What is the Help to Buy Scheme?
The Albanese Labor Government has announced a new type of homebuyer scheme, the Help to Buy Scheme that will assist eligible Australians in entering the property market more swiftly.
Since property prices are at an all-time high, there are only select homebuyers who will be eligible for the program even though most need the leg up when it comes to home ownership. The scheme is the Labor Party’s way of making good on subsidising property costs.
So let’s discuss the Help to Buy Scheme and what important criteria to take note of.
What is the Help to Buy Scheme?
The Help to Buy Scheme is designed as a shared equity initiative that enables homebuyers to acquire a property with a smaller upfront deposit. Under this scheme, potential buyers who have at least a 2% deposit of the home purchase price can secure a loan with an equity contribution from the Labour Federal Government.
Much like previous state-level programs, such as the VIC HomeBuyer Fund and the WA HomeShare Scheme, this new initiative operates as a shared equity scheme. The government can shoulder up to 40% of the home’s total cost in exchange for a proportional interest in the property.
This means that while you are not required to pay rent on the portion held by the government, you will be paying down the equity contribution over time or paying it back once it’s time to sell the home. Come repayment time, the home’s valuation may change, so you could actually owe the federal government more or less than what the original contribution cost.
Help to Buy Scheme is introduced as part of the 2022 federal election campaign and has yet to be launched, but Labor announced that it should be accessible to 10,000 homebuyers each year.
What are the requirements?
Eligibility criteria for the Help to Buy Scheme have been outlined in the announcement:
Citizenship: Applicants must be Australian citizens who are at least 18 years old.
Income: Yearly income should not exceed $90,000 for individuals or $120,000 for couples.
Residential property: Purchasers are required to live in the property they acquire.
Ownership: Prospective buyers must not currently possess any other land or property, whether
in Australia or overseas.
Deposit: Individuals must have saved the necessary minimum deposit of 2% of the property’s cost and must be able to finance the remaining amount through a home loan offered by a participating lender.
Costs: Buyers should be capable of covering all associated upfront costs, such as stamp duty, legal fees, and bank fees. They will also be responsible for ongoing property-related expenses, including rates, strata fees, electricity bills, and more.
Why Help to Buy Scheme is Relevant
The Labor Party’s Help to Buy program is set to launch in the first half of 2024 and will span four years. To prevent concentration in specific regions, the scheme is subject to location caps, ensuring broader distribution. The program has the potential to
One noteworthy feature distinguishing this government initiative from the first-home guarantee and family home guarantee schemes is that it doesn’t exclusively cater to first-home buyers. However, a crucial requirement for applicants is that they should not currently own any residential property, be it in Australia or overseas.
This shared equity scheme extends solely to Australian citizens with individual annual incomes not exceeding $90,000 or $120,000 for couples. Eligible candidates are expected to have saved a minimum deposit of 2% and demonstrate their capacity to comfortably finance the remainder of the property’s cost through a home loan.
Further Details About Help to Buy Scheme
The scheme will not cover costs related to stamp duty, home utility bills, strata, and other corporate fees. Eligible applicants should be able to display the ability to cover these costs.
And while yet to be announced, the scheme is expected to have property price caps. These will vary depending on the state or territory plus location. Here are the price caps for the scheme:
New South Wales
Sydney and regional centres – $950,000
Rest of the state – $600,000
Victoria
Melbourne and Geelong – $850,000
Rest of the state – $550,000
Queensland
Brisbane, the Gold Coast, and the Sunshine Coast – $650,000
Rest of the state – $500,000
Western Australia
Perth – $550,000
Rest of the state – $400,000
South Australia
Adelaide – $550,000
Rest of the state – $400,000
Tasmania
Hobart – $550,000
Rest of the state – $400,000
Australian Capital Territory
$600,000
Northern Territory
$550,000
How Much Potential Savings?
It all really depends on what type of home and which location you are buying, but it is likely that the savings provided by the Help to Buy Scheme will accumulate over time and benefit homebuyers because of the smaller loan amount and repayments.
Moreover, eligible Australians are able to save thousands upfront as you are exempt from having to pay Lenders Mortgage Insurance even if you are only placing a 2% deposit.
An estimated amount of savings would be around $380,000 over a home priced at $950,000.
Help to Buy Scheme is expected to help thousands of homebuyers who struggle the most in overcoming financial barriers to homeownership. It’s expected that upon approval of states and territories, the program will commence in early 2024.
