How Does The Equity Assisty Loan Work?
The Equity Assist Program is designed to provide the 20% deposit required for a conventional home loan. We lend you the necessary deposit amount, which can then be combined with an 80% LVR mortgage from a different lender.
Homeownership rates among Australians aged 25 to 34 have dropped by over 25% since 1981, primarily due to the challenge of saving for a deposit.
Typically, a home loan requires a deposit of 20% of the property's purchase price. In today's market, where property values often exceed $1 million, this translates to needing at least $200,000 upfront, which is no small feat.
In Australia, the time it takes to save for a deposit has risen dramatically, from six years based on median earnings in 1994 to an astonishing 14 years today, with even longer durations in cities like Sydney and Melbourne.
For renters in competitive markets like Sydney, a significant portion of their income often goes toward housing costs, effectively paying off someone else's mortgage without building any equity or savings.
Even individuals with high incomes can struggle to gather such a substantial upfront amount unless they receive financial assistance from family or a guarantor.
While government initiatives for first-home buyers, such as the First Home Guarantee, offer some support, they come with limitations, including income caps and property value restrictions that leave many potential buyers without options.
Additionally, opting for a deposit lower than 20% can result in hefty charges for Lenders Mortgage Insurance (LMI) and higher interest rates associated with loans that have elevated loan-to-value ratios (LVRs).
This is where the Equity Assist Program makes a significant impact. Let’s explore how this innovative loan operates and what you should know about it.
How Does Equity Assist Work?
The Equity Assist program designed to enhance accessibility to homeownership. This program allows you to leverage the equity from the community, providing financial support that can be combined with a standard mortgage.
The Equity Assist program is specifically tailored for Australians with strong incomes and credit scores, enabling them to secure home loans without the need for extensive savings. This initiative helps you enter the property market sooner and work toward acquiring your ideal home.
Upfront Costs of the Equity Assist Program
The Equity Assist program may involve an Equity Premium, which varies based on your unique circumstances and the amount of equity accessed.
Additionally, all homebuyers in Australia are subject to various government fees when purchasing a property. Customers of New Home Group Australia should also be prepared for:
- Stamp duty
- Loan application fees, including transfer and registration costs
(If necessary we can assit with these costs as well)
To compare how our costs measure against traditional lending options, be sure to use our Upfront Cost Calculator.
What’s Covered by the Equity Assist Program?
The Premium for the Equity Assist program includes if required:
- Access to a Buyer’s Agent: We have access to licensed Buyer’s Agents that can assist you through every step of the home-buying process, from property searching to settlement and moving in. They can manage all communications with real estate agents, including negotiations and auction processes.
- Building and Pest Reports, and Strata Reviews**: While we hope for favorable outcomes, we’re ready to assist if any issues arise and will advise you on the next steps if any concerns are identified.
- Regular Updates and Weekly Consultations: We prioritize communication to keep you informed throughout the process.
- Personalized Digital Home Finder Tool: We’ll collaborate closely with you to identify properties that truly align with your needs.
- Financiall planning Advice: From one of our prefered Financial advisers.
New Home Group Australia is dedicated to making the journey to homeownership more accessible, affordable, and enjoyable!
How do the Equity Assist repayments work?
The Equity Assist program is a fixed rate loan that operates on an interest only basis, with a term of 30 years. It can provide funding for a home deposit of up to 20% of the property's purchase price plus costs, while a traditional mortgage from a primary lender covers the remaining amount.
You will need to make repayments on both the Equity Assist loan and your main mortgage.
Example:
Emily wants to buy a house for $750,000, the entire 20% deposit is provided by Equity Assist and a normal bank has approved her for the primary loan of 80% loan-to-value (LVR) with an interest rate of 6.25% per annum (the same applies for the comparison rate). Her overall interest rate for the combined loans is 6.55% per annum, which results in initial monthly payments totaling $3,937.
For the Equity Assist Loan, Emily's monthly payments amount to $687. Once she has fully repaid the Equity Assist loan, her only remaining obligation will be the 80% LVR mortgage, bringing her monthly payment down to $3,250.
In summary, Emily's payments look like this:
- Monthly repayments for Equity Assist: $687
- Mortgage monthly payments: $3,250
- Total monthly obligations: $3,937
Overview
Terms
- From $50,000 - $500,000*
- 30 Years
- Pay it forward
Rates - Fixed
- Rate: 5.50% pa
- Comparison Rate: 5.78% pa
Fees
- Establishment fee: $3,490
- Risk Fee: 5%
- Monthly fee: $10
- Application fee $2,500 (Fully refundable at settlement if the applicant sticks to the designated time line)
- Program fee is payable depending on loan amount
*Case by case basis for higher loan amounts
What are the eligibilitiy requirements
The Equity Assist program is not suitable for everyone. If you already have sufficient savings for a 20% deposit, we recommend considering traditional home loan options.
This program is specifically tailored for high-earning Australians with strong credit ratings who can manage their mortgage repayments but lack the necessary 20% deposit to qualify for a conventional home loan.
To be eligible for the Equity Assist Deposit Support Loan, applicants must meet the following criteria:
- At least one applicant must be an Australian citizen or a permanent resident.
- A sufficient income to cover both the Equity Assist Loan and an 80% loan-to-value ratio (LVR) mortgage.
- A solid credit history with no significant issues.
- Sufficient funds to pay the Low Deposit Premium and associated Stamp Duty fees.(In some circumstances this can be also be paid using the program)
Moreover, the property must fall within our designated price range and be situated in a location that we currently service.
