Your Home Your Terms A Personalized Guide to Mortgages
Labour says it's the most important change to housing laws in decades. The Albanese government has set a start date for the shared equity plan it ran for office, but the big question is still whether it will help people buy homes.There's no easy answer. Maybe for a lucky few. But it's not a magic pudding, and a lot of people may not be able to use it.
What does it look like?
The goal of the programme is summed up by the name “Help to Buy” from Labour.
The government will help people who qualify get into the housing market by loaning them 30% (for an existing build) or 40% (for a new build) of the buying price. This lowers the amount they have to borrow from a bank to 60% or 70%. It's what most people call a “shared equity scheme.” Your home's wealth is owned by the government. You pay it back over time, either when you sell the home or while you live in it.
The smaller loan is meant to help more people get home loans faster than they would have been able to without the government's help.
They don't have to take as much money from the bank, so their home loan payments will be smaller, and they only need to put down 2% of the total price of the home. For some, that can mean the difference between saving $20,000 and $200,000. This person also doesn't get lenders' mortgage insurance, which saves them another $30,000 or so.
How does it do its job?
Ten thousand people can apply each year for four years under this plan.
Depending on where the land is located, there are also limits on how much it can cost to buy. For instance, homes in Sydney or a big regional town in New South Wales that cost less than $950,000 are qualified. In the rest of NSW, the most a home can be sold for is $750,000.
The plan is also limited by place, so not all 10,000 spots will be used in the same area.
People who make up to $90,000 a year or couples who make up to $120,000 a year can only join the programme. But if you've owned a home before, that won't stop you from asking for this plan. Life changes can put people back in unstable housing or the renting market, but you can't own another house at the same time.
Those who want to buy a home must put down at least 2% of the price and show that they can get funding for the rest of the price, as well as pay the stamp tax, rates, body corporate fees, and utilities. The government's share of the equity will not require you to pay rent.
How am I going to repay the government?
It's still not clear what will happen. But according to what was said about the programme during the election campaign and other state-based equity plans in WA and NSW, people can return the government on their own to get a bigger stake in the property.
Depending on the situation, if your income goes over the limit for two years in a row ($90,000 for people and $120,000 for couples), you might have to repay the government for its share of the business.
People who took part would talk to their lender about how much of the commonwealth's share they could pay back by refinancing. Each person's situation would be taken into account. When this was brought up during the election campaign, it was said that the plan's goal was to keep people in their homes instead of forcing them to leave because of unnecessary income limits.
It's possible to refinance the loan and buy the government out, make payments to the government on top of your mortgage payments, or raise your loan so that you buy some of the government's ownership share.
If you sell the house, the government gets back its share of the equity, not the money it loaned you. If the value of the house goes up, the government will get more money back than it gave you. It's possible that the government would feel some of the loss and take a cut of the money it loaned.
People who die and leave their home to make more than the allowed income could get two years to figure out how to pay the government back. This was talked about during the election campaign.
When does it begin?
To make the plan work, state and federal laws are needed. There shouldn't be any problems because WA, NSW, and Victoria already have shared equity plans, and Queensland has a state Labour government without an upper house. All three states have decided to move the law forward.It's either the Coalition's support, which was harsh on the policy, or the Greens' support, which comes with some conditions.Because of all of that, the plan won't start until the first half of 2024.
Limits on prices.
$950,000 for New South Wales' main city and rural hub
New South Wales: $750,000 for the rest of the state
Victoria: $850,000 for the main city and regional hub
Vic: rest of the state – $650,000
$700,000 for Queensland's main city and rural hub
Queensland: $550,000 for the rest of the state
The main city of Western Australia costs $600,000.
Western Australia gives $450,000 to the rest of the state.
The main city of South Australia is worth $600,000.
South Australia: $450,000 for the rest of the state
The main city of Tasmania costs $600,000.
New South Wales: rest of state – $450,000
$750,000 in the Australian Capital Territory
$600,000 for the Northern Territory
$550,000 for Jervis Bay Territory and Norfolk Island
Christmas Island and the Keeling Islands $40000 for the islands
Newcastle and Lake Macquarie, Illawarra, the Central Coast, the north coast of NSW, Geelong, the Gold Coast, and the Sunshine Coast are all regional areas that are part of Help to Buy.
Summary
Overall this can be seen as the start of multiple policies and initiatives to assist the Australian housing market. As with any grant or assistance, applicants would do well to consult a mortgage broker and financial planner as a minimum before making any decisions. Additionally, there are repercussions that some forward planning need to allow for, and to also think about this may effect other grants and applications that are available.