The Australian Government’s Help to Buy legislation is set to be reintroduced to Parliament again next week, with the potential for a double dissolution election looming if it fails once more.
In September, a Senate vote on the matter was postponed due to opposition from both the Greens and the Coalition.
While the Coalition seems unequivocally opposed to the plan, the Greens are open to negotiations, seeking reforms to negative gearing, capital gains tax, and rental protections in exchange for their support.
It’s been several years since the government announced plans for the scheme, so in this week’s newsletter, we revisit the nuts and bolts of the proposal.
The Australian Federal Government’s Help to Buy scheme is designed to assist eligible Australians in purchasing their own home by lowering the financial barriers to entry, such as deposit requirements and mortgage sizes. This shared equity program, introduced as part of the government’s housing affordability efforts, is aimed at helping lower and middle-income earners who may otherwise struggle to enter the property market.
Key Features of the Help to Buy Scheme
Shared Equity Model – The government contributes up to 40% of the purchase price for a new home or up to 30% for an existing home, which reduces the loan amount the buyer needs to borrow.
Lower Deposit Requirements – Buyers are required to have a deposit of at least 2% of the home’s purchase price, much lower than the typical 20% required by most lenders.
No Lenders Mortgage Insurance (LMI) – Because the government is co-investing in the property, buyers are not required to pay costly LMI, which is usually needed for deposits below 20%.
Eligibility
The scheme is open to Australian citizens over 18 years old who do not currently own a home and meet specific income thresholds—individuals earning up to $90,000 per year and couples earning up to $120,000 combined annually.
Property Price Caps – There are limits on the price of the property that can be purchased under the scheme, varying depending on the state and region, ensuring the program targets affordable housing.
Repayment of Government’s Share – The government’s equity share must be repaid when the property is sold, the homeowner buys out the government’s share, or their financial situation significantly improves. Repayments can be made gradually over time or in a lump sum.
Benefits of the Scheme
- Helps first-time buyers and middle-income earners purchase a home sooner by reducing deposit and loan size requirements.
- Lowers ongoing mortgage payments, making homeownership more accessible and affordable.
- Encourages home ownership in a housing market that has become increasingly difficult to enter due to rising prices.
This initiative aims to address housing affordability and offer practical assistance to Australians who may be priced out of the housing market.
Variable
The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR.
1 Year Fixed
The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR. At the end of the three year fixed period, the borrowers interest rate will revert to a standard variable rate for the life of the loan.