Imagine being able to buy your own home with just a $12,000 deposit. That’s what the federal government’s new Help to Buy shared equity scheme can offer. But there are some pros and cons to be aware of. Let’s take a look.
Think back to 2022. That’s when the Labor government first proposed a new Help to Buy scheme.
It sparked plenty of interest back then. But three years is a long time to wait for anything, and chances are plenty of would-be home buyers have now forgotten about it ahead of its December 5 launch date.
Below we explain how Help to Buy works, and weigh up the potential benefits and drawbacks.
Help to Buy is unlike any other scheme currently available.
It doesn’t offer a cash handout like the First Home Owner Grant.
And it goes beyond the 5% Deposit Scheme, which sees the government guarantee a first home buyer’s mortgage, so they can buy with a small deposit and avoid lenders mortgage insurance.
Instead, Help to Buy is a shared equity scheme.
Eligible home buyers only need a 2% deposit. From there, the government contributes up to 40% of the purchase price of a new home and up to 30% for existing homes, in exchange for an equity stake in the property.
Here’s an example.
Olivia is a first home buyer. Using Help to Buy, she purchases an established home costing $600,000.
Olivia pays a 2% deposit of $12,000, and takes out a home loan for $408,000.
The government chips in $180,000 (30% of $600,000).
In this way, Olivia is able to pay the full $600,000 purchase price.
Help to Buy may benefit Olivia in two key ways.
First, it takes less time to save a 2% deposit than a 5% or 20% deposit. So Olivia can bring forward her home buying plans.
Secondly, because the government pays 30% of the purchase price, Olivia can take out a smaller home loan, which lowers her regular loan repayments, making home ownership more affordable.
While Help to Buy is chiefly pitched at first home buyers, it’s also available to those returning to home ownership.
Along with the need to have at least a 2% deposit, income limits apply. Singles can earn up to $100,000 annually, or up to $160,000 for single parents and couples combined.
There are caps too on the value of properties that can be purchased under the scheme. These vary between states and territories as well as between metropolitan centres and regional locations.
Talk to us to find out if you’re eligible.
As we’ve noted, Help to Buy offers an opportunity to buy with just a 2% deposit, pay zero lenders mortgage insurance, and get started on the property ladder with a smaller home loan.
No rent or interest is owed on the government’s equity stake, though home buyers still pay upfront purchase costs such as stamp duty and legal fees.
The chief downside is that at some stage the government expects to get its money back.
Home owners using Help to Buy can repay the government’s 30% or 40% equity stake through either voluntary repayments, or from profits on the sale of the property, or when they have the money to do so at some future date, for example, by borrowing the funds.
But it’s important to know the fine print.
Home owners aren’t just expected to repay the government’s initial contribution.
The government’s share of a home is linked to the value of the property at the time of paying out the government’s stake.
Put simply, the government scores a slice of any profits made on the sale of a home in line with its equity stake.
Completing renovations can be more complicated too.
For any major home improvements, Housing Australia (which oversees Help to Buy) will organise a valuation both before and after the renovation.
While this ensures the home owner – and not the government – pockets any value-add from renovation spending, it does mean more hoops to jump through.
One further drawback – for now at least, is that very few lenders are participating in the scheme. More are expected to join from early 2026.
Help to Buy is currently limited to 10,000 home buyers each year.
As a new and very different way of helping home buyers, time will tell how Australians feel about sharing equity in their home with the federal government.
In the meantime, if you’re a first home buyer or returning to home ownership, talk to us about the various options to help you get started in the market.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to your circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
Paul da Silva
Director & Senior Mortgage Advisor
