Background:
From October 2023 to 30 June 2024, the ‘Shared Equity Home Buyer Helper’ (hereafter, ‘SEHBH’) Scheme in NSW helped participants secure more affordable mortgages and reduced initial deposits, to as low as 2% of the property purchase price (hereafter, ‘PPP’).
The program saw the NSW Government contribute up to 40% of the PPP for a new home, or 30% for an existing property, in exchange for an equity share. Subsequently, while buyers retained ownership over their homes, they weren’t obligated to repay the Government’s equity share (unless they chose to), thus lowering their mortgage payments.
However, the SEHBH ended in mid-2024, with pre-approved participants being required to find and purchase a home by 30 September 2024.
Nevertheless, in November 2023, the Federal Government introduced the ‘Help to Buy’ Scheme (hereafter, ‘HBS’), a national version of the SEHBH.
After a 9-month deadlock in the Senate, where the Coalition opposed the Labor proposal, the Labor Government secured the support of the Greens and crossbenchers, allowing the Bill to pass on 27 November 2024.
The HBS:
Typically, an Australian property deposit can be as high as 20% of the PPP. In NSW, this deposit is often around 10%, though negotiations and certain deal structures, may reduce it to as little as 5%.
Under the HBS, similar to the SEHBH, eligible parties need only pay a minimum 2% deposit, while the Government will contribute 30% of the value for an existing home, or 40% for a new build.
What does the Equity Share Mean?
The Government’s equity share effectively mean it becomes a part-owner of the property, entitled to up to 40% of its value upon its resale.
While voluntary payments can be made to reduce the Government’s stake in the property, there is no obligation to repay the Government contributions, for mortgage purposes.
This effectively reduces a buyer’s mortgage from 90% of the purchase price (assuming a 10% deposit) to between 58% and 68% (with a 2% deposit).
Eligibility Criteria:
The Government aims to assist 40,000 people over four years through the HBS, subject to the following eligibility requirements:
- The applicant must be a first-time homebuyer;
- Their annual income must not exceed $90,000 (individually) or $120,000 (for couples);
- The property must fall within certain price caps (e.g. $950,000 for Sydney, and $400,000 for regional South Australia).
Summary:
While the HBS offers significant benefits to eligible participants, its strict eligibility criteria, 40,000 participant cap and limits on property price may prevent many Australians taking advantage of it.
If you or someone you know wish to discuss the HBS further, or acquire legal advice on property matters, then please do not hesitate to contact us on 02 8999 9809.