IBA Shared Equity is a finance product that IBA can offer in addition to your IBA Home Loan if you meet the eligibility requirements. The IBA Shared Equity product helps bridge the gap between the maximum amount you can borrow with an IBA Home Loan and the cost of the home you want to purchase.

Here’s how it works, in addition to a home loan that you can afford, IBA can provide you with additional finance via the IBA Shared Equity product of up to 35% of the purchase price of your new home. The percentage that the IBA Shared Equity finances, is what we refer to as IBA’s equivalent share in the property or IBA’s equity share. This will be the percentage returned to IBA when you sell or refinance your home, along with the outstanding balance of your home loan at that time.

For example, if the maximum amount you could borrow was $400,000 and properties in your location were selling for around $500,000, IBA might be able to finance the gap of $100,000 via IBA’s Shared Equity product to help you buy your new home sooner.

Do I make repayments?

You will not be required to make any repayments on the IBA Shared Equity product during its term like you will be required to with your home loan. You will, however, need to buyout the full amount of IBA’s equity share when you sell your home, refinance your home loan or pay your home loan out in full.

You can make lump sum payments at any time to reduce (or buyback) IBA’s equity share. Each payment must be at least $10,000.

Is interest charged on the IBA Shared Equity product?

No. Interest is not charged on the IBA Shared Equity product. Instead of IBA charging interest on the financed amount with IBA’s Shared Equity product, when you refinance or sell the property, you will buyout IBA’s equivalent share in the property which will be based on the value of your home at that time.

Do I own my home?

Yes. Unlike some other shared equity schemes, IBA will not be registered as an owner of the property. This means that you will be the registered owner of the property.

We will record our interest in the property by registering a mortgage on the property title, the same way we do for all IBA Home Loans. However, in some states/territories, we may also need to register an additional security document to ensure that we are covered for the full amount of the funds we have provided you for the purchase of your home.

How is the Shared Equity amount determined?

First, IBA will determine how much you can afford to borrow. Then we will work out the amount you will need to purchase a suitable home. While the shared equity amount can be up to 35% of the purchase price, we encourage customers to consider what is the appropriate product mix between the IBA Home Loan and IBA Shared Equity product and to obtain financial advice via a financial planner to assist with this.

How does IBA’s equity share change?

Over time, the value of your home may increase or decrease depending on housing market movements. As this happens, your and IBA’s equity increases or decreases.

For example, when the value of your home increases:

When You Buy:		After 5 Years:
Purchase Price	$500,000	Property Value	$550,000
IBA Home Loan	$315,000 (63%)	IBA Home Loan	$285,000 (52%)
IBA Shared Equity	$175,000 (35%)	IBA Shared Equity	$192,500 (35%)
Your Deposit	$10,000 (2%)	Your Equity	$72,500 (13%)

IBA will assess the current value of your home and reset the amount of your and IBA’s equity share at least every 5 years and at the time you refinance or sell your home. IBA uses suitably qualified valuers to carry out these assessments and may seek your permission for the valuer to access your home to carry this out.

How can I reduce IBA’s equity share?

There are two ways that you can reduce IBA’s equivalent share in your home.

By buying back IBA’s equity share in lump sum payments. Each voluntary payment must be at least $10,000; or
By making significant renovations or improvements to your home valued at $25,000 or more and that increase your property value by $25,000 or more.

You must contact us before making a lump sum payment or commencing renovations or improvements to ensure that we can adjust the equity shares fairly, accurately and to ensure you receive the full benefit. IBA will arrange a valuation of your home to understand the value prior to you making a lump sum payment. We will also arrange a valuation of your home prior to and after renovations to enable us to determine the new equity shares.

How can I fully buyout IBA’s equivalent equity share?

There are several ways you can buyout IBA’s equivalent equity share, including:

Selling your home
Refinancing your IBA Home Loan and IBA’s Shared Equity product with IBA or another financier
A cash windfall or accumulated savings.

The amount to buyout IBA’s equity share will be determined by the current value of your home and the equity percent held by IBA at that time.

Who covers the cost of the valuations and how much do they cost?

Any IBA initiated valuations, including the one we will carry out every 5 years, will be at IBA’s expense.

Any valuations required in response to a request from you to buyback or buyout IBA’s equity share or a notification that you intend to carry out significant renovations or improvements to your home, will be at your expense.

The cost of a valuation ranges extensively based on location, valuer availability and the ease of valuer accessibility. Valuations typically range from $300 to $800, however, it is best to discuss this with your IBA Home Lender who will be able to provide you with an idea based on your individual circumstances.

For customers that are unable to afford to meet the costs of the valuation, IBA may be able to meet this cost on your behalf and add the cost back to your home loan balance.

Who is responsible for maintaining the property and paying ongoing property costs?

As the property owner, you are responsible for all the ongoing maintenance and costs of the property. This includes rates, electricity and building insurance. IBA does not share in these costs.

What type of insurance do I need to take out on the property?

The type of insurance will depend on the type of property you own.

For a unit, this will most likely be covered in your Body Corporate fees.

For a home on land that you own, you will need to ensure you have adequate building insurance, with Indigenous Business Australia (IBA) recorded as an interest party on your insurance policy.

You will also need to ensure that as you renew your insurance policy each year, you provide IBA with a copy of your renewal confirmation. Or if a new policy or insurance provider, a copy of the new policy.

Am I eligible for IBA’s Shared Equity?

You will need to meet minimum criteria to be eligible for IBA’s Shared Equity, which we will discuss with you during your application process. This includes:

Meeting minimum deposit requirements;
The location and cost of your new home; and
You must be eligible for a home loan with IBA.
IBA also strongly encourages you to obtain independent legal and financial advice to make sure IBA’s Shared Equity product is right for you.

What type of property can I buy?

Like a home loan, you can choose to buy or build your home.

It is important to consider what a suitable home looks like for you, and then compare that to what you can afford. Have you found the right suburb, considered proximity to schools, public transport, parks, shops, support networks or employment? Are you looking for your first home to help you step onto the property ladder? Knowing what you want, or will need in the near future, means that you can properly assess how much you are willing to spend, and if bridging the gap with IBA’s Shared Equity will help you find a suitable home.

Are there any restrictions where I can purchase?

Yes, your home must be in a metropolitan or regional location. Homes in rural or remote locations are not eligible. You can discuss your preferred location with your IBA Home Lender when you apply.

Do I have to live in the property?

Yes, the home must be your principal place of residence.

Can I sell my home at any time?

Yes, in most circumstances. However, you must advise IBA of your intention to sell before putting your home on the market.

How are proceeds from the sale of my property treated?

When you sell your home, the proceeds will be used to:

repay the outstanding balance of your IBA Home Loan (including any accrued interest, fees and charges)
buyout IBA’s equity share in the property value at that time.

You will receive any remaining sale proceeds.

The amount owing on IBA’s equity share will be calculated based on the final valuation or sale price, whichever is the greater of the two.

Can I refinance my home loan at any time?

Yes, in most circumstances. However, you must advise IBA of your intention to refinance. IBA may decline the refinance if the refinance loan is not enough to fully repay the IBA Home Loan and buyout IBA’s equity share.

IBA will require you to attempt to refinance IBA’s equity share after the first 5 years either with an IBA home loan or home loan from another lender. If you are unable to afford to refinance, IBA will require you to attempt to refinance again into the future.

What happens if I’m unable to buyout the IBA Shared Equity at the end of the term?

At the end of the term, you will be required to buyout IBA’s equity share so it’s important that you plan for this and obtain legal and financial advice on the best way for you to plan and prepare for buyout.

There are a number of different scenarios or customer circumstances that might apply at that time. Some customers may be looking to sell and downsize their home at the end of term, others may be looking to retire and use their superannuation to buyout IBA’s equivalent equity share and others may have a partner or family member who is interested in buying out IBA’s equity share.

Noting that every customer’s circumstances are different, it is really important that before entering into this product, that you get independent legal and financial advice to help you with your planning and to ensure that the product is right for you.

Can I still receive the First Home Owner Grant (FHOG)?

Yes. The IBA Shared Equity product does not impact your eligibility for the FHOG. If you are eligible for the FHOG, we can assist you to apply.

Can I participate in the Home Guarantee Scheme (HGS)?

No. Homes purchased with shared equity arrangements are not eligible for the HGS.

You can find more information about the HGS here.