60,000 spots for home buyers - what's on offer from the new government

The Help to Buy scheme is set to become a reality from January 1 next year, following Saturday’s election.

The new Labor government has also committed to keeping the Coalition’s existing Home Guarantee Scheme, but not the proposal to allow first home buyers to use their super.

Regional buyers will have access to Labor’s First Home Buyer Support Scheme, rather than the Coalition’s Regional Home Guarantee.

RateCity.com.au has compared what support is on the table for up to 60,000 Australians a year wanting to buy a home.

Source: RateCity.com.au

Help to Buy – the finer details

• Borrowers don’t have to pay LMI or rent but are responsible for other costs such as stamp duty, strata levies and council rates.
• When the property is sold or borrowers buy back equity, they will need to pay the government their share of capital gains (adjusted for any major renovations paid for by the borrower).
• If a person earns over the income threshold for more than two years, they’ll need to buy back equity from the government. The amount will be determined on a case-by-case basis.
• Borrowers can also buy more equity from the government, however, they must buy at least 5 per cent at any one time.
• The government will not force a borrower to sell their property at any time.

RateCity.com.au research director, Sally Tindall, said: “The Help to Buy scheme will give people on lower incomes an immediate leg up into a property market that might have otherwise been out of reach.”

“Co-buying with the government has the potential to knock hundreds of thousands of dollars off a person’s loan size and see them finally get the green light from the bank to buy,” she said.

“However, this policy is by no means straightforward. There’s going to be a fair whack of ongoing red tape that comes with buying with the government.

“Understand the rules of engagement and war-game every possible scenario. A change in career, a new baby, even a pay rise might be enough to throw the balance out.

“Weighing up your options is a great way to understand and compare the risks, rewards and compromises of each scheme.

“Also know that taking out a loan with a small deposit can be incredibly risky, even when the government is co-buying with you.

“While it’s an amazing feeling to be able to hammer a nail in the wall without having to get permission first, when your roof starts leaking or your hot water system blows up there’s no-one to pass the bills to.

“No matter how you get on to the property ladder, make sure you have money left in the tank to deal with emergencies as they arise.

“With interest rates on the rise, property prices are forecast to drop over the next couple of years. While most buyers should be able to ride out a drop in the property market, they could still find they’re trapped in a home buying scheme for a lot longer than expected,” she said.

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