Finance and Coffee
3 years ago · 3 min read
(Words by Alexa Tran)
The previous government grants have served to alleviate some of the pressure brought about by the pandemic and induce a surge in demand for housing. But they so far have only danced around the housing affordability issues.
People still end up overexerting themselves, carrying significantly heavier debt loads and having mild heart palpitations every time the rate increases.
In actuality, Australians are in need of some solid long-term solutions to afford a home of their own.
The Labour party has promised a ‘co-ownership’ scheme for homebuyers called ‘Help to Buy’. The scheme will allow Australians to purchase a home with a smaller deposit, a smaller mortgage and smaller mortgage repayments.
Lots of people were intrigued by this. Many have never even considered owning a home in the current market. Could there be light? Could where we’re going next be better than where we currently are?
Here’s the gist: The federal government will chip in up to 40% of the purchase price for a new home and up to 30% of the purchase price for an existing home.
As a homebuyer, you still need to have at least 2% deposit to qualify for a standard home loan to finance the remaining value of the property. You will still be required to cover costs associated with buying a home such as stamp duty and loan fees.
But you won’t be required to pay LMI or rent on the portion of the home owned by the government. The government will simply take back its equity and its share of the capital gain after the property is sold.
It makes perfect sense right?
As you might have expected, the Help to Buy scheme is limited to 10,000 Australians per year. These spots can go fast.
The scheme is intended for Australian citizens with a taxable income of maximum $90,000 for individuals and maximum $120,000 for couples.
They don’t have to be first home buyers but must not already own a property at the time of purchase.
Over the ensuing years, the homebuyer can buy an additional stake in the home when they are able to do so.
If their income exceeds the income threshold for 2 consecutive years, they will be required to repay the government’s financial contribution in part or whole.