Our unique shared ownership loan may be suitable for you if you're unable to apply for a traditional home loan from mainstream lenders or unable able to afford 100% of the purchase price of the home. This guide covers applying for a shared ownership loan, right through to selling or refinancing your home.
A shared ownership loan is designed to help more people reach their dream of owning a home in an affordable way. With a shared ownership loan, Western Australia's Housing Authority help fund up to a maximum of 30% of the purchase of your home. The Housing Authority will co-own a share of the property with you, acting as a silent partner to help you with the purchase price to get you into home ownership sooner.
A shared ownership loan reduces your ongoing monthly repayments. You purchase a share in your property and the Housing Authority fund up to 30% of your property’s value. The Housing Authority retain a share of the home going forward. Even though the Housing Authority retain a share of your property, the home is still yours. You can increase your share of the property whenever you able to do so.
Your loan with Keystart will be for your portion only, taking into account any additional associated loan fees.
Let's look at an example:
Sam is looking to purchase a property for $350,000. He has qualified for a Shared Ownership Home Loan with the Housing Authority owning 20% of the property value ($70,000). His deposit will be 2% of the purchase price, that is $5,600. His share of the property will be 80% ($280,000) and his loan amount with Keystart will be $274,400 (80% of $350,000 less the deposit $5,600). He will also need funds for any additional associated loan fees.
At Keystart, we don't adopt a one type fits all’ approach, as every person's situation is different. Our team will work with you to help you find a suitable solution for you depending on your income and household size, whether that's a shared ownership loan or one of our other loan products.
Keystart is the only lender that offers this kind of loan in Western Australia. Our Shared Ownership Home Loan assists you if you are unable to afford a 100% home loan, including if you are:
This will be your home, so general maintenance, payments for your rates, insurance, any strata levies and property valuations are solely the responsibility of yourself as the owner.
As a co-owner, the Housing Authority does not require you to pay rent or interest towards their share in the property. You're also able to increase your share of the loan by purchasing further shares when you are in a position to do so.
Note: if you have a fixed shared ownership loan you will not be able to purchase further shares.
Shared ownership loans fall under two categories.
With a flexible shared ownership loan you can refinance or purchase more shares (percentage share) in your property, if you are in a financial position to do so.
With a fixed shared ownership loan, the percentage share of the property that you purchase will always remain the same. You are not able to purchase any further shares of your home or refinance to another lender. If you decide to sell your property, it must be sold back to the Housing Authority for the valuation price. This enables the Housing Authority to retain properties in key locations within the Perth Metro area.
If you opt for a fixed loan, while you'll never own your property outright, if your property value increases, so does the value of your share. This provides you with the opportunity to increase your equity. An increase in equity will be beneficial to you if you choose to sell the property in the future. You can use the equity that has built up in your home loan to assist you in purchasing another home outright in the future.
The real plus with this type of loan is that the Housing Authority will always be there to buy your share from you at its valued price. This reduces the selling time and you won't need to pay marketing fees, property listing fees or commission fees to a real estate agent as you would with a traditional house sale.
We encourage you to purchase more shares in your home when you are in a position to do so. By purchasing more shares, you are reducing the Housing Authority's share of your home. You are moving towards managing a loan for 100% of your home.
You can purchase as many shares as you wish, with a minimum that you can opt to purchase at any one time is a 5% share.
If you decide to buy shares we will need to calculate what the Housing Authority's shares are worth for your home. We'll arrange for an independent property valuer to complete a valuation of your home so we can calculate this.
You don't have to buy more shares. We encourage you to buy more shares if it is suitable for you do so, but you are not obliged to buy any further shares. Your share and the Housing Authority share of your home has an impact if you wish to sell your home or refinance your loan.
As responsible lenders, we will provide support to you by considering any impacts this could have on you and your family. It's important to consider your financial situation before you purchase further shares, as you'll be increasing your loan amount with Keystart and, in turn, increasing your minimum monthly repayments.
We'll work with you to review your current income, any other debts you may have, your current expenses and the current value of your home. This will give you an indication as to whether or not purchasing further shares is suitable for you.
Even if a loan increase is not suitable for you at one time, this doesn't mean that you won't be able to do this in the future.
As with all of our customers, we are happy to assist you to move to another lender when you are ready to do so. Keystart is the only lender that offers shared ownership loans. If you want to refinance to another lender, your new finance must cover the current balance of your loan with Keystart and the current value of the Housing Authority's share.
Let's look at a refinancing example:
Ali and Saliya have had a shared ownership loan with Keystart for 10 years and are looking to refinance. They have a loan for 85% of their property and the Housing Authority holds a 15% share. They have $120,000 left owing to Keystart for their loan. A valuation is completed to calculate what the Housing Authority's 15% share is worth. The property is valued at $350,000, making the Housing Authority's share worth $52,500.
Ali and Saliya will need to receive financial approval from their new lender for $172,500.
[Note - fixed shared ownership loan customers cannot refinance to another lender.]
There may come a time when you want to sell your home.
If you have a fixed shared ownership loan you will only be able to sell your shares in your home back to the Housing Authority.
If you have a flexible shared ownership loan and the Housing Authority still retains a share of your home, your sale price should cover:
If the sale price is less than the amount required to cover all costs, you will have what we call a shortfall. When a shortfall occurs you will need to find funds from elsewhere to cover this amount. You can choose to halt the sale process at any time and wait until your equity increases if this occurs.
If you decide to go ahead with the sale of your home, you'll need to notify Keystart so we can arrange the valuation of your home.
The Housing Authority will be given the first right of refusal to buy the property from you at the valued price of your shares. This reduces the selling time and you will not be required to pay marketing fees, property listing fees or commission fees to a real estate agent as you would with a traditional house sale. If the Housing Authority decides not to buy your shares, it will issue a consent to sell letter with your settlement statement.
After you have received your settlement statement and consent to sell letter, you can begin the process of listing your house for sale on the open market. Keystart is required to co-sign your listing agreement on behalf of the Housing Authority before your real estate agent posts the listing. Your real estate agent can send the prepared listing agreement through to us at email@example.com.
To start the process of refinancing, selling or even purchasing further shares, we first need to arrange an independent valuation of your home. This valuation is used to calculate the value of the Housing Authority's share in the current market.
To ensure a fair valuation for all parties, Keystart uses independent, qualified property valuers. The valuer does not work for Keystart. You will be required to pay the valuation fee. As a silent partner, the Housing Authority is not required to assist you with this cost. The cost of your valuation can vary depending on the location of your property in a metro, regional or rural area.
As part of your valuation, the valuer will assess improvements you may have made to your home and calculate the value they have added to your property. The Housing Authority does not claim any share of this added value.
Let's look at a valuation example:
Alex and Taylor have a shared ownership loan for 90% of their home. The Housing Authority still retains a 10% share. Their property has been valued at $420,000 meaning that the Housing Authority's share is worth $42,000 without taking into consideration any home improvements.
During their time there, the couple have made some improvements to their property and the valuer has indicated that these improvements have added $8,000 to the overall value of the property. This means that the value used to calculate the Housing Authority's share is $412,000. This then reduces the Housing Authority's share to $41,200.
We use the property valuation to help produce a settlement statement for you. This document provides you, your real estate agent and your settlement agent, with a breakdown of the valuation amount, the value of home improvements used and the required amount to pay out the Keystart loan and the Housing Authority share of the loan. It also includes an estimate of the fees and charges involved in the sale (excluding any agent fees).
A copy of the valuation report is not provided to you as it is for the purpose of creating your settlement statement only.
It can take 3-4 weeks to generate your settlement statement as we need to liaise with the valuer, the Housing Authority and the Office of State Revenue to create your documentation.
If your home improvements have added value to your property, this reduces the value of the Housing Authority's share.
When looking to sell, refinance or purchase a greater share in your shared ownership home, a valuer is able to assess any improvements you may have made to your home and will take those into account in the valuation. Some examples of changes that may add value are adding an air conditioner, deadlocks, security screens, a bathroom or kitchen renovation, a patio, reticulation, or adding a shed. We have a list of improvements that are considered to add value to your home. Some of these improvements require evidence that you had shire approval before your valuation can take place so keep your paperwork somewhere handy.
If a single improvement has added upwards of $5,000 to the overall value of your home, Keystart will require receipts to show the payment amounts. If you cannot locate a receipt that shows this, the maximum that the Housing Authority's share can be reduced by for this item is $5,000.
Let's look at an example with home improvements:
Nuong installed an air conditioner in her home for $8,000.
When the property is valued, the valuer advises that this had added $6,000 to the overall value of the property. She is unable to find the receipt for the purchase of the air conditioner or the instalment cost. The company she used is no longer in business and she is unable to retrieve a copy from their records. In this case, only $5,000 worth of value can be applied to reduce the Housing Authority's share. If she had managed to get hold of a receipt showing the works had been paid for she would have been able to claim the full $6,000 suggested by the valuer.
Keystart recommends that you seek your own independent financial advice prior to making any decisions about your financial needs. The examples given in this post are provided for illustrative purposes only.
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