For many Australians, the dream of owning a home can seem out of reach due to the high cost of property and the burden of saving for a hefty deposit. To help address this issue, the Australian government is expecting to launch the Help to Buy scheme in 2024, which aims to assist low and middle-income earners in achieving their homeownership goals.
The scheme is currently under review, and we won’t know many of the finer details until the laws for the scheme are officially passed and applications open, which is expected to be later this year.
Why Help to Buy?
When purchasing a property, you will generally be required to have a 20% deposit to avoid incurring substantial costs from lenders’ mortgage insurance (LMI).
Recent data from the financial comparison website Finder has identified that the average first-home buyer needs at least 12 years to save for a deposit on an average apartment and 16 years for an average house. This is a big barrier for most to enter the property market. Some states have their own schemes in place at the moment to lower this burden on first home owners, with scheme eligibility and entitlements varying greatly from state to state. If you are looking to purchase your first home, it’s best to chat with your mortgage broker who can provide you with details on any initiatives that you may be eligible for.
The Help to Buy scheme is a shared equity initiative that aims to help 40,000 Australians purchase a home, with 10,000 allocations each year. According to the latest announcement, the scheme is not limited to first home buyers. However it is like that to be eligble, you cannot have any other current property assets.
How Does it Help to Buy?
Under this scheme, the federal government has proposed to provide subsidies worth up to 40% of the value of a new home or 30% of the value of an established home.
Under the submitted scheme that is currently under review, home buyers will be required to contribute a minimum of 2% deposit and must satisfy all the lenders’ requirements to pay for the remaining balance. It is expected that lenders’ mortgage insurance will also be waived for eligible participants, providing significant relief for home buyers who struggle to come up with a substantial deposit.
Who is Eligible?
Full eligibility criteria details will be known when the scheme passes legislation. However, according to the most recent announcement, the scheme will be available to purchase a principal residence place. Even if you have previously owned a home, you may still be eligible for the scheme for your new home.
All states must also pass legislation for their residents to participate in Help to Buy. However, at the National Cabinet in August 2023, all states agreed to progress the Help to Buy legislation so that the scheme can run nationally.
Time to Get ‘Application Ready’
The Help to Buy scheme is an initiative aimed at reducing the challenge of low and middle-income earners on the path to homeownership. Whilst we wait for the finer details, now is a great time to get yourself ‘application ready’. It may be an opportunity for you to clean up outstanding credit debts and cut back on discretionary spending so you are in the best possible position when it comes time to apply for a loan.
At the end of the day, the Help to Buy scheme’s launch is exciting news for home buyers struggling to get their foot in the property market. With the government providing up to 40% of the property’s value, home buyers can become property owners sooner than they once thought.
Other Home Owner Schemes
Depending on which state or territory you’re in, you might qualify for additional support when buying your next home, especially for first home buyers.
However, it’s important to remember that these programs are designed to make homeownership more accessible. It’s important not to rush into a home purchase just because you’re eligible for a scheme.
Buying a property is most likely one of the most significant financial decisions you’ll make, so it’s crucial to thoroughly research and understand all the costs and future repayments involved. Our team of experienced mortgage brokers can guide you through your options and help you identify the incentives that you may qualify for, and the loan options that are available to you.
Schedule a chat with our team about your options for financing your next property purchase.
Terms are subject to approved persons only. This information is true and correct as of 30/05/2023. All of the content above is general in nature and may not suit your personal needs, situation objective & goals.