Unlocking Shared Equity Schemes: What First Home Buyers Need to Know
Shared equity schemes can help first home buyers get into the market with a smaller deposit, but they come with long-term trade-offs that often get missed.
In this guide, we’ll walk you through:
What shared equity actually means
The rules and responsibilities while you’re in the scheme
And how to exit if you want full control of your home in future
If you're considering shared equity, already using it, or want to understand how it compares to other options, this guide is for you.
This guide gives a general overview of shared equity. Each state has its own version of the scheme (and not every state offers one), so over the coming weeks we’ll dive deeper into the state-based rules to help you understand what applies where you're buying.
This resource supports Episode 11 of the First Home Unlocked podcast, part of our Grants & Schemes Series.
Part 1: Should You Use a Shared Equity Scheme?
What Is Shared Equity?
Shared equity is when a government (or sometimes a private partner) contributes a percentage of the purchase price. In return, they own that same percentage of your property and reduce the amount you need to borrow.
You still live in the home but when you sell or refinance, the government gets back their share of the value, plus or minus any growth or loss. It's not a gift. It's not a grant. It’s co-ownership.
Example:
Let’s say you’re buying a $600,000 home:
You contribute $30,000 (5%)
The government contributes $150,000 (25%)
You borrow the remaining $420,000 from a lender
In the future you sell the home for $720,000 (a $120,000 gain):
The government’s 25% share now equals $180,000, not the $150,000 they originally contributed
You keep what’s left after repaying the loan, the government, and your selling costs
Other Key Considerations:
You’re responsible for 100% of the loan repayments, but the loan amount is smaller, based on your share (e.g. 75%)
You don’t pay interest or repayments on the government’s portion, but you are giving up equity
The property must be owner-occupied, no investment or short-term rental use
Eligibility rules apply, including income caps, purchase price limits, and residency requirements (these differ state by state)
Very limited lender options, often only 1–2 banks available per scheme
Most schemes require you to go direct to the lender, so you miss out on tailored strategy and support from a broker
Consider Other Options:
Before deciding on shared equity, it’s worth comparing all your options. In many cases, a different approach could help you keep full ownership while still buying sooner.
As mortgage brokers, we have access to over 40 lenders and can help you compare all the pathways available, not just the ones that are most popular or talked about.
Let us help you make a decision that fits your income, deposit, and long-term goals.
First Home Guarantee Scheme (FHGS) – Buy with 5% and no LMI, while keeping 100% ownership
Family Guarantor Loans – If family support is available, this can unlock more options
Strategic use of LMI – In some cases, paying LMI upfront may be more cost-effective than giving up 25% of your future equity
When Shared Equity Works Best: When Your Income Can’t Support the Full Purchase Price
The most common reason buyers use shared equity is income servicing.
Because you’re only borrowing your share of the property (e.g. 75%), your loan repayments are lower, and that might be the only way to get into the market at your current income level.
If you’ve found a quality home, you’ve run the numbers, and you know you can comfortably service a 75% share but not the full price, shared equity could be your entry point.
This can be especially useful if:
You’re not expecting your income to increase anytime soon
You’re in a stable job but priced out of quality homes on your own
You’re okay with giving up future equity in exchange for certainty now
It gives you the chance to secure a better-quality asset sooner, rather than settling for something lower quality or continuing to rent while prices rise.
Part 2: Living With Shared Equity
Getting into the market with shared equity can feel like the hard part is over. But once you’ve bought, there are ongoing rules and restrictions that affect how you live in the home, and what you can do with it over time.
It’s still your home, but there’s a co-owner involved, and that comes with responsibilities.
Annual Income Reviews
Most schemes require you to report your income every year to confirm you still meet the eligibility criteria.
If your income grows beyond the set threshold, you might be required to start repaying the government’s share, and this usually isn’t a small, ongoing repayment.
Often, the scheme will ask for large lump sum repayments, like 5% of the property’s current value, not just what it was worth when you bought it.
It’s something to plan for, especially if your income increases faster than expected.
Renovation Restrictions
Thinking about adding a deck, upgrading the kitchen, or making a major change?
If your renovation costs more than $10,000, you’ll likely need written approval first, even though you’re paying for it yourself.
Because the government owns a portion of the property, you can’t just renovate freely without considering how it affects their share.
Windfalls May Trigger Repayment
If you come into a lump sum of money, whether through inheritance, selling another asset, or even a lotto win, some schemes may require you to repay part of the government’s contribution early.
What if you want to rent out your property or refinance?
Even day-to-day decisions can come with extra admin under shared equity.
Renting out a room? Most schemes don’t allow it, and doing so could breach the owner-occupier requirement.
Refinancing? You often need formal approval, and refinancing options can be limited.
Selling? You will need to notify the government before you can sell and in some cases, you may need written approval.
It’s essential to check what’s allowed before making changes.
Loan Strategy Limitations
One of the biggest downsides is restricted lender choice.
Many shared equity schemes only partner with one or two lenders, and you often have to apply directly, meaning you can’t work with a broker to optimise your loan strategy or compare options.
This limits your flexibility and could mean missing out on better rates, structures, or features available elsewhere.
Part 3: Exiting a Shared Equity Scheme
So what if you want out?
Getting the government off your title isn’t always easy, and it’s not just about paying back what they originally gave you.
Here are the main ways to exit:
1. Sell the Property
You’ll repay the lender and the government (based on their share of the current value).
After selling costs, you keep what’s left.
2. Refinance and Buy Out Their Share
If your income and borrowing capacity improve over time, you may be able to refinance and buy out the scheme provider’s share, either partially or in full.
To do this, you’ll usually need:
Stronger income to qualify for the full loan amount on your own
(Note: Many schemes include annual income reviews, and if your income grows beyond a set threshold, you may be required to start repaying the government’s share early, often in large lump sums.)Or with significant equity growth, either by paying down your loan or through property value growth, which typically takes time
The provider’s share is based on the current market value, not the original amount they contributed. So if your property has increased in value, buying out their share may cost more than you expect.
3. Use Savings to Gradually Buy Them Out
Some schemes allow you to buy back the government’s share in stages, but usually only in a minimum of 5% chunks of the property’s current value.
That means you can’t make small regular repayments. You’ll need to come up with a lump sum each time.
For example, if the government has a 25% share in ownership and your home is now worth $500,000, a 5% buyback means you’ll need $25,000 upfront. And as your property grows in value, that minimum repayment gets bigger too.
Final Thoughts
Shared equity can be a useful way to get into the market if your income can’t support a full loan. But it’s not always the best long-term move.
You’re giving up future equity and signing on to strict rules. That’s why it’s so important to explore all your options first.
Before committing, its worth speaking to your broker to compare all options. As brokers, we can help you compare over 40 lenders and find the best fit, not just the schemes that seem easiest now.
Need Help Weighing It Up?
Book a free Get to Know You Chat and we’ll help you make a plan that fits your income, deposit, and future goals.
