Saving a 20% deposit can feel like the biggest hurdle when buying your first home.
With property prices continuing to make it challenging for many Australians to save a large deposit, the Australian Government Help to Buy Scheme may provide an alternative pathway for eligible home buyers.
Under the scheme, eligible participants may be able to purchase a home with a minimum 2% deposit, with the Australian Government contributing up to 30% of the purchase price for an existing home or 40% for a new home.
For some buyers, this could mean getting into their first home sooner and borrowing less than they otherwise would.
How does the Help to Buy Scheme work?
The Help to Buy Scheme is a shared equity scheme designed to help eligible Australians purchase a home with a smaller deposit and a smaller home loan.
Depending on whether you are purchasing a new or existing property, the Government may contribute:
- Up to 30% of the purchase price for an existing home
- Up to 40% of the purchase price for a new home
- With the buyer contributing a minimum 2% deposit
Because the Government contributes towards the purchase price, you may need to borrow less through your home loan.
Could a 2% deposit make buying a home easier?
For many first home buyers, saving the deposit can be one of the biggest obstacles to purchasing a property.
For example, a 20% deposit on a $700,000 property would be $140,000. A 2% deposit would be $14,000.
That’s a significant difference in the amount of savings required upfront.
However, having a smaller deposit doesn’t necessarily mean you can borrow enough to purchase a particular property. Your income, existing debts, living expenses, interest rate and the lender’s servicing assessment will still determine your borrowing capacity.
That’s why understanding your borrowing capacity before you start house hunting can be so important.
Who is eligible for Help to Buy?
Help to Buy is subject to eligibility requirements. These can include criteria relating to:
- Your income
- Your citizenship status
- Whether you are a first home buyer or currently don’t own any property
- The type and price of the property
- Your available deposit
- Other Government scheme requirements
Property price caps and other scheme conditions also apply.
Eligibility should be checked based on your individual circumstances and the current scheme rules before you make any purchasing decisions.
Not every lender offers Help to Buy
Another important consideration is the lender.
Not every lender participates in the Help to Buy Scheme, and participating lenders may have different lending policies, interest rates, fees and servicing requirements.
This means that choosing a lender isn’t simply about finding the lowest interest rate.
Your borrowing capacity and the overall structure of the loan also need to work for your circumstances.
We can help you understand the participating lender options and assess your borrowing capacity before you start looking at properties.
Thinking about buying your first home?
You don’t need to wait until you’ve found your dream property before speaking to a broker.
Getting your borrowing capacity assessed early can help you understand your realistic price range and whether the Help to Buy Scheme may be an option for you.
At Triple M Finance, we can help you explore your home loan options, understand the lending requirements and work through whether Help to Buy may suit your circumstances.
General information only. Government scheme eligibility, property price caps, participating lenders, interest rates and lending policies may change. Eligibility should be confirmed based on your individual circumstances and the current scheme rules before making any financial or property decisions.