The government is anticipated to pass legislation later this year and allow the launch of the Help to Buy Scheme.
With housing affordability being a significant issue in Australia, a new Help to Buy Scheme is anticipated to pass into law and become available in late 2024. This federal initiative, announced in 2022, aims to make it easier for low- and middle-income earners to purchase a home. The scheme is expected to have 10,000 places available each year. For some Western Australians, this program could be a game changer—and has few differences to the existing Keystart Shared Ownership Scheme, which has already helped many in WA achieve their homeownership dreams.
Let’s explore how the Help to Buy Scheme is expected to work, its eligibility criteria, the risks involved, and how it compares to the Keystart Shared Ownership Scheme.
What is the Help to Buy Scheme?
The Help to Buy Scheme is a shared equity initiative where the Federal Government co-invests in a home with the buyer, effectively lowering the financial burden of purchasing a property. The government contributes up to 40% of the price for new homes and up to 30% for existing homes, reducing the size of the loan you need to take out and, therefore, lowering your monthly repayments.
- Deposit: You only need a minimum deposit of 2% of the home’s purchase price.
- No Lenders Mortgage Insurance (LMI): Buyers under this scheme won’t need to pay for LMI, which can save thousands of dollars.
- Government’s Share: The government retains a share of the property, and when the property is sold, they will claim back the same percentage of the sale price, including a share of any capital gains.
- Buy Back Government’s Share: You can gradually buy back the government’s share, starting after two years, to increase your ownership stake.
Eligibility for Western Australians
To qualify for the Help to Buy Scheme, there are specific eligibility criteria:
- Australian Citizenship: Applicants must be Australian citizens and at least 18 years old.
- Income Thresholds: For singles, the income limit is $90,000, while for couples, it’s $120,000.
- Ownership Restrictions: You cannot currently own any property, either in Australia or overseas, but the program is available to people who have owned property in the past.
- Principal Residence Requirement: The property you purchase must be your primary place of residence.
Price Caps in Western Australia
To ensure affordability, the Help to Buy Scheme includes price caps based on location:
- Perth (Capital City): $600,000
- Regional WA: $450,000.
These caps ensure that the scheme targets homes within the reach of low- to middle-income buyers, keeping the program focused on affordability.
Existing Support: The Keystart Shared Ownership Scheme
While the Help to Buy Scheme is set to begin in late 2024, Western Australians already have access to the Keystart Shared Ownership Scheme, which offers similar benefits. Like the Help to Buy Scheme, Keystart allows you to buy a property with a co-investor—Western Australia’s Housing Authority. Through this scheme, the government can own up to 30% of the property, reducing the size of your mortgage.
Key features of the Keystart Scheme:
- Low Deposit: You can enter the market with as little as a 2% deposit.
- No LMI: Similar to the Help to Buy Scheme, you won’t need to pay for Lenders Mortgage Insurance.
- Ongoing Costs: You’ll still be responsible for ongoing expenses, such as rates, utilities, and maintenance, even though the government owns part of your home.
- Limited Property Pool: Keystart properties are typically new homes, units, or apartments listed through the Opening Doors program. This limits the availability of properties compared to the Help to Buy Scheme, which allows both new and existing homes.
What Are the Risks?
While these shared ownership schemes offer significant advantages, there are some potential risks and obligations:
- Shared Equity: Both the Help to Buy Scheme and Keystart mean the government holds a share in your home. If the property is sold, the government is entitled to its percentage share of the sale price, which includes any capital gains.
- Property Value Fluctuations: If the value of your home decreases, you may owe more than you anticipated when selling or buying back the government’s share.
- Ongoing Financial Obligations: You are still responsible for rates, insurance, and property maintenance, even though the government owns part of your home.
- Income Limits: If your income exceeds the scheme’s thresholds for two consecutive years, you may need to repay the government’s equity stake.
How the Schemes Compare: Help to Buy vs. Keystart
Both the Help to Buy Scheme and Keystart Shared Ownership Scheme share the goal of helping Western Australians enter the property market with reduced financial barriers. Here are the key differences:
| Feature | Help to Buy Scheme | Keystart Shared Ownership Scheme |
| Government Contribution | Up to 40% for new homes, 30% for existing homes | Up to 30% |
| Eligible Properties | New and existing homes | Limited to new homes, units, or apartments |
| Income Threshold | $90,000 for singles, $120,000 for couples | $113,000 for singles, $174,000 for couples |
| Available Properties | Market-wide, subject to price caps | Limited to properties listed through Opening Doors |
| Program Start | Expected late 2024 | Currently available |
Making the Most of the Help to Buy Scheme and Keystart in WA
For Western Australians struggling to break into the housing market, both the Help to Buy Scheme and Keystart Shared Ownership Scheme offer valuable pathways to homeownership. The Help to Buy Scheme, with its broader range of eligible properties and higher potential government contribution, could be particularly attractive when it becomes available in 2024. In the meantime, the Keystart Scheme remains a viable option for those looking to take advantage of shared ownership now.
Both schemes come with the shared responsibility of co-ownership with the government. It’s important to remember that you would be responsible for costs associated with the property, such as maintenance, rates and utility bills, so it’s crucial to understand the long-term financial commitments involved.
Get Ready to Own Your Home
We are still waiting on confirmation of which lenders will be participating. In the meantime there are still other first home buyer incentives available that may be more suitable. If you’re ready to explore your options for homeownership contact Fox Mortgage Services to learn more about your eligibility, the application process, and how you can make the most of the current schemes.
Sources:
Help to Buy Scheme Overview
Keystart Shared Ownership Scheme