Shared Equity Loans
Shared equity schemes, also known as Shared Appreciation Mortgage(SAM)
or Equity Finance Loans (EFM) and other similar branded names,
the product has been developed to help make buying a home more
affordable. This innovative product has been developed to help
make buying a home more affordable. Its appeal will be for -
- first home buyers lacking sufficient funds for entry
into the home market by reducing the upfront and ongoing
costs of purchasing a new property
- reducing monthly home loan repayments
- allowing buyers to upgrade and purchase a more valuable
property than they would otherwise be able to afford
- existing home-owners looking to refinance using the equity
in their home to raise cash for other purposes or reduce
monthly home loan repayments
This product is only available to owners who live in the
property they are using as security.
How does it work?
A shared equity scheme works in conjunction with a traditional
home loan offered by the same lender. The traditional portion
is like any other home loan where interest is calculated daily
and charged monthly.
However, you do not pay ongoing interest on the 'shared equity'
portion of the loan. Instead of paying interest, you give
up some of the capital gain on the property. The shared equity
loan is repaid when you sell the property or elect to repay
the shared equity loan at which time the original amount borrowed
plus up to 40% of the increased value is paid back to the
lender. If the property deceases in value, the lender will
share a portion of the loss.
The more traditional shared equity schemes involve shared
ownership, with the lender taking a stake in your home. However
the more recent shared equity loan products are a mortgage
product, you retain full title and ownership of your property.
The governments of Victoria, South Australia and Western
Australia have announced shared equity schemes.
As this is a relatively new product, it is strongly recommend
that you obtain independent legal and financial advice in
relation to this product before entering into a loan contract.