Under Help to Buy, Housing Australia (the federal government entity) co-purchases a share of your home alongside you. You own the property and live in it as your principal place of residence. The government holds a passive equity interest - it does not live there, does not charge you rent on its share, and does not have any say in how you use the home.
You only need a 2% deposit of your own funds (genuine savings), and there is no Lenders Mortgage Insurance payable. Your loan covers your share of the purchase price - for example, if the government contributes 30% of a $600,000 property ($180,000), you are borrowing the remaining 70% minus your 2% deposit, so approximately $408,000. This substantially reduces your loan size and therefore your repayments.
To be eligible for Help to Buy, you must be an Australian citizen, at least 18 years old, and not currently own any property in Australia or overseas. Income caps are $90,000 per year for singles and $120,000 per year for couples (assessed on the previous financial year's taxable income).
Property price caps vary by location. In Adelaide, the cap for Help to Buy is set at the regional South Australia price cap (check Housing Australia's current cap for your specific area, as these are updated periodically). The scheme applies to both new and existing homes, with the government contributing up to 40% for new builds and up to 30% for existing properties.
Shared equity means the government has a financial interest in your property proportional to its contribution. If the government contributed 30% and your property doubles in value, the government's share also doubles in value. This is different from a loan or grant - the government is genuinely co-investing with you.
You can buy out the government's share over time, in full or in increments, as your financial position improves. You are not required to do this by any deadline, but most participants plan to buy the government out as their equity grows. When you sell, the government receives its proportional share of the sale proceeds at market value.
The First Home Guarantee (FHBG) allows eligible buyers to purchase with a 5% deposit and no LMI - the government guarantees the top portion of the loan, but you borrow the full purchase price. Help to Buy goes further by actually reducing the amount you borrow, which means lower repayments. However, Help to Buy means sharing future property growth with the government.
The First Home Guarantee is simpler and does not involve ongoing government co-ownership. It suits buyers who can afford the full loan amount but lack the 20% deposit. Help to Buy suits buyers with limited deposit savings and lower incomes who would struggle with the full loan repayments. The right scheme depends on your income, savings, and local property prices.
Jason and Steve are Adelaide mortgage brokers who give honest advice at no cost to you. No obligation.
The information on this page is general in nature and does not constitute financial advice. Given Finance Pty Ltd (t/a Lendology) ACN 624 144 501 is authorised under LMG Broker Services Pty Ltd ACL 517192. Scheme eligibility conditions and price caps are subject to change - confirm current details with Housing Australia.