HOME LOANS
How your LVR impacts your home loan
By Megan Birot
What is the Help to Buy Scheme?
The Help to Buy Scheme helps eligible home buyers purchase a property with a deposit as low as 2%, with the government contributing part of the purchase price and becoming part-owner of the property.
Under the scheme, the government will contribute up to 40% of the purchase price for new homes and 30% for existing homes, in exchange for an equivalent equity share in the property.
The scheme was first proposed by the Australian Labor Party in 2022 as part of its federal election platform to address housing affordability. It passed through Parliament in November 2024. Applications opened on 5 December 2025.
At launch, only two lenders are offering home loans under the scheme - Commonwealth Bank and Bank Australia.
How does the Help to Buy Scheme work?
Here are the nuts and bolts of how the Help to Buy Scheme works:
Government contribution
If you qualify, you can purchase a home with just a 2% deposit, and the government will contribute up to 40% of the cost for new homes (or 30% for existing ones), in exchange for a share of the ownership.
No lender’s mortgage insurance (LMI)
You avoid paying lender’s mortgage insurance (LMI) on your home loan under the scheme. In practice, this would allow eligible buyers to purchase a $600,000 house with a deposit of as little as $12,000, excluding other buying costs.
Shared equity ownership
The government owns a proportional share of the property. You won’t pay rent on this share, but will need to repay the government’s contribution when you sell the home or refinance. You can also choose to buy out the government’s share over time.
Suppose the government owns 30% of your home, and your deposit is 2%; your home loan would only need to cover the remaining 68% of your property’s value.
In other words, you would have a loan-to-value ratio (LVR) of 68%. On a $600,000 home, for instance, this is a loan of $408,000.
Help to Buy Scheme eligibility criteria
To be eligible for the Help to Buy Scheme, you must:
- Be an Australian citizen and at least 18 years of age
- Have a taxable income of $100,000 per year or less as an individual, and $160,000 per year or less for couples and single parents
- Buying a home valued below the price cap in your area (more on this below)
- Live in the purchased home (i.e. it cannot be used as an investment property)
- Not own any other land or property in Australia or overseas when you apply.
What are the property price caps on Help to Buy?
Here are the maximum property price caps for the Help to Buy Scheme, based on the city or region where you're buying. These caps are set to closely reflect the median house prices in each state or territory.
State | New South Wales |
|---|---|
Capital/regional centre | $1,300,000 |
Rest of the state | $800,000 |
State | Victoria |
Capital/regional centre | $950,000 |
Rest of the state | $650,000 |
State | Queensland |
Capital/regional centre | $1,000,000 |
Rest of the state | $700,000 |
State | Western Australia |
Capital/regional centre | $850,000 |
Rest of the state | $600,000 |
State | South Australia |
Capital/regional centre | $900,000 |
Rest of the state | $500,000 |
State | Tasmania |
Capital/regional centre | $700,000 |
Rest of the state | $550,000 |
State | Australia Capital Territory |
Capital/regional centre | $1,000,000 |
Rest of the state | N/A |
State | Northern Territory |
Capital/regional centre | $600,000 |
Rest of the state | N/A |
| State | Capital/regional centre | Rest of the state |
|---|---|---|
New South Wales | $1,300,000 | $800,000 |
Victoria | $950,000 | $650,000 |
Queensland | $1,000,000 | $700,000 |
Western Australia | $850,000 | $600,000 |
South Australia | $900,000 | $500,000 |
Tasmania | $700,000 | $550,000 |
Australia Capital Territory | $1,000,000 | N/A |
Northern Territory | $600,000 | N/A |
Help to Buy Scheme pros and cons
Pros
- You only need a 2% deposit, making homeownership more accessible – especially for first home buyers and lower-income households. A recent Money.com.au analysis found that 34% of Australians spent 3-4 years saving for a house deposit, a timeframe that could be significantly reduced under the Help to Buy Scheme.
- No need to pay LMI, which can save thousands of dollars in costs (plus interest if it’s added to your loan).
- It reduces the amount you need to borrow, which will result in smaller monthly repayments compared to what you would otherwise need.
Cons
- Since the government helps fund part of your home, they retain a share in it, which you’ll need to repay when you sell or refinance.
- Even with the shared equity scheme’s expansion, places are capped at 40,000 over four years, meaning not all eligible buyers will secure a spot
- There are caps on income and property value, and not all homes or buyers will qualify, plus you still have to pay associated upfront costs (i.e. stamp duty).
Limited lender participation also narrows borrowers' options
Debbie Hays, Senior Mortgage Broker
“At this stage, the Help to Buy Scheme is only available through two participating lenders. One of them is CBA, which has chosen to restrict applications and enquiries to its branch network. This significantly reduces the upside for borrowers who may qualify for the scheme, as they could end up with a product or rate that isn’t in their best interest. The full benefits of the scheme will only become clear once more lenders come on board and if demand is strong enough to support broader participation. In saying that, we have already seen an uptick in enquiries, particularly from borrowers wanting to understand how the scheme compares to the First Home Guarantee (FHG).”
Debbie Hays, Senior Mortgage Broker
Help to Buy vs First Home Guarantee: Which is better?
Money.com.au analysis shows that over the life of the loan, buyers would pay more interest under the First Home Guarantee than with the Help to Buy Scheme.
However, after 5 years (assuming the property increases in value), a buyer using the First Home Guarantee would have built up even more equity in their home. Even after five years, the Help to Buy scheme borrower still might not be in a position to refinance their loan as their LVR would still be above 80%.
This example is based on a borrower with a home loan interest rate of 6.00% p.a. over a 30-year term, with mortgage fees excluded.
House price | |
Help to Buy Scheme | $600,000 |
First Home Guarantee | $600,000 |
Minimum deposit | |
Help to Buy Scheme | $12,000 (2%) |
First Home Guarantee | $30,000 (5%) |
Government support | |
Help to Buy Scheme | $180,000 (30% for existing home) |
First Home Guarantee | 15% guarantee (equivalent of 90,000) |
Loan amount | |
Help to Buy Scheme | $408,000 |
First Home Guarantee | $570,000 |
Monthly repayments | |
Help to Buy Scheme | $2,446 |
First Home Guarantee | $3,417 |
Total interest payable | |
Help to Buy Scheme | $472,620 |
First Home Guarantee | $660,278 |
Borrower equity after 5 years with property value of $750,000 | |
Help to Buy Scheme |
|
First Home Guarantee |
|
| Help to Buy Scheme | First Home Guarantee | |
|---|---|---|
House price | $600,000 | $600,000 |
Minimum deposit | $12,000 (2%) | $30,000 (5%) |
Government support | $180,000 (30% for existing home) | 15% guarantee (equivalent of 90,000) |
Loan amount | $408,000 | $570,000 |
Monthly repayments | $2,446 | $3,417 |
Total interest payable | $472,620 | $660,278 |
Borrower equity after 5 years with property value of $750,000 |
|
|
While a buyer using the Help to Buy Scheme may pay less interest on their loan, their repayments would only contribute towards them owning 70% of their existing property.
There would be an additional $180,000 required to purchase the government’s stake in their home. Meanwhile, a buyer using the First Home Guarantee would own 100% of their property at the end of the loan term.
Shared equity scheme risks to consider
Participating in a shared equity scheme offers a pathway to home ownership for buyers who face challenges saving for a larger deposit. However, the compromise is that a portion of your home will be owned by the government for some time. There are other potential downsides too, according to Mortgage Broker, Mansour Soltani.
"If you’re considering the Help to Buy Scheme as a means to transition to your next property, consider your exit strategy from the shared equity arrangement carefully. The possibility of building up enough equity to buy a larger home in the future may be limited since you will need to repay the government its 30-40% equity stake when you sell."
It could also increase house prices
Mansour Soltani, Mortgage Broker and Property Expert
"While the Help to Buy Scheme can assist low-income earners to enter the property market sooner, it also has the potential to increase demand for property by boosting buying power, pushing house prices up and out of reach for other buyers in the process. We’ve seen it happen in 2008 with the First Home Owners Boost and the HomeBuilder program during COVID."
Mansour Soltani, Mortgage Broker and Property Expert
How to apply for the Help to Buy Scheme
Verify your eligibility
Check that you meet the eligibility criteria, including: having a 2% deposit, being within the income limits and property price caps. Consider using a mortgage broker if you need help understanding the scheme and whether you qualify.
Contact a participating lender
After checking your eligibility, a participating lender can help guide you through the process and assess your financial position.
Get pre-approval
Once your participating lender completes their checks, they’ll submit your pre-approval application to Housing Australia. If approved, your place in the Help to Buy Scheme is reserved for 90 days (matching your loan pre-approval) with the option to request one 90 day extension before the initial period expires.
Start looking for properties
With pre-approval secured, you can begin looking for a home that suits your needs and meets the Help to Buy requirements. Your confirmation letter will outline your maximum purchase price, reservation expiry date, and the State or Territory you applied in, giving you a clear guide as you house hunt.
Finalise your contract and pay your deposit
Once you have chosen an eligible home, you’ll work with your solicitor on the contract of sale, confirm you’re comfortable with ongoing costs, sign the contract, and pay your deposit. After signing, contact your Participating Lender right away so they can update your application, share details with Housing Australia, and arrange final approval.
Settle your home and join Help to Buy
Your Participating Lender will submit the final part of your application to Housing Australia, and once all requirements are met, your place in the Help to Buy scheme will be formally approved.
You’ll then sign key documents, such as the Participation Agreement and National Mortgage Form, with guidance from your solicitor or conveyancer before moving toward settlement.
Before settlement you must arrange building insurance and provide proof to your lender and Housing Australia. On settlement day, the funds transfer, ownership is finalised, and the home officially becomes yours.
