How Stuart bought the home he loved, without the bank of mum and dad

Stuart Thompson was in his mid-30s and living in a share house when he realised he was now getting paid enough to think about saving for a home.

Fast-forward five years and he’s a homeowner, but he would not have been able to buy his place without two key pieces of help.

Stuart Thompson bought a Hawthorn apartment.Credit: Penny Stephens

He saved using a government salary sacrifice savings scheme, and he took advantage of another federal program that enables first home purchases on a low deposit without lender’s mortgage insurance.

“I probably would have been able to buy, just not what I wanted,” said the 40-year-old property manager, who did not have family help to purchase. “The difference would have been stark.”

From later this year, first home buyers will also have the option to use the federal Help to Buy shared equity scheme - expanded in this week’s budget - in which the government co-purchases a stake in the home worth up to 40 per cent.

It will replace the existing Victorian Homebuyer Fund, and although the property price caps for Melbourne in each are the same at $950,000, the federal version offers a slightly larger government contribution compared to the state’s maximum of a 25 per cent equity stake.

Thompson thinks a shared equity scheme is another good way to help first home buyers, but in his situation the fine print did not suit him, so he chose to buy outright instead through the First Home Guarantee scheme.

“If I was completely priced out of buying where I wanted to buy, then perhaps that scheme would have been really valuable,” he said.

Thompson was looking for a two-bedroom apartment in the Hawthorn area, which he found, paying a 10 per cent deposit. It’s spacious, in his ideal location, and has a second bathroom.

“There was one [apartment] in particular that I saw maybe two or three weeks into the search that I just fell in love with straight away and it ticked all the boxes for me,” he said.

Thompson was able to use government schemes to purchase a home.Credit: Penny Stephens

There are more than 100 Greater Melbourne suburbs where the median house price is $950,000 or less on Domain data, ranging from Carrum, Emerald, Chelsea, Brunswick West and Footscray at north of $900,000, through to Melton at $465,000.

Dr Kate Raynor, director of the Centre for Equitable Housing at think tank Per Capita, offers cautious backing to shared equity schemes for first home buyers.

“I don’t think it’s a bad idea,” she said of Help to Buy. “Support for first home buyers is a good option because our social welfare system is based on homeownership.”

She likes that the program offers a low deposit and reduced weekly mortgage costs.

But she noted the expansion of the program this week, which made the property price cap more generous in Melbourne and increased the income thresholds to $100,000 for a single person or $160,000 for a couple.

“It is policy targeted at moderate-income households, which is not in and of itself a bad thing, but we do know that housing need is highest in low-income households,” she said.

She thought government could take a bigger role in building some of the homes, supporting people into home ownership and retaining them as affordable in perpetuity, a model used overseas.

Mortgage broker Andrew Wheatley of Wheatley Finance is based in Melbourne’s west and has assisted many first home buyers to purchase sooner using the existing 5 per cent deposit scheme.

He welcomes the new federal shared equity program but his clients have been less interested in using the Victorian shared equity model than buying outright.

“Any government scheme that can help people is good,” he said.

“Every person I’ve spoken to that qualifies for the First Home Loan Deposit Scheme will always take that before the shared ownership option because there’s no future debt to the government.”

He thought a 2 per cent deposit minimum could be helpful to someone struggling to save. But in his area, he said many entry-level properties are available on a budget of $600,000, for which first-time buyers would pay no stamp duty in Victoria and which they could purchase on a $30,000 deposit using the existing program.

Thompson’s colleague, Little Real Estate sales agent and state sales leader Shawn White, said first home buyers have been active in the one and two-bedroom apartment market.

“We get a lot of requests for 5 per cent deposits when purchasing, and buyers mention it is part of the first home buyer scheme,” he said.

As for the new program? He thinks giving potential home buyers more options is never a bad thing.

“Because there are the income caps, it is designed to appeal to a segment of the market that may not be able to get in otherwise.”