What the New Help to Buy Scheme Means for Mortgage Brokers

What the New Help to Buy Scheme Means for Mortgage Brokers

The First Home Guarantee is a part of the Australian government’s initiative to support first-time homebuyers in achieving homeownership. In a recent announcement, the government plans to make owning a home even more accessible through newly passed programs like Help to Buy scheme, complemented by the joint applications with friends and family which has been allowed since July 2023.

We’re likely going to see a growing interest among Australians to own a home thanks to this First Home Guarantee update. How can mortgage brokers prepare for this new era in the real estate market? We talk about this in today’s blog and learn more about the Help to Buy scheme.

First Home Guarantee Scheme Surpasses 26,000 New Homeowners

Minister for Housing, Julie Collins, recently disclosed that the Albanese government’s extended Home Guarantee Scheme has successfully ushered more than 26,000 individuals into homeownership within its inaugural six months. This significant achievement contributes to a broader initiative that has assisted over 93,000 people in achieving homeownership since the 2022 election. The positive impact of the Home Guarantee Scheme indicates a promising trend towards increased accessibility to homeownership for thousands of Australian households, with the forthcoming implementation of the Help to Buy scheme.

As part of the housing reform agenda, the government continues to allocate available spots under various guarantee programs. During this financial year, 18,000 places remain open under the First Home Guarantee, providing an opportunity for aspiring homeowners. Additionally, 5,000 spots are designated for the Regional First Home Buyer Guarantee, and 4,000 places are available for the Family Home Guarantee.

What is the Help to Buy Scheme?

The Help to Buy scheme is an initiative aimed at making homeownership more achievable for thousands of Australians.

Under the Help to Buy scheme, eligible homebuyers will receive substantial support from the government, including an equity contribution of up to 40% for new homes and 30% for existing homes. The scheme aims to alleviate the financial burden on participants, requiring only a minimum 2% deposit and offering lower ongoing mortgage repayments through a smaller home loan.

Help to Buy is designed to be inclusive, assisting various segments of the population, including couples, siblings, singles, those close to retirement, and those just starting out in the workforce.

The government emphasises the long-term relief provided by the scheme and highlights its commitment to addressing the decline in home ownership rates through comprehensive housing initiatives. Help to Buy is positioned as a crucial element of the government’s strategy to ensure more Australians have access to safe and affordable housing.

How will the Help to Buy Scheme help my clients?

The Help to Buy scheme aims to make homeownership more affordable and achievable by reducing the upfront financial burden on clients. Your clients can look forward to:

1. Early Market Entry with a Lower Deposit

Clients can enter the property market sooner than expected. The scheme allows them to do so with a lower deposit requirement of only 2%, making homeownership more accessible.

2. No LMI (Lenders Mortgage Insurance) Payable

Despite the deposit being less than the traditional 20% of the purchase price, clients won’t have to pay Lenders Mortgage Insurance (LMI) which is typically required when a borrower has a deposit less than 20%. The absence of LMI can represent significant cost savings for the clients.

3. No Fees or Interest on Government’s Equity Contribution

The government is making an equity contribution to assist clients in purchasing a home. Clients benefit from this support without incurring any fees or interest on the government’s equity contribution, providing additional financial relief.

These features collectively make the path to homeownership more accessible and financially viable for eligible individuals participating in the scheme. It’s also important to take note that the expanded Home Guarantee Scheme is helping thousands of Australians, including siblings, friends, and single guardians, as the ‘couples’ category now includes siblings and friends under the expansion.

First Home Guarantee Update: Opportunities for Mortgage Brokers

For mortgage brokers, the introduction of the Help to Buy scheme and continuation of the expanded Home Guarantee Scheme can present several opportunities:

1. Increased Market Activity

The Help to Buy scheme, with its lower deposit requirement and other favorable terms, may stimulate increased activity in the property market. This could lead to more potential clients seeking mortgage financing.

2. New Clientele

The scheme’s focus on helping a diverse range of individuals, including those with a 2% deposit, may open up a new market segment for mortgage brokers. Brokers may encounter clients who were previously unable to enter the market due to financial constraints.

3. Educational Opportunities

Mortgage brokers can play a crucial role in educating potential homebuyers about the benefits and details of the Help to Buy scheme. This includes explaining the lower deposit requirement, the absence of Lenders Mortgage Insurance, and the government’s equity contribution without fees or interest.

4. Adaptation of Services

Brokers may need to adapt their services to cater to clients participating in the Help to Buy scheme. This may involve staying informed about the specific requirements of the scheme, assisting clients in navigating the application process, and providing tailored advice based on the unique features of the scheme.

5. Market Differentiation

Brokers who are well-versed in government-backed initiatives, such as Help to Buy, may use this knowledge as a point of differentiation in the competitive mortgage broking landscape. Positioning themselves as experts in these programs can attract clients looking for guidance in navigating such schemes.

More Prospects in 2024 and Beyond

2024 promises a notable shift in the real estate market, presenting mortgage brokers with a unique landscape to work with. As more prospective clients explore the opportunity of owning a home thanks to the First Home Guarantee update, brokers can anticipate changes in client needs and expectations.

To thrive in this market, staying ahead of the curve is a major priority. Being well-informed positions you as a proactive broker ready to guide clients through the nuances of these new initiatives.

Our blog articles provide in-depth insights into key statistics and the current market outlook, offering you valuable tools to enhance client relationships and succeed in your role. Your foresight will be appreciated by clients seeking a knowledgeable and forward-thinking partner in their homeownership journey.