Australia's housing affordability crisis continues to make headlines across the nation, with many first-time buyers struggling to enter the property market due to rising prices and the challenge of saving for a substantial deposit. In response to these challenges, the federal government has significantly expanded its Help to Buy scheme in the 2025 Federal Budget, allocating an additional $800 million to this shared equity initiative designed to lower the barrier to home ownership for thousands of Australians. Housing Minister Clare O'Neil has stated that with these changes, "most first home buyers are now eligible" for the program.
What is the Help to Buy Scheme?
Help to Buy is a federal government shared equity scheme that will assist 40,000 Australian households (10,000 per year) to purchase either a new or existing home with an equity contribution directly from the government. The scheme, which was introduced by the Labor government in 2022 and passed the Senate in November 2024, has received a substantial boost in the 2025 Federal Budget with total funding now reaching $6.3 billion through 2028-29, up from the initial $5.5 billion allocation. Applications are set to open later this year, aiming to make home ownership more accessible by reducing the initial deposit required and lowering ongoing mortgage repayments.
Under this shared equity approach, the commonwealth provides first home buyers with 30% of the purchase price of an existing home, or 40% for a new home. The buyer needs to contribute only a 2% deposit, significantly lower than the traditional 20% required to avoid Lenders' Mortgage Insurance.
How Does the Scheme Work?
The Help to Buy scheme works by allowing eligible buyers with a deposit of as little as 2% to obtain a home loan with a significant equity contribution from the federal government:
- For a new home, the government can contribute up to 40% of the purchase price
- For an existing home, the government can contribute up to 30% of the purchase price
This structure means that buyers effectively need to secure financing for a much smaller portion of the property value, resulting in:
- A smaller deposit requirement (minimum 2%)
- A reduced mortgage size
- Lower monthly repayments
- No requirement to pay Lenders' Mortgage Insurance (LMI), which is typically required for loans with deposits under 20%
While participants in the scheme won't pay rent on the portion of the home owned by the government, they will be expected to pay down the government's equity contribution over time or when the property is sold.
Financial Benefits for Homebuyers
According to the 2025 Budget announcement, the Help to Buy scheme offers substantial savings for first-time buyers. The government estimates that a buyer with a $519,000 home loan at average interest rates would save approximately:
- $900 per month on existing properties
- $1,200 per month on new builds
These savings come from two main sources:
- Reduced loan size: With the government contributing up to 40% of the purchase price, your mortgage will be significantly smaller than if you had to finance the entire property value (minus your deposit).
- No LMI costs: Despite only providing a 2% deposit, you won't be required to pay Lenders' Mortgage Insurance, as the government's contribution will bring the total equity to well above the 20% threshold typically required to avoid LMI.
Eligibility Criteria
The 2025 Federal Budget has expanded the eligibility criteria to include more Australians. To qualify for the Help to Buy scheme, applicants must now meet the following criteria:
- Be an Australian citizen
- Be at least 18 years of age
- Have a yearly income of $100,000 or less for individuals (increased from $90,000), or $160,000 or less for couples (increased from $120,000)
- Live in the purchased home as their primary residence
- Not currently own any other land or property, either in Australia or overseas
- Have saved the required minimum 2% deposit of the home price
- Be able to secure financing for their portion through a participating lender
- Be able to cover all associated upfront costs including stamp duty, legal fees, and bank fees
Property Price Caps
The 2025 Federal Budget has significantly raised the property price caps, now linking them to average house values in each state and territory rather than average dwelling prices. This important change recognizes that dwelling prices (which include apartments and units) are typically lower than house prices, and allows the scheme to better reflect the real costs first home buyers face in the current market.
Housing Minister Clare O'Neil highlighted some key examples of these increases: "In Brisbane, for example, we're raising property price caps from what were $700,000 to now $1m. In Melbourne from $850,000 to $950,000, and in Sydney from $950,000 to $1.3m."
For New South Wales specifically, the price cap has been set at $1.3 million rather than Sydney's median house price of approximately $1.5 million, to ensure prices remain within the borrowing capacity of first home buyers.
The updated caps are:
Area: Price Cap
Sydney: $1,300,000
Brisbane: $1,000,000
Melbourne: $950,000
Perth: $850,000
Adelaide: $900,000
Hobart: $700,000
Canberra: $1,000,000
Darwin: $600,000
The government has stated that these increased caps will ensure that "more than 5 million properties in Australia" will fall under the scheme's thresholds, significantly expanding the range of homes available to eligible buyers.
Increasing Your Ownership Stake
One of the key features of the Help to Buy scheme is the flexibility it offers for participants to increase their ownership stake over time. As your financial situation improves, you can apply to purchase additional stakes in your home from the government's share.
The minimum additional stake that can be purchased is 5% of the property. This allows homeowners to gradually work toward full ownership at a pace that suits their financial circumstances.
What Happens If Your Income Increases?
Under the expanded scheme, if your income exceeds the annual threshold (now $100,000 for individuals or $160,000 for couples) for two consecutive years, you may be required to repay the government's contribution either in part or in full.
This requirement ensures that the scheme continues to benefit those most in need of assistance, while providing a pathway for participants whose financial circumstances improve to transition to full ownership.
Scheme Availability and Timeline
With legislative approval secured in November 2024 and enhanced funding confirmed in the 2025 Federal Budget, the Help to Buy scheme will be available to approximately 40,000 Australians thanks to the expanded funding of $6.3 billion. The program is structured to support 10,000 places per year over a four-year period.
Applications are scheduled to open later in 2025, with the operational framework now firmly established following Senate approval. Housing Minister Clare O'Neil has expressed expectations that "the scheme will be really, really popular" once launched.
Given the expected high demand, interested buyers who meet the eligibility criteria should prepare their documentation well in advance of the application opening date to ensure they don't miss out.
Application Process
The application process for the Help to Buy scheme involves several key steps:
- Eligibility Assessment: Complete the online eligibility checker on the National Housing Finance and Investment Corporation (NHFIC) website and gather necessary documentation including identity proof, tax assessments, payslips, and bank statements.
- Official Registration: Create an account on the Help to Buy portal, complete the application form, and submit a statutory declaration confirming the accuracy of your information.
- Application Assessment: After a processing period of 4-6 weeks, successful applicants will receive an Eligibility Certificate detailing their maximum property price threshold and government equity contribution percentage.
- Loan Pre-Approval: Approach participating lenders with your Eligibility Certificate to secure pre-approval for your portion of the home loan (with a minimum 2% deposit).
- Property Search: Find a suitable property within your price threshold and verify its eligibility under the scheme.
- Equity Contribution Application: Submit property details through the Help to Buy portal and await formal approval for the government's equity contribution.
- Settlement Process: Complete the legal and financial requirements for purchasing the property, with funds transferred from both your lender and the scheme.
Important Considerations
While the Help to Buy scheme offers significant benefits, potential participants should be aware of several important considerations:
Equity Arrangement Limitations
- The government maintains partial ownership until you buy them out
- You must repay the government's equity share when you can afford to, when you sell the property, or after about 25 years
- The government's equity portion increases in line with property value appreciation
Ongoing Ownership Constraints
- Major renovations require pre-approval from the scheme administrator
- Limited ability to switch lenders without buying out the government portion
- The property must remain your principal place of residence
- Annual income verification and eligibility reassessment may be required
Is Help to Buy Right for You?
The expanded Help to Buy scheme specifically targets essential workers such as "teachers, nurses, police officers, retail workers and those in the care sector" who may struggle to enter the housing market otherwise. However, any eligible Australian can apply.
Consider these factors when deciding if the scheme is right for you:
Potential benefits:
- Enter the property market sooner with a smaller deposit
- Reduce your mortgage repayments significantly
- Avoid Lenders' Mortgage Insurance costs
- No fees or interest charged on the government's equity contribution
Potential considerations:
- The government will own a portion of your property
- You may need to repay the government's contribution if your income increases significantly
- There may be implications when selling the property or making major renovations
- Expected high demand may make securing a place in the scheme competitive
Conclusion
The expanded Help to Buy scheme represents a significant initiative to address housing affordability challenges for first-time buyers. By reducing the initial deposit required and lowering ongoing mortgage repayments, the scheme aims to make home ownership more accessible for thousands of Australians who might otherwise struggle to enter the property market.
With the 2025 Federal Budget allocation of $6.3 billion, the government has significantly enhanced the scheme's reach through higher income thresholds and property price caps. As Housing Minister Clare O'Neil noted, "a lot of young Australians can't see themselves ever owning a home of their own, and one of our government's goals is to turn that around."
As the scheme prepares to launch later this year, prospective homebuyers should familiarize themselves with the updated eligibility criteria and property price caps for their region, and begin preparing their finances to take advantage of this opportunity when applications open.
For the latest information about the Help to Buy scheme and other housing initiatives, keep an eye on the official government housing websites and speak with financial advisors who specialise in first home buyer programs.
Disclaimer: This information is current as of March 26, 2025, following the Federal Budget 2025 announcements. Details of the Help to Buy scheme may change before its official launch. Readers are advised to seek professional financial advice before making decisions based on this information.
