Are shared equity schemes like Help to Buy worth it?

Australia's Help to Buy scheme is now live, giving eligible buyers the chance to purchase a home with a deposit as low as 2%.

With high property prices, flat wage growth and stricter lending rules, the idea of the government covering up to 40% of a property's cost is attractive.

After it all, it makes saving a deposit easier and reduces the pressure of loan repayments.

But shared equity is not a simple shortcut into the market. It's a co-ownership arrangement: the government takes an equity stake in the property, and you buy it back over time or when you sell.

For some households, this structure makes home ownership possible. For others, the obligations and long-term costs may outweigh the benefit.

Here's how the scheme works, who it's most likely to help, and the risks every buyer should consider.

How the Help to Buy scheme works

Help to Buy is open to first-home buyers and "returning buyers" - those who previously owned but no longer hold property. Under the scheme, the government contributes:

• Up to 40% of the price of a new home
• Up to 30% for an existing home

The buyer borrows the remainder, reducing the deposit required and lowering repayments.

The government's share goes up or down with the property's value because it matches its contribution.

The scheme also helps borrowers avoid lenders mortgage insurance (LMI), which is usually charged when the deposit is less than 20%.

If you choose to take part in the scheme, you'll be answering to Housing Australia, the government's independent housing agency.

The program is available in most states and territories, with WA and Tasmania expected to join once legislation passes. Commonwealth Bank and Bank Australia are the initial participating lenders, with others joining in 2026.

Who is eligible?

Eligibility rules are strict. Applicants must:

• Be Australian citizens aged 18 or older
• Earn up to $100,000 as singles or $160,000 as couples or single parents
• Live in the home they buy
• Purchase under local price caps (shown below)
• Secure a loan with a participating lender

Only 10,000 places are available each year for four years.

Who Help to Buy is most likely to help

While first homebuyers are the main target, the scheme supports a wider group of households in specific circumstances.

1. Buyers who fall short on borrowing capacity

Some households can save a deposit but can't borrow enough to meet rising local property prices. Help to Buy can bridge that gap, contributing the portion a bank won't lend and reducing the loan to a manageable size. This can bring ownership forward by several years for buyers stuck between saving and market growth.

2. Single parents needing to buy out an ex-partner

In separations, one parent may wish to keep the family home but lack the borrowing power to purchase the other party's share. Mortgage broker Nick Rabba says the scheme can fill that shortfall when a borrower has equity but insufficient borrowing capacity, allowing them to retain the home and avoid being forced to sell.

3. Families transitioning to a larger home

Households needing more space may use the scheme to upsize while staying in their preferred suburb or school catchment. Eligible buyers can settle on a new property first and sell their existing home within four weeks, easing the transition without relying on temporary rentals.

The risks and obligations buyers need to know

Help to Buy lowers the upfront cost of purchasing a home, but shared equity creates long-term trade-offs that buyers need to understand clearly.

1. You only own your share until you buy it back

While shared equity is complex, Mortgage broker Joseph Daoud from It's Simple Finance says its vital people know the government co-owns the property.

"When you sell, the government receives the same proportion of the sale proceeds as the equity it contributed," he says.

That means buyers only benefit from growth on their portion. Importantly, the value of the government's share is based on the property's value at the time of sale, not a fixed dollar amount.

For example, on a $750,000 home where the government contributes 20%, a future sale at $1 million gives the government a $200,000 share - not the original $150,000 contribution.

Daoud says this is the case even if the property has stagnated or fallen in value.

While this is how shared equity is designed to work, it can limit long-term wealth building for buyers who anticipate strong price growth.

"You will still need to repay the government's initial contribution. You may not build as much equity as you would with a larger deposit."

2. Buying out the government can cost more than expected

Buyers can increase their ownership over time by repaying the government's share in 5% increments or when they sell. They can also refinance through a participating lender later to reduce the government's stake.

But again, the repayment is based on the current market value, not the original purchase price.

Daoud says this could surprise buyers: "If prices rise significantly, the cost of buying out the government rises too."

3. Strict rules continue long after settlement

Eligibility doesn't end once you move in. Buyers must continue to meet stringent conditions to occupy the home.

"You must remain within the income thresholds and live in the home; turning it into an investment property isn't permitted and could result in penalties or removal from the scheme," Daoud says.

Also, if you happen to get a pay rise and your income exceeds the thresholds - $100,000 for singles or $160,000 for households - you may be required to start buying back the government's stake sooner than planned.

There are some perks: Buyers would get to keep the percentage difference in value after major renovations.

However, renovations over $20,000 renovations require approvals and valuations, and buyers who fail to follow the process may not receive credit for improvements.

4. You carry all the costs of ownership

Despite co-owning the home, the government doesn't contribute to any ongoing expenses.

Daoud explains: "You're responsible for stamp duty, rates, maintenance and insurance - the government doesn't cover these despite benefiting from the capital gains."

5. Income caps don't reflect reality

You are not automatically guaranteed a home loan even if you meet the eligibility requirements for Help to Buy. You will first need to have your income and financial capacity assessed to see if you are eligible for a home loan from a participating lender.

So, despite having wide-ranging income caps, Daoud says Help to Buy would only target a narrow group of buyers.

"The limit in New South Wales is $1.3 million," he says. "In practice, someone earning under $100,000 with no other liabilities might only be able to borrow around $550,000, and even with the government's help, would fall far short of the price cap."

6. The scheme adds demand without adding supply

While it will help a small group of buyers, Daoud says the broader effect is to inject more demand into a market where supply is already constrained.

Daoud warns that because it doesn't add new homes, it could fuel demand and push prices higher.

"Without more housing supply, demand-side assistance risks inflating prices rather than improving affordability," he says.

"A sustainable solution requires streamlining planning approvals, investing in infrastructure and encouraging new construction, so affordability improves across the board."

Who the scheme may not suit

Help to Buy is not for everyone. It may not suit:

• Buyers uncomfortable with long-term co-ownership
• Those planning to convert their home to an investment property
• Households expecting rapid income growth
• Anyone wanting full control over capital gains

Bottom line

Help to Buy offers a meaningful path into home ownership for some Australians, particularly those caught between saving a deposit and keeping pace with the market.

But the trade-offs are significant. Shared equity limits how much wealth you can build, and the rules and obligations continue long after settlement.

For the right buyer, the scheme can be a helpful leg-up. For others, the long-term costs and restrictions may outweigh the benefit. As always, independent financial advice is essential before signing on.

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