Help to Buy Scheme! Relief for FHB?

What is the government's Help to Buy shared equity scheme?

The government has announced that the Help to Buy scheme, will help get?first-home buyers?into the property market by loaning eligible applicants’ part of the upfront purchase price.

But since?Australian property prices?are so high, there are "naturally" a lot of terms and conditions and not everyone who needs the program is eligible.

So, what is it?

The Help to Buy scheme is a shared equity scheme. The government will loan eligible home buyers’ part of the upfront purchase price of a new home, either 30% of an existing property or 40% of a new build.

This means the federal government would own part of your home equity and you would need to pay out the government’s share, over time or when the property is sold.

Because it’s a shared equity scheme, you could owe the federal government more (or less) than the amount of money they originally gave you.

Example: You purchase a house in 2025 for $800,000 with 40% of it ($320,000) being owned by the government. In 2035, you decide to sell the property. House prices have increased over this time by 40% with a new home valuation of $1,120,000. Great, except the Governments original $320,000 has also increased by 40% to $448,000.

However, the upside is that homeowners won’t have to ask for 30% - 40% of the required money from a lender, making owning a home more affordable in the short term.

Eligible home buyers could benefit from some great advantages from this scheme:

1.????? Lower home loan interest rates.

2.????? No need to save for a?20% minimum deposit.

3.????? No need to pay?Lenders Mortgage Insurance (LMI)

4.????? Lower, more manageable, mortgage repayments.

What are the catches?

The Help to Buy scheme is designed to help 100,000 eligible home buyers (in total) get their own home over four years, starting in the first half of 2025.

The scheme also has location caps, so it doesn’t get used by homeowners in one area, like Sydney.

Applicants don’t need to be first-home buyers. However, you can’t own your own home when you apply (either in Australia or overseas).

The scheme is only available to Australian citizens making less than $90,000 individually or $120,000 as a joint couple per year.

Eligible applicants will need to have saved a minimum deposit of 2% and show they can comfortably finance the rest of the property price through a home loan.

What does the scheme not cover?

The scheme does not cover costs related to stamp duty, utility bills, and body corporate fees like strata, so eligible home buyers will need to show they can cover these, as well.

The government says that loan repayments to them will be voluntary, and they will not charge rent on their share of your home.

Property price caps will apply but will vary depending on the state or territory with price caps for Victoria as follows:

Melbourne and Geelong: $850,000, Regional VIC: $650,000

If you would like to know how much you could borrow and how much it would cost, drop me a line at?[email protected] ?

It’s your money, you work hard for it, let me see if I can keep more of it in your pocket.

This article is not intended to provide specific legal or financial advice, and the content contained therein is subject to change.

Martin Bailey is a Credit Representative (522104) of Buyers Choice Licencing Pty Ltd ACN 626 172 281 (Australian Credit Licence Number: 509484)