Government home loans and assistance

If you’re having trouble securing a home loan through traditional means, there are some government programs that might help you achieve your property goals.

As house prices rise, saving a deposit for a home becomes increasingly difficult. Many Australians may be able to service a home loan, but find themselves shut out of the housing market due to an inability to save a deposit.

However, depending on where you live, there could be options for low deposit home loans that help get into the property market faster than traditional options. Here’s a look at the loan programs on offer through state governments around Australia.

Keystart

If you live in Western Australia and can’t save the deposit required by many traditional lenders, the WA government’s Keystart program might be able to help.

What is it?

Keystart was established in 1989 to help West Australians who are unable to meet the deposit requirements of mainstream lenders. The scheme provides low deposit home loans to WA residents who fall below an income cap. The loans are available with a 2% deposit in metro areas and a 10% deposit in regional areas. First home buyers can also use the state’s first home owner grant scheme to help fund their deposit.

In spite of carrying a high loan-to-value ratio (LVR), Keystart loans differ from the low deposit home loans traditional lenders may provide because they do not require lenders mortgage insurance (LMI). The loans carry no ongoing fees, and have an interest rate that’s calculated based on the average of the four major banks’ standard variable rate.

The program also has home loans tailored to the needs of specific groups of Australians. In addition to the standard Keystart Home Loan, Keystart also offers an Aboriginal Home Loan, a Disability Home Loan, a Sole Parent Home Loan and home loans for Housing Authority properties and shared ownership arrangements.

Shared equity home loans

Keystart offers a unique finance option called a shared equity home loan. This loan helps finance properties offered by the Housing Authority. The program enables loan recipients to finance part of the price of the property through a Keystart Home Loan, with the Housing Authority contributing a percentage and sharing ownership.

Who’s eligible?

Keystart home loans are available to West Australian permanent residents who meet the following criteria:

How do I find out more?

Keystart’s website offers a full rundown of products, as well as questionnaires to determine eligibility.

HomeStart Finance

South Australians can increase their borrowing power and reduce the amount they need to save for a deposit by utilising the SA Government’s HomeStart program.

What is it?

HomeStart was launched in 1989 as a government organisation to help South Australians achieve home ownership sooner. The program enables borrowers to avoid paying LMI, and instead pay a much less expensive loan provision charge. It also offers loans at 97% LVR for certain groups of customers.

HomeStart also has a Repayment Safeguard in place to help borrowers manage repayments. The system sets an initial repayment rate based on what borrowers can afford rather than the loan’s interest rate. HomeStart repayments generally only change once a year, when they are adjusted for inflation.

The program offers a range of home loans for purchasing existing homes, vacant land, building a home or refinancing. Low deposit loans are available for graduates with a Certificate III or IV, diploma, bachelor degree or higher qualification. HomeStart loans can also be combined with other loans to enable home buyers to borrow up to 30% more without increasing their repayments.

Who’s eligible?

To qualify for a HomeStart loan, you must:

Other eligibility criteria may apply for specific loans.

How do I find out more?

A full rundown of the loans available through HomeStart and the eligibility requirements for each product can be found on the Homestart Finance website.

Queensland Housing Finance Loan

If you live in Queensland and can afford home ownership, but are struggling to get a loan through a traditional lender, the Queensland Housing Finance Loan may be the answer.

What is it?

The Queensland Housing Finance Loan is a low deposit home loan to help eligible Queenslanders build or buy a home. The loan has variable or fixed rate options, and requires only a 2% deposit with no LMI. It also carries no monthly account keeping fees.

The loan is structured to help borrowers meet their repayments. Rather than calculating repayments solely on loan size, term and interest rates, the Queensland Housing Finance Loan also takes into account borrowers’ income. Initial monthly repayments start at 30% of the borrower’s income, and will not exceed 35% of their income.

Who’s eligible?

To qualify for the Queensland Housing Finance Loan, you must:

How do I find out more?

The Queensland Government’s website includes information on the Queensland Housing Finance Loan, including eligibility requirements and how to apply.

HomesVic Shared Equity Initiative

The Victorian government allows up to 400 first home buyers on low to average incomes to get home loans if they have saved a 5% deposit.

As a shared equity scheme, the Victorian government will provide part of the deposit (up to 25% of the property's value). The borrower needs a 5% deposit and will repay the remainder of the mortgage. When the property is sold HomesVic will receive a portion of the sale in proportion to the amount of deposit they initially provided.

You can learn more about the scheme here or read up on the concept of shared equity agreements.