Maximising Homeownership with Shared Equity: A Game-Changer for First Time Buyers

20 March, 2024: In the ever-evolving world of real estate, the shared equity option has quickly gained traction, especially among first-time homebuyers looking to step onto the property ladder.

Shared equity arrangements are gaining favour not only with lenders but also with government initiatives in select states, designed to empower aspiring homeowners. Additionally, innovative private fintech firms like FrontYa offer enticing shared equity solutions, catering to those who might not meet the stringent eligibility criteria of government programs.

How Shared Equity Works

In the realm of shared equity, you receive a substantial boost to your initial deposit, thereby increasing your chances of securing your dream home. In return, your equity partner is entitled to a portion of the property’s future appreciation.

Once you embrace this arrangement, both you as a homebuyer and your chosen property will undergo a thorough evaluation to ensure that your equity partner recognises its potential.

Pro Tip: It’s essential to note that the deposit boost provided by an equity partner, such as FrontYa, doesn’t constitute debt or a loan. Your lender will not consider it a liability, safeguarding your overall financial health. To gauge the impact of FrontYa’s deposit boost on your home buying budget, use their online purchasing power calculator or reach out to their prequalification team.

For a detailed breakdown of the costs associated with a shared equity partnership, refer to FrontYa’s website. Here, you’ll find comprehensive scenarios and insights on repaying the deposit boost in the future, leveraging the equity growth in your property.

Advantages of Shared Equity

  1. Full Ownership: From day one, you are the sole legal owner of your property. There’s no shared ownership or co-ownership involved.
  2. Increased Purchasing Power: Shared equity can significantly enhance your maximum purchase price and expand your borrowing capacity. This means you can consider larger properties or choose to reside in your preferred neighbourhood that complements your lifestyle.
  3. Enhanced Equity Growth: Investing in a higher-value property may lead to more substantial equity growth, even after accounting for the equity partner’s share.

Disadvantages of Shared Equity

  1. Higher Mortgage Commitments: Shared equity often entails taking on a larger mortgage, resulting in higher monthly repayments compared to a smaller loan. Exiting the arrangement through a cash-out refinance may further increase your future loan obligations.
  2. Market Fluctuations: Negative property market movements can pose challenges when exiting a shared equity arrangement, especially if your exit strategy relies on utilising property equity, such as through a refinance.
  3. Ongoing Costs: While the equity partner contributes to the initial deposit, ongoing living costs and property maintenance typically remain the responsibility of the homebuyer and are not shared with the equity partner.

If you would like to speak further about FrontYa’s shared equity program, please click below to start the conversation.