Struggling to save for a home deposit? The Federal Government’s new Help to Buy scheme is finally here, and it could be your ticket to homeownership with just a 2% deposit and no Lenders Mortgage Insurance. Find out how this shared equity program works and if you could be one of the 40,000 Australians it aims to assist.
The federal government has finally succeeded in passing its housing support measure, Help to Buy, through parliament. Once it takes effect, Help to Buy will support 40,000 low- and middle-income earners to purchase a property years ahead of schedule, in two ways.
First, buyers will be able to purchase their property in tandem with the government, which will take an equity stake of up to 30% in an existing home and up to 40% in a new home. That will reduce the funds that a buyer will need to commit. For example, if a buyer purchased a $700,000 property, their share could be $490,000 (i.e. 70%) for an existing home and $420,000 (i.e. 60%) for a new home.
Second, buyers will need to contribute a deposit of only 2% and will not be charged lenders mortgage insurance. For a $700,000 home, the deposit requirement would be just $14,000.
Help to Buy will be available to first-home buyers as well as people who previously bought real estate but no longer own it.
Income restrictions will apply – to participate, your annual income must be less than $90,000 if you’re an individual buyer or $120,000 if you’re a joint buyer. There will also be property price restrictions, which will differ from state to state (and will be higher in metro than regional areas).
Help to Buy will become available in each state/territory once it passes legislation for the scheme to operate in its jurisdiction.
Industry association backs government policy
Property Council of Australia Chief Executive Mike Zorbas welcomed the passage of Help to Buy, which he said would provide valuable support to those who were struggling to get on the property ladder.
“We need to ensure that home loans are not just for the wealthy, and that we are giving first home buyers a realistic chance at accessing credit for housing. Removing blockers to home ownership is important and one of the biggest challenges, alongside access to finance, is saving up for a home deposit. Schemes like this must be targeted directly to those who need them most, and this initiative will hopefully help 40,000 low- and middle-income Australians into home ownership,” he said.
“The next step, the most important step in making housing more affordable, is boosting the supply of new homes across Australia. Unlocking state planning systems and setting taxation levels to create more at-market, more affordable housing, more rentals, more retirement villages and more student accommodation must be a national effort.”
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