The Labor Party refers to it as the most significant housing reform in decades.
A start date has been set for the shared equity program that the Albanese government campaigned on before the election; however, the primary question that needs to be answered is whether or not it will assist you in purchasing a home.
There is no easy solution to this problem. Perhaps for those privileged few. However, this is not a magic pudding, and many people may find that they are not eligible to participate.
The goal of the initiative is encapsulated in the name “Help to Buy” given to it by Labor.
In order to facilitate eligible applicants’ entry into the housing market, the government will lend them thirty percent (for an existing build) or forty percent (of a new build) of the purchase price, thereby lowering the amount of the bank loan to sixty or seventy percent. A shared equity scheme is a more frequent name for this type of arrangement. You are required to pay back a portion of the equity in your property to the government over the course of time, either when you sell the home or while you continue to live in it.
The purpose of the lowered loan is to increase the number of people who are authorized for a home loan and to do it more quickly than they would have been able to do so without the assistance of the government.
Because they will need to borrow less money from the bank, their monthly payments on the home loan will be lower, and the percentage of the home’s purchase price that they must put down as a deposit will be decreased to 2%. That could mean the difference between putting away $20,000 and two hundred thousand dollars. In addition, the borrower doesn’t have to pay for the mortgage insurance that the lender requires, which is another $30,000 or so saved.
The program will only accept the first 10,000 candidates each year for the next four years.
There are also limits placed on the amount that can be paid to purchase the property, and these limits vary from area to location. For instance, in Sydney or a large regional center in New South Wales, qualifying properties include those with a value of less than $950,000. The remainder of New South Wales is subject to a maximum property price of $750,000.
The program is only available to people with an annual income of up to $90,000 and couples with an annual income of up to $120,000 combined. The fact that you already owned a home does not automatically disqualify you for this program, however, because of the way that a shift in one’s living circumstances can force a person to return to the unstable housing or rental market (although you can’t own another property at the same time as applying for this program).
The applicants are required to have a deposit of at least 2% and must demonstrate that they have the ability to obtain financing for remaining balance of home’s purchase price, as well as the expenditures associated with stamp duty, as well as rates, body corporate fees, and utility costs. On the government’s equity stake, you won’t have to worry about paying rent to the government.
The particulars are still being ironed out at this time. On the other hand, according to what was stated when the program was unveiled during the election campaign (as well as other state-based equity systems like those in WA and NSW), individuals are able to make voluntary repayments to the government, which will enhance their equity portion in the property.
Depending on the specifics of the situation, you may be required to reimburse the government for its equity stake if, over the course of two consecutive years, your income is higher than the criterion for eligibility (currently $90,000 for people and $120,000 for couples).
The participants would discuss with their lender how much of the commonwealth’s share they would be able to return through refinancing, and their specific circumstances would be taken into consideration. When this topic was brought up during the campaign for the next election, it was said that the goal of the program was to help individuals remain in their homes rather than to push them out due to artificial income limits.
This could involve refinancing the loan in order to buy the government out, making additional payments to the government on top of your mortgage payments, or raising your loan amount to the point where you are buying out a portion of the government’s equity share.
If you sell the property, the government will recuperate its equity portion, but not the dollar amount that was loaned to you. This implies that if the price of the property goes up, the government will collect more money in repayment than it initially gave you in the form of a loan. If the value of the property drops, it is likely that the government will have to absorb some of the loss and reduce the amount it has loaned out.
During the campaign for the election, it was recommended that there would be a two-year time leniency period in the event that you pass away and those you leave your home to make more than the acceptable income. This would give them time to figure out how to pay the government back.
To put the plan into action, there needs to be legislation passed at both the state and the federal level. There is a low probability of any problems occurring given that Western Australia, New South Wales, and Victoria already have shared equity programs, that Queensland has a state Labor government with no upper house, and that all jurisdictions have decided to move through with the legislation.
Either the support of the Green Party, who have expressed qualified support, or the support of the Coalition, who have been extremely critical of the policy, is what the federal government needs.
Because of everything that needs to be worked out, the plan won’t get off the ground until the first half of 2024 at the earliest.