First Start

First Start is a Shared Equity Agreement (SEA), which is a formal agreement to be used in conjunction with a Snow Star Credit Union Home Loan. The agreement supports parents or other family members who contribute money towards a deposit in order to help a home buyer get into the property market. The agreement protects all parties by structuring the financial assistance into a formal agreement.

The home buyer’s parents or other family members (referred to as the Contributors) make a contribution towards the purchase of the home in exchange for a share of the equity in the home. The contribution reduces the amount the Home Buyer has to borrow from Snow Star Credit Union.

To be eligible for First Start the Home Buyer’s home loan must be with Snow Star Credit Union.

If you already have a home loan with a bank other than Snow Star Credit Union and you wish to use First Start, you must refinance your home loan to Snow Star Credit Union.

• First Start provides the Home Buyer assistance to get into the market and own a property sooner.
• The amount borrowed from Snow Star Credit Union may be reduced to <80% of the property valuation, saving on average over $10,000 in Lenders Mortgage Insurance (LMI) costs.
• There are no regular principal and interest repayments required with First Start, you simply repay the contribution and a percentage of the equity as a return to the Contributors when you sell the home or at the end of the First Start SEA term.
• The Home Buyer can still apply for the First Home Owner Grant and any stamp duty concessions (if available and if eligible).
• The Home Buyer retains full Home Ownership in their name.

• Circumstances can change in family relationships. Having the arrangement documented in a formal agreement allows for the agreement to be subsequently enforced, waived, or forgiven such as in the unfortunate situation of a death or default.
• The formal agreement can better protect the Contributor’s interest from exposure to marital or family breakdowns.
• The Contributor’s home, assets and credit rating are not at risk.
• The Contributor shares in a percentage of any increased value of the property for helping with the initial cost.
• On repayment the Contributor can use the funds for their own or for other family member needs.

• Repayment of the Contributor’s return may have to be made early in the event of a Home Buyer no longer living in the home or where there is a death of any of the parties to the First Start SEA.
• The First Start SEA is secured using a second Mortgage over the Home Buyer’s property (The Snow Star Credit Union home loan is secured by a first mortgage). If the Borrower commits an event of default, the Contributor may be entitled to sell the home to repay the First Start SEA amount.
• An increased risk of an early repayment event occurring might arise where one or more Contributors is aged or unwell.

Note: Refer to the First Start Shared Equity Agreement Information Statement for further information.

• The property may decline in value. The very worst case would be a significant decline in the property value where little or no equity has been built and the property is subsequently sold. This may mean that the Contributor may not receive the full amount of their initial contribution.
• The Home Buyer is in significant default under their Snow Star Credit Union loan.

Note: Refer to the First Start Shared Equity Agreement Information Statement for further information.

• The Contributor does not share in the ownership, the property is owned by the Home Buyer. However, the Contributor is entitled to a share of the equity built up in the property over the term.
• With First Start, the Contributor has a financial interest, which is secured by way of a registered mortgage. As the Contributor does not share in the ownership of the property, all rights and responsibilities associated with the property such as rates, taxes and insurance fall on the Home Buyer.

The return is based on the percentage proportion the original contribution was of the Purchase Costs. For example, if the original First Start contribution amount was 10% of the purchase costs, at the conclusion of the First Start SEA (e.g. when the property is sold) the Contributor is entitled to 10% of the Sale Proceeds.

Referred to as the Contributor’s return, it is the:

• First Start contribution amount plus any appreciation payment (if property value has increased).
• First Start contribution amount if property value has remained static.
• Possibility of a reduced contribution amount if property value has declined.

To find out more, see our First Start Shared Equity Agreement case studies at bankfirst.com.au.

Note: Purchase Costs and Sale Proceeds are defined terms in the First Start Shared Equity Agreement.

It can run for a maximum term of 20 years, which allows the Home Buyer to build-up increased equity in the property. However, depending on the increase in equity the Home Buyer is encouraged to repay the Contributor as early as possible.

It is concluded when the Contributor’s Return is paid and this is generally when the home is sold or at the end of the term, but may be repaid early if the Home Buyer has the financial capacity to do so. The Home Buyer is encouraged to consider repaying once savings have been built up or sufficient equity has been built up in the property.

Other events may invoke early repayment such as death of a Contributor or Home Buyer.

Yes, if the Home Buyer is eligible and the grants available, they can access both Commonwealth and the relevant State Government first home buyer assistance grants.

Not all properties are acceptable security. Restrictions exist, including but not limited to, commercial/income producing properties (e.g. farms, shops, commercial and industrial properties), remote rural properties, “off the plan” and high-density apartments. Our lending consultants will be happy to provide more detail.