Help to Buy Scheme Australia: Eligibility & Savings Guide
- The Help to Buy scheme will allow eligible homebuyers to buy property with a 2% deposit, with the government acting as a ‘buying partner’ for a 30-40% equity stake.
- Money.com.au compared the potential savings for an eligible home buyer using the Help to Buy scheme versus the First Home Guarantee.
In our Help to Buy scheme guide:
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What is the Help to Buy scheme?
The Help to Buy scheme is a new national shared equity scheme that will help eligible home buyers buy a property with a deposit of as little as 2%, with the government contributing 30-40% equity towards the purchase.
You would avoid paying lender’s mortgage insurance (LMI) on your home loan under the scheme. In practice, this would allow eligible buyers to buy a $600,000 house with a deposit of as little as $12,000, excluding other buying costs.
The Help to Buy Scheme is expected to commence sometime in 2024, according to the Treasury. There are up to 10,000 places for FY 2023-24, with a total of 40,000 spots allocated over four years. The Help to Buy scheme will require legislation in all states and territories so the roll out timetable and specific scheme rules may vary depending where you are in the country.
The shared equity scheme is designed to help Australians on low and modest incomes buy a property sooner. Because of this income thresholds apply, and Help to Buy places will be available on a first come, first served basis.
How will the Help to Buy scheme work?
Under the Help to Buy scheme, you can buy a house, unit or townhouse by contributing a minimum 2% deposit, with the government providing an equity contribution of up to 40% for new homes, or 30% for existing homes.
The remainder of the property’s value would be financed through a home loan with a participating lender.
In layman’s terms, the government will serve as your ‘buying ‘partner'. It will fund 30-40% of your home for an equivalent stake in that property. The government will then recoup its initial investment, plus a share of any capital gains if the property has increased in value when it is sold.
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. Usually, the maximum LVR allowed is 80% if the borrower is to avoid paying for LMI.
Help to Buy scheme pros & cons
Pros
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Pro: You won't have to pay rent or interest on the government's share of the home.
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Pro: You won’t have to pay LMI on the loan and your repayments will be lower as you can purchase a home with a smaller loan compared to what you would otherwise need.
Cons
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Con: You will still have to pay associated upfront costs, such as stamp duty and you must be able to finance the remainder of the loan. You will also be responsible for ongoing costs like rates, home insurance and utilities.
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Con: The government will own 30-40% of your property until you either sell it or buy back some equity later on. The government will recover its initial investment when you sell the property or buy back its equity.
Who’s eligible for the Help to Buy Scheme?
To be eligible for the Help to Buy scheme, you must:
- Be an Australian citizen & at least 18 years of age
- Have an annual taxable income of less than $90,000 for individuals and $120,000 for couples (you may be asked to provide a Notice of Assessment from the ATO)
- Be buying a home valued below the price cap in your area
- 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.
Please note, these are the indicative eligibility criteria announced so far by the government – the final rules for the scheme are still to be announced.
Help to Buy scheme property price caps
The Help to Buy program has property price caps, depending on the city and region in which you’re buying a home. Price caps closely align with the median house prices in each state.
State | New South Wales |
|---|---|
| Capital/regional centres | $950,000 |
| Rest of the state | $750,000 |
State | Victoria |
| Capital/regional centres | $850,000 |
| Rest of the state | $650,000 |
State | Queensland |
| Capital/regional centres | $700,000 |
| Rest of the state | $550,000 |
State | Western Australia |
| Capital/regional centres | $600,000 |
| Rest of the state | $450,000 |
State | South Australia |
| Capital/regional centres | $600,000 |
| Rest of the state | $450,000 |
State | Tasmania |
| Capital/regional centres | $600,000 |
| Rest of the state | $600,000 |
State | Australia Capital Territory |
| Capital/regional centres | $750,000 |
| Rest of the state | $600,000 |
State | Northern Territory |
| Capital/regional centres | $600,000 |
| Rest of the state | $550,000 |
| State | Capital/regional centres | Rest of the state |
|---|---|---|
New South Wales | $950,000 | $750,000 |
Victoria | $850,000 | $650,000 |
Queensland | $700,000 | $550,000 |
Western Australia | $600,000 | $450,000 |
South Australia | $600,000 | $450,000 |
Tasmania | $600,000 | $600,000 |
Australia Capital Territory | $750,000 | $600,000 |
Northern Territory | $600,000 | $550,000 |
Help to Buy vs First Home Guarantee: How much could you save?
Money.com.au analysed the potential savings under the Help to Buy scheme and First Home Guarantee for an eligible home buyer with a home loan at 6% interest over a 30-year term. Both example scenarios exclude home loan fees.
Help to Buy scheme
- House price: $600,000
- Minimum 2% deposit: $12,000
- Government 30% equity for existing home: $180,000
- Loan amount: $408,000
- Monthly repayments: $2,446
- Total interest payable: $472,620
First Home Guarantee
- House price: $600,000
- Minimum 5% deposit: $30,000
- Government 15% guarantee: Equivalent of $90,000
- Loan amount: $570,000
- Monthly repayments: $3,417
- Total interest payable: $660,278
A home buyer eligible for the Help to Buy scheme could save approximately $971 in monthly repayments and $187,658 in interest over the life of the loan compared to someone using the First Home Guarantee.
However, while a buyer using the Help to Buy scheme may pay less interest on their loan, their repayments would only contribute towards them owning 60-70% of their property. There would be an additional cost of at least $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.
Help to Buy 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 Money.com.au’s home loan expert Mansour Soltani.
Buying your next home in future could be more complicated
"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 increase house prices
"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, Money.com.au’s home loan expert
Help to Buy scheme FAQs
Is the Help to Buy scheme for first-home buyers only?
No, the Help to Buy scheme will be available to any eligible low-to-middle-income earners, and is not limited to first-home buyers. However, you must not own or have any interest in a property at the time of your application.
This differs from other grants and incentives like the First Home Guarantee (FHBG) and First Home Super Saver (FHSS) where you must be a first-home buyer to apply.
Can my deposit for the Help to Buy scheme include the First Home Owners Grant?
It’s not yet clear whether buyers will be able to apply for the Help to Buy scheme and a First Home Owner Grant. But either way, you won’t be able to use the FHOG as your deposit for the Help to Buy scheme. That’s because the 2% Help to Buy deposit must be made up of genuine savings accrued over time and excludes gifts or money from family.
Can I buy back the government's portion of the property?
Yes, you should be able to buy back some (or all) of the government’s share in your property during the loan term, according to the Treasury. It’s likely you will be able to buy back the government’s share using your own cash savings or it may be possible to do so by refinancing your home loan if you are eligible to do so.
How do I apply for the Help to Buy scheme?
Official application details for the Help to Buy scheme are not yet available, but it is expected that homebuyers will need to apply through Housing Australia, similar to the Home Guarantee Scheme. Here are some steps to help you get started:
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Verify your eligibility: Check that you meet the eligibility criteria, including: having a 2% deposit made up of genuine savings, being within the income limits and property price caps.
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Evaluate your financial situation: Look at your income, expenses and liabilities (including outstanding debts). Get a free copy of your credit score to understand how lenders view your creditworthiness. This can help you spot any irregularities in your spending, improve your credit and put your best financial foot forward when applying for a home loan.
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Scope out properties: Look at real estate websites to see which properties within your budget sell in your area over the next few months. This can give you an idea of the types of properties you may be eligible for, considering the Help to Buy scheme price caps in your state or territory.
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Written by
Senior Finance Writer
Megan Birot
Reviewed by
Editor
Sean Callery
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