For many people, the prospect of saving for a home deposit can be daunting. This is especially true for first home buyers and low income earners as median home prices across Australia continue their march higher.
But what if you could partner with someone else in shared ownership of a home? So-called 'shared equity' arrangements could be your key to entering the housing market sooner.
What is shared equity?
A shared equity scheme involves a third party, known as an equity partner, contributing funds to help you purchase a home.
In exchange for their contribution, the equity partner secures a proportional stake in your home. Essentially, it means the contributor co-owns a share of your home so when it comes time for you to sell, you will need to pay back their share.
Some arrangements might make provisions for you to buy them out sooner. It will depend on individual agreements.
Case study
To give you an idea of how this would work in practice, let's look at a hypothetical example.
Jenna wants to buy a home that's worth $700,000, but she only has a deposit of 5% saved ($35,000). To avoid taking out a loan of $665,000 and paying lenders mortgage insurance (LMI), she decides to find an equity partner.
Her equity partner agrees to contribute an additional 15% ($105,000) to help her secure a property. This way, she has a competitive enough deposit to negotiate a deal she's happy with, and takes out a $560,000 mortgage.
After 10 years, Jenna's home is worth $850,000. At this stage, the equity partner's original 15% share is now worth $127,500, reflecting the home's increase in value.
How do shared equity agreements work?
Shared equity agreements can work in various way depending on who the equity partner is. Entities such as governments, non-profit organisations, for-profit lenders, and private individuals can offer shared equity schemes, and how they work can differ accordingly.
However, to give you a general idea of how an equity agreement works in practice, they usually look something like the following.
Firstly, the home buyer finds their equity partner (e.g. a state government) to fund a portion of their purchase. Then, of course, they need to find a suitable property.
After the sale price has been agreed, the equity partner will agree to contribute their share while the home buyer applies for a home loan to cover the remaining sum needed to finalise the purchase. In some cases, the home buyer will need to go through a specific lender but, in other cases, the home buyer can apply for a home loan as they would normally.
It's worth noting government and not-for-profit shared equity schemes are typically offered to owner-occupiers only, meaning the buyer will need to live in the property once it's purchased.
Can you get out of a shared equity agreement?
You may be wondering, Can I just pay them out, or does the agreement end when I sell? It all depends on your specific agreement but, generally, you can pay out your equity partner before you sell your property. But doing so might be difficult and can come with a few strings attached.
Paying out your equity partner before you sell is permitted by some equity partners, but not others. You'll need to double check the specifics of your agreement before jumping the gun. Otherwise, when it comes time to sell, you'll need to pay out your equity partner their share in the property. In most cases, that entails their original contribution plus their share of any gains.
For those aiming to gradually pay back their equity partners before they sell, there will likely be a few rules around doing so. You'll need to make sure the amount you're paying is reflective of the home's current value, which might mean getting a valuation each time you decide to chip away at your equity partner's share. Again, this will depend on your individual arrangement.
Victorian Homebuyer Fund case study
As an example of what gradually paying back an equity partner's share in your home could entail, let's consider the Victorian government's Homebuyer Fund.
Participants are required to buy back the government's share in their properties by refinancing, using savings, or handing over a lump sum when the property is sold.
There are quite a few other ongoing obligations of the Homebuyer Fund but there are also terms surrounding how you can reduce the fund's share in your property.
One is any payments must occur in large increments (so no paying back an extra $20 a week). Each repayment must reduce the government's share by at least five percentage points, e.g. from 25% to 20%, and be at least $10,000. Additionally, you would need to ask for permission and be approved to pay off the full amount or reduce the state's equity below five percentage points in the first two years.
Pros and cons of using shared equity agreements
To weigh up whether it's worth jumping onto a shared equity scheme, it's important to understand both sides of the coin. Like most things, there are benefits and drawbacks, some of which are outlined in the table below:
Pros | Cons |
|---|---|
You could buy a home sooner | You may be limited in what you can do with the property without permission |
You owe less money to the bank | You essentially don't own a portion of your home |
You have more borrowing power, which could mean you can buy a higher priced home or one in a better location | You have to pay back equity earned on the property |
Whether the pros outweigh the cons or the cons outweigh the pros, the decision ultimately up to you.
Shared equity schemes are not considered inherently 'risky' and, generally speaking, they're not that common. But if you crunch the numbers and it ends up being worth your while, there are quite a few ways for you to source a shared equity agreement.
Where can I find a shared equity scheme?
As mentioned earlier, governments, not-for-profit organisations, for-profit lenders, and private individuals may offer shared equity schemes.
Here are some existing (and upcoming) government schemes (as at August 2025).
- Federal government Help to Buy (legislation passed; program due to be launched later in 2025)
- Victorian Homebuyer Fund
- South Australian Homestart Shared Equity Option
- Homes Tasmania MyHome
Other state and territory government programs are either discontinued, limited to those in specific circumstances, have limited availability, or have been replaced by other housing initiatives. It pays to check what suitable programs may be available in your particular state or territory.
Alternatives to entering a shared equity agreement
If you're desperate to own a home but you're struggling to get the funds together for a deposit, there are a few alternatives that might be suitable instead of shared equity.
Take advantage of other government initiatives
For some homebuyers in specific circumstances, there are government guarantee schemes that you may be able to take advantage of.
See:
Find a low deposit home loan
If you don't qualify for the programs mentioned above, many lenders offer home loans for borrowers with a deposit as low as 5%. The main drawback of low deposit home loans is that you will need to add on LMI as an additional expense, which can often amount to thousands of dollars.
See also: Is it possible to buy a home with no deposit?
Some positives are that there will be less time needed to save for your deposit and you can start building up equity in your home sooner. But in exchange, you're likely going to need to make larger repayments and you may be charged a higher interest rate.
It's worth shopping around for low deposit home loans in any case. Pay attention to things like interest rates (advertised rate and comparison rate), the loan type, fees and charges, helpful features, and who the lender is.
The table below features some of the most competitive 90% home loans on the market and is a good place to start.
| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Extra Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
5.94% p.a. | 5.98% p.a. | $2,978 | Principal & Interest | Variable | $0 | $530 | 90% |
| Promoted | Disclosure | ||||||||||
6.39% p.a. | 6.42% p.a. | $3,124 | Principal & Interest | Variable | $0 | $845 | 90% | |||||||||||||
6.79% p.a. | 7.16% p.a. | $3,256 | Principal & Interest | Variable | $0 | $450 | 90% | Disclosure | ||||||||||||
7.09% p.a. | 7.09% p.a. | $3,357 | Principal & Interest | Variable | $0 | $160 | 90% | Disclosure |
Joint property purchase
If you can't buy a property on your own, you could consider buying a home with a spouse, family member, or close friend. Co-ownership can increase your collective borrowing power, allowing all parties to own a property sooner.
There are two ways you can own a property with another person: through joint tenancy or as tenants in common.
With a joint tenancy, all co-owners act as a single entity and are jointly responsible for the property. Under a tenants in common arrangement, each party has a proportionate share in the property.
If a joint property purchase is on the cards, you could look into a 'property share home loan'. A share home loan essentially allows you to both take out home loans for your own share of the property. This may minimise some of the risks involved of buying with another person. These types of loans are not offered by all lenders, however, so you'll need to research the market.
See also: The pros & cons of buying a house with family or friend
Consider rentvesting
If you can't afford to buy where you want to live, you could look into rentvesting as a way to become a property owner faster and, perhaps, at a lower cost. Rentvesting involves purchasing a property in an area where you can afford to buy but don't want to live in, and renting it out. Meanwhile, you yourself rent in an area where you'd prefer to live.
By rentvesting, you can often accumulate equity in your investment property which can become helpful when buying a second property. However, it's important to consider that by rentvesting as a first home buyer, you're no longer eligible for any government first home buyer support which is limited to owner occupiers.
See also: First home, second thoughts: Rentvesting onto the property ladder
Get a guarantor
You could also look into getting a guarantor for your home loan. A guarantor, usually a parent or close family member, will essentially secure your home loan by using the equity in their own home as security for part/all of your loan.
In one sense, a guarantor can act as a conduit between you and your lender, protecting you from LMI costs and improving your chances of loan approval if you're not a very strong applicant on your own merits.
While the mortgage will be in your name and is your responsibility to meet, if anything goes wrong (such as you're unable to make your repayments for any reason), the responsibility then falls onto your guarantor. This is why there is considerable risk involved for the guarantor.
By agreeing to go guarantor on a mortgage, guarantors take on significant risks. In worst-case scenarios, they risk losing their property, damaging their credit standing, and fracturing the relationship should things go wrong.
Savings.com.au's two cents
Shared equity models can provide a viable pathway to home ownership.
Whether through government offerings or private arrangements, it's imperative you understand the implications of the shared equity agreement to gauge whether it aligns with your short and long term goals. Government programs are a good place to start.
If you enter into your own shared equity agreement with another party, it's essential you engage a legal professional to draw up your contract and shared equity agreement. That way all parties will be clear on what's entailed and how any future issues will be handled.