Shared Equity home loans are an attractive option for potential home buyers on low-middle incomes.  The loan helps borrowers to purchase property they may not have been able to afford otherwise.  The target markets for this type of loan are first-home buyers, and second-home buyers wanting to purchase a more expensive home.

The shared equity home loan works buy allowing the borrower to borrow 20 per cent of the price of the property interest free, which reduces the monthly repayments.  In return, the lender gets 40 per cent of any future capital gains.

The equity finance mortgage can be repaid in full by the borrower at any time, although fees and charged would most likely be involved.

This type of loan is dependent on house prices increasing, and although long term data suggests that generally this is the case, shared equity loans are still a risk for lender.

If the value of the home increases, the borrower has to give the bank 40 per cent of any capital gain made when the loan is repaid. If the value of the home decreases, the borrower will have to pay 20 per cent of the capital loss.

A shared equity loan can reduce initial costs for home buyers wishing to purchase their own property.  However, note that it can cost more in the long run.

Why wait to find out if a shared equity home loan could work for you?  Contact Your Local Finance Broker.