Help To Buy Scheme Explained

Typically, buyers are required to save a 20% deposit of the total value of the property. In South Australia where the average house price is $500,000, a 20% deposit is $100,000. Which is making the dream of home ownership increasingly difficult for first home buyers. The Labor Party has pledged to help home buyers get into the market sooner through its Help to Buy Scheme.

What’s the Help to Buy Scheme?

The Help to Buy Scheme will cut the cost of buying a home by up to 40%. Resulting in a smaller deposit, smaller mortgage, and smaller mortgage repayments for home buyers. Eligible buyers will need a minimum deposit of 2%, and the government will provide an equity contribution of up to 40% the purchase price of a new home, and a maximum of 30% for an existing home. Home buyers will also avoid paying Lenders Mortgage Insurance.

Eligibility

The scheme will be open to 10,000 Australians each financial year. The requirements to be eligible are below.

  • You are an Australian citizen of at least 18 years of age.
  • Earn $90,000 or less per annum for individuals, or $120,000 or less per annum for couples.
  • Live in the purchased home as your principal place of residence
  • Not own any other land or property – either in Australia or overseas
  • Have saved the required minimum 2% deposit of the home price and qualify (can finance) the remainder of the purchase through a standard home loan with a participating lender.
  • Pay for any associated purchase cost like stamp duty, legal and bank fees. Home buyers will also be responsible for ongoing property costs like rates, strata, and any other bills.

Total Savings From The Scheme

The property price cap is $550,000 for a property in Adelaide. The maximum savings of 40% a buyer can receive from the government would equate to $220,000 for a new home, and $165,000 for an existing property. Also requiring buyers to save a minimum of 2%, which would be $11,000 for a $550,000 property. Refer to the table below to see the governments contribution for the rest of Australia.

Government Contribution With Help To Buy Scheme

Other Rules of The Scheme

During the loan period, a home buyer can buy an additional stake in the home. The minimum stake that a homebuyer can opt to purchase at any one time is 5%. If a home buyer’s income exceeds the Help to Buy annual income threshold for 2 consecutive years, they will be required to repay the government’s financial contribution in part or whole as their circumstances permit.

To Recap

  • The government will provide an equity contribution of up to 40% the purchase price of a new home, and a maximum of 30% for an existing home.
  • Eligible buyers will need a minimum of 2% deposit
  • Home buyers will also avoid paying Lenders Mortgage Insurance
  • The scheme is open to 10,000 Australians each financial year
  • A home buyer can opt to purchase an additional stake in the home. Minimum 5% at any one time.
  • If a home buyer’s income exceeds the Help to Buy annual income threshold for 2 consecutive years, they will be required to repay the government’s contribution.

This scheme is a big boost for home buyers who are finding it difficult to enter the current market. Click here for more information about the scheme or get in touch with our team.

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