cleanly, including the shared equity payout.
This page is part of our Ultimate Guide to HomeStart Finance. HomeStart did its job: it got you into your home. Now your equity has grown and you are paying a rate higher than the mainstream market offers. This is the moment HomeStart was designed to lead to, the exit. Here is how to make the move cleanly.
How do you refinance away from HomeStart?
To refinance away from HomeStart to a mainstream lender you usually need enough usable equity, often around 20 percent, plus income that meets standard bank serviceability tests. If you used the Shared Equity Option, you also repay HomeStart’s agreed share of your property’s value as part of the discharge.
When is the right time to move to a mainstream lender?
The classic trigger is reaching around 20 percent equity, which lifts you to an 80 percent loan to value ratio. At that point a mainstream lender will usually take you on without charging fresh Lenders Mortgage Insurance, so you capture a lower rate without paying a new insurance bill. Equity can build through paying down the loan, through your property rising in value, or both.
The other half of the test is serviceability. Even with the equity, a mainstream lender will assess your income against its own benchmarks, which may be stricter than HomeStart’s. If your income has grown or stabilised since you bought, you are in a strong position.
The sweet spot for most HomeStart borrowers is hitting an 80 percent loan to value ratio with stable income. That combination usually means a lower rate with no new LMI, which is the whole payoff of using HomeStart as a stepping stone.
The reality of paying out the Shared Equity Option
If you took the Shared Equity Option, refinancing means settling it. You repay the original amount plus HomeStart’s agreed percentage of your property’s current value, established through a fresh valuation at the time of discharge. In a market that has risen strongly, that payout can be larger than people expect, because the whole point of the option is that it shared in your growth.
Before you refinance out, get the Shared Equity payout figure calculated properly. A rising market means you may hand back more than the original amount borrowed. This is not a fee that has been hidden from you, it is the agreed structure, but it needs to be in your numbers so the refinance still makes sense.
Navigating the HomeStart discharge process
Discharging a HomeStart loan follows the same broad path as any refinance. You sign a discharge authority, your incoming lender and the relevant parties coordinate settlement, any shared equity component is settled, and the mortgage is released and re registered to the new lender through Land Services SA. Timeframes vary with how quickly each party moves and how complete the paperwork is, so build in a buffer rather than assuming a fixed window.
Think you might be ready to leave HomeStart behind? We will check your equity, test your serviceability against mainstream lenders, and calculate any shared equity payout so you can see the real saving before you move.
Speak With An Accredited HomeStart Broker
Not sure whether the timing is right yet? It can help to revisit how the costs stack up in our honest review of whether HomeStart is worth it, and the mechanics of the rate you are currently paying in our guide to HomeStart rates 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
What are the fees to pay out a HomeStart Shared Equity loan?
You repay the original amount borrowed under the Shared Equity Option plus HomeStart’s agreed percentage of your property’s current value, based on a fresh valuation taken during the discharge. In a rising market this payout can be larger than the original amount, because the option shares in your capital growth.
What is involved in the HomeStart discharge process?
You sign a discharge authority, your incoming lender coordinates settlement, any shared equity component is settled, and the mortgage is released and re registered to the new lender through Land Services SA. Timeframes vary with how quickly each party moves, so it is wise to allow a buffer rather than count on a fixed number of days.
When is the best time to refinance away from HomeStart?
A common trigger is reaching around 20 percent equity, which lifts you to an 80 percent loan to value ratio and usually lets you move to a mainstream lender without paying fresh Lenders Mortgage Insurance. Stable income that meets standard bank serviceability is the other half of the timing.
Free, no obligation
Find out if you can refinance out of HomeStart
We will check your equity, test your income against mainstream lenders and calculate any shared equity payout, so you can see the real saving before you move.
General information only. Not financial or credit advice. Eligibility criteria apply.