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On episode 79 of the FS360 Podcast, M Group Geelong office Lending Partner Liam Nankervis discussed the Australian Government’s 5% Deposit Scheme and Help to Buy Scheme. Chatting to Gavin Nash, Liam outlined what the schemes entail, eligibility and the positives and negatives of both schemes. “Since 2020, the Federal Government have come in and said we’re going to help first home buyers to get back into the property market and we’re going to do that with a minimum 5% deposit,” Liam said. “What it means is that you need to borrow up to 95% of the value of the property. You do need to cover your purchase cost as well… things like stamp duty and mortgage registrations. “Depending on how much you purchase for, whether there’s any stamp duty related to your property, you might be putting in your 5% and then needing to cover that on top as well. “The Federal Government have come in and said we’ll make it easier and get you a better loan so you can get into the property market easier. You are being guaranteed by the Federal Government and you don’t pay any Lenders Mortgage Insurance (LMI).” There are three categories to determine those that are eligible for the scheme. A first home buyer. A single parent or guardian, so long as they don’t own any other property. Individuals in this category are able to borrow up to 98%. If you haven’t owned property in over 10 years. “The thing that people need to know is that not every lender actually uses this 5% Deposit Scheme, not every lender is approved, not even all the big four banks are engaging with this scheme,” Liam said. “I can’t say that’s by their choice, it might be, but that’s where it’s really important to use a mortgage broker. “The important thing with the scheme is that it is very personalised to where you might be buying because the limitations, the boundaries that are set out by the government in what you can purchase and how much for, are going to be different based on where you’re located. “You might be in Geelong, that’s going to be totally different from Brisbane, Canberra or any regional town of any state. The price thresholds are going to be very different.” The Help to Buy Scheme sees the government give buyers a percentage of the property value to assist with the purchase. This means the government owns that percentage of the property. “For this one, it’s probably a little more loose than the 5% Deposit Scheme in terms of eligibility, almost anyone can quality for this version,” Nankervis said. “It’s got some different limitations in the lenders that will act in it. As opposed to the 5% Deposit Scheme which has a broad number of lenders … there’s really only three lenders that can help you with the Help to Buy Scheme now. “I think it’s still helpful and it’s worthwhile for a lot of people to consider doing it, the main difference being that it can either keep their repayments much lower, or they can enter in at a higher price point that they personally couldn’t achieve by themselves.” While this can help buyers get into the market, there is also the option to buy back the government’s share as time progresses. “In terms of getting out of this scheme as well, it’s not just when you sell the property and therefor the government’s going to take their portion of the sale proceeds,” Liam said. “You can also buy back that from the government when you’re in a position to do so. Whether you’re building up money or because you’ve paid down you’re debt, building some equity in the property, borrowing against that equity, you can repay in portion or in whole, the government. “It is still based on the time that you do want to make your next application to buy back from the government, they will re-value the property. If it’s gone up in value, maybe your attempt is to buy back another 5% of the share of the property, it’ll be 5% of today’s value, not the value of when you purchased it.”