Help to Buy and Other Support Options for First Home Buyers in Australia

Key Takeaways

• The Help to Buy scheme allows eligible buyers to purchase a home with as little as 2% deposit.

• Several government grants, guarantees, and stamp duty concessions are available across different states.

• Mortgage brokers can simplify the process, compare options, and improve your chances of approval.

As exciting as the prospect of buying your first home in Australia is, it can also feel quite daunting.

With property prices on the rise, job uncertainty always looming, and the cost of living stretching many household budgets, saving for a deposit can seem out of reach for many. Add to that the confusing mix of government schemes, loan products, and complex financial jargon, and it’s easy to see why first-time buyers sometimes feel stuck.

But don’t worry, there are more ways you can get into the market than you might think. In fact, between the Help to Buy scheme and a range of other government programs and home loan options, getting a foot on the ladder is still very achievable. You just need to know how to make it happen.

Hopefully, this post will make things clearer for you.

Help from Mortgage Brokers Like AFMS Group

Before we get into the details, it is worth pointing out that if you are looking for a home loan, mortgage brokers can be a big help.

Companies like AFMS Group specialise in assisting first home buyers across Australia. They’ll work with you to compare loan products, explain your options in simple terms, and help you apply for government-backed schemes like Help to Buy.

The great thing about seeking the guidance of mortgage brokers is that they can save you time and money, which are often two things most first-time buyers don’t have much to spare.

What Is the Help to Buy Scheme?

The Help to Buy scheme is a shared equity program backed by the Australian Government. Its goal is to make home ownership more affordable for eligible Australians by reducing the deposit and ongoing loan amount needed.

Under the scheme, the government contributes up to 40% of the purchase price of a new home and  30% for an existing one. In exchange, they own that percentage of the property. This means you’ll need a much smaller deposit (as little as 2%), and you can avoid Lenders Mortgage Insurance (LMI), which can save thousands of dollars in the long run.

However, because the government has an equity stake in your home, you’ll share a portion of the capital gains (or losses) if you sell. You may also need to repay their share earlier if you refinance or make major changes to the property.

Eligibility is based on income thresholds, which max out at $90,000 for individuals and $120,000 for couples. Additionally, there are property price caps depending on your state or region.

Other Government Help for First Home Buyers

Help to Buy is just one of several government initiatives that are designed to support first-time buyers. However, several others may suit you better depending on your savings, location, and goals for the future.

For instance, the First Home Guarantee (formerly known as the First Home Loan Deposit Scheme) lets you purchase a home with just a 5% deposit, without paying Lenders Mortgage Insurance. With this option, the government guarantees the remaining 15%, so this will lower your upfront costs.

Another option is the First Home Owner Grant (FHOG), which is a one-off payment that is available for newly built homes or major renovations. The amount varies between states but often starts at $10,000.

Stamp duty concessions or exemptions are also available in most states for first home buyers. For example, in NSW and Victoria, you may be eligible for reduced or waived stamp duty, which again can save you thousands.

There’s also the First Home Super Saver Scheme, which allows you to make voluntary contributions to your super fund and later withdraw up to $50,000 (including earnings) to put towards your deposit. This is a tax-effective way to save and can be especially beneficial for those who plan ahead.

Additionally, for Aussies in rural or outer-metro areas, the Regional First Home Buyer Guarantee can help you access the same 5% deposit deal as metro buyers, albeit tailored to regional living.

Common Home Loan Options for First Home Buyers

Alongside the various government schemes available, it is wise to understand what loan options you can apply for. Below is a brief overview of some of the most common types of home loans first home buyers might want to consider.

• Fixed rate loans: This type of loan locks in your interest rate for a set period (usually 1–5 years) to give you predictable repayments. It is a good option for those who are worried about rate rises and want to stick to a budget.

• Variable rate loans: Some people are attracted to this option because it can offer lower rates or extra features such as redraw facilities or offset accounts. However, in unfavourable market conditions, your repayments can go up unpredictably.

• Low deposit loans: With this option, you can borrow with as little as a 5% deposit. When doing this, you will usually have to pay LMI, although this can be waived under schemes like the First Home Guarantee.

• Family guarantee loans: If you have an affluent family member, such as a parent, they can use equity in their own home or their cash reserves as additional security. This allows you to borrow higher amounts or avoid LMI without having to save for a larger deposit.

• Interest-only loans: In the short term, this option might appeal to some buyers because it offers lower repayments. However, as they don’t reduce your principal, it can end up costing more in the long run.

Whichever type of loan you get, if you borrow more than 80% of the property’s value without a government guarantee, then you will most likely need to pay for Lenders Mortgage Insurance. This protects the lender, not you, and can add thousands of dollars to your loan. For this reason, it's best to understand the total cost of your loan.

Help to Buy vs Traditional Home Loans: Which One’s Better?

Unfortunately, there’s no uniform answer as both Help to Buy and traditional loans have their own set of pros and cons. Therefore, what you choose should depend on your financial position and future plans.

Help to Buy is great if you’ve got a modest income and a small deposit. It also helps you avoid LMI and get into the market sooner. But the trade-off is that the government owns a slice of your home, and you’ll eventually need to repay that share.

By contrast, traditional home loans offer more control. You retain full ownership and don’t have to share profits if your property grows in value. That said, you’ll need a bigger deposit and might face higher upfront costs.

As mentioned earlier, probably the best way to decide is to use the services of a mortgage broker. They can model different scenarios for you, show what your repayments look like under each option, and forecast how much equity you’ll have in five or ten years.