With rising property prices across Australia, Government Shared Equity Schemes are becoming a popular pathway for first home buyers who are struggling to save a large deposit.

These schemes allow eligible buyers to purchase a home with a smaller deposit and no Lenders Mortgage Insurance (LMI), by having the government contribute part of the purchase price in exchange for an equity share in the property.

When used correctly, shared equity can be an effective stepping stone into long-term home ownership.

How a Government Shared Equity Scheme Works

Under a shared equity arrangement, the government contributes a percentage of the purchase price, usually between 25% and 40%, depending on the scheme and property type.

You:

  • Live in the home as the owner-occupier

  • Take out a smaller home loan

  • Make repayments only on your portion of the loan

  • Do not pay interest on the government’s contribution

The government:

  • Owns an equity share in the property

  • Shares in capital growth or loss proportionally

  • Is repaid when you refinance, sell, or buy back their share

Simple Example

  • Purchase price: $800,000

  • Buyer deposit: 5% ($40,000)

  • Government contribution: 30% ($240,000)

  • Home loan required: $520,000

Without the scheme, a buyer may have needed a much larger deposit or paid LMI. The trade-off is that the government owns part of the property.

Who Is Eligible?

Eligibility varies slightly between federal and state-based schemes, but common requirements include:

  • Australian citizen or permanent resident

  • Owner-occupier only (no investment properties)

  • Income caps apply (generally around $90,000–$100,000 for singles and $120,000–$160,000 for couples)

  • Property price caps depending on location

  • Minimum deposit, usually between 2% and 5%

  • First home buyers or buyers who do not currently own property

Some state schemes are targeted at specific groups such as single parents, key workers, or older singles.

Benefits of Shared Equity Schemes

  • Lower deposit required

  • No Lenders Mortgage Insurance

  • Smaller loan and lower repayments

  • Faster entry into the property market

  • Opportunity to buy sooner rather than waiting years to save

Risks and Important Considerations

Shared equity is not free money and should be entered into with a long-term strategy in mind.

Key considerations include:

  • The government shares in capital growth

  • Buying back equity is done at market value

  • Restrictions often apply to renting the property

  • Refinancing options can be limited until equity is repurchased

  • Places are capped and competitive

Understanding the exit strategy upfront is critical.

How Refinancing Works with a Shared Equity Scheme

There are two main ways to refinance.

1. Buying Out the Government’s Share

To fully refinance, you must repay the government’s equity based on the current market value.

Example:

  • Property value at refinance: $900,000

  • Government share: 30%

  • Amount to repay: $270,000

Your new loan would need to cover your existing loan balance plus the government buy-out amount. Once repaid, you own 100% of the property.

2. Partial Buy-Back

Many schemes allow partial buy-backs over time, such as 5% or 10% increments. This gradually increases your ownership and reduces the government’s share.

What Lenders Will Assess When You Refinance

To refinance out of a shared equity scheme, lenders will review:

  • Current income and employment stability

  • Existing debts

  • Updated property valuation

  • Loan-to-value ratio after buy-out

  • Overall serviceability

In most cases, refinancing works best once income has increased or the property has experienced capital growth.

Is a Shared Equity Scheme Right for You?

A shared equity scheme can be suitable if:

  • You have stable income but limited savings

  • You plan to live in the property long-term

  • You expect your income to grow

  • You want to avoid LMI

It may not be suitable if:

  • You plan to sell in the short term

  • You want full exposure to capital growth

  • You can reasonably save a 20% deposit

Final Thoughts

Government Shared Equity Schemes are best viewed as a strategic entry point into the property market, not a shortcut.

When structured correctly, they can:

  • Reduce barriers to entry

  • Lower upfront risk

  • Accelerate home ownership

The key is understanding how the scheme works from day one, particularly how and when you can refinance or buy back the government’s share.

Professional advice is strongly recommended to ensure the structure aligns with your long-term financial goals.

Finance, simplified.