Jack Elliott on What a 5% Deposit Really Buys

In this episode, we turn the spotlight squarely on first home buyer borrowing. Not the emotional roller coaster of house hunting, but the mechanics of getting a loan approved in the first place. Leaning policy shifts quietly in the background, serviceability calculators tighten without warning, and government schemes promise access while adding layers of complexity.

For many aspiring owners, a real barrier isn't just saving a deposit, it's understanding how banks assess risk, how borrowing capacity is actually determined, and how one small misstep can derail an application. If the lending system feels opaque, is that by design or just a byproduct of how it's evolved?

To take us on a tour of the options available for first home buyers today, we're joined by Jack Elliott, Mortgage Broker and National First Home Buyer Specialist at Alcove and co-host of the First Home Unlocked podcast.

welcome to the elephant in the room this is the podcast where we love to talk about the big things in property that never usually get talked about i'm veronica morgan real estate agent buyer's agent and buyer's agent mentor co-host of foxtel's location location location australia author of auction ready and co-host of your first home buyer guide

Hi, I'm Chris Bates, ex-financial planner and mortgage broker, currently ranked number three in the annual MPA Top 100 Mortgage Broker Awards. Before we get started, everything we talk about today is not personal advice, and we recommend you engage the services of a licensed and experienced professional.

Our guest today is Jack Elliott, a member of Chris's team at Alcove and a first-home buyer specialist mortgage broker. He's got a background in education and a focus on guiding first-home buyers through the finance side of the journey. And Jack works at the coalface of credit policy, lender appetite and borrower behavior.

He sees firsthand where applications fall over, where expectations don't match reality, and where a well-structured strategy can materially change an outcome, positioning him well to challenge some of the assumptions many first-home buyers bring to the borrowing process. So today is going to be an interesting one. Welcome, Jack. It's good to see you.

Veronica, thanks for having me on. And thanks, Chris. We work together. So we've done 400 episodes. We very rarely get people from our own teams on. So you should feel very privileged, but also we don't really like to pump up our own businesses on here. And so today's not about that, right?

Today's us having... a real conversation around first home buyers, the challenges they're facing, not just from a lending point of view, but actually going out and buying and what we're seeing.

And I guess give people a bit more understanding of the pros and cons and their situations, because I do think there's a lot of misunderstanding about Every first time buyer out there is using 5% deposit schemes and that's what's driving the market when on the reality it's not.

So let's just talk about the clients you're working with. And we've got clients all over the countries. But what are some of the major challenges they're facing? Yes, they can get access to lending and better than they ever have. But what are some of the challenges they're really facing day to day?

Yeah, look, it's a good question, Chris. And a lot of it starts with that first time of doing anything. It's that overwhelm, right? Like there's a lot that comes to buying your first home. Now, the most common thing we're hearing is that buyers don't know where to start.

So there's so much innovation out there. It's so conflicting. Like you've mentioned, there's so many schemes and different options to use. It can feel really, really overwhelming. Now, underneath that, then there's usually the fear of making the wrong decision. So it's a really big financial decision when buying your first home.

And that's where they don't want to get it wrong. There's kind of that hesitation to do the wrong thing. Now, like we've mentioned, the good news is there are more pathways available to you as a first homeowner right now than ever before. But then it's about stepping back

And my role is to kind of guide them through that feeling clear, calm and confident throughout the whole process and show what them options actually are. And then more importantly, what options actually suit your situation and what you want in the future as well.

It's not just about talking about what you need today. It's also setting you up in the future as well. And that first decision can be really make or break kind of them future decisions down the track as well.

One of the other hats that I wear and the other podcast that I'm actually on as well is called Your First Homebuyer Guide. I don't talk about too much on here, but we certainly are fans. In fact, step one of that, we teach people how to buy a property, right?

And step one is getting your support crew right. And that includes a mortgage broker. And we're definitely advocates of using a broker, but not all brokers are equal, right? And we're also advocates of getting people to talk to a broker before they think they're ready for one.

Because I think what and where we're going to get to here, I'm guessing, is that quite often people are actually ready to buy sooner than they might think they're ready to buy, particularly with a lot of these government incentives. So can we talk through some of those?

Maybe the most pressing one is the most recently new and improved version, if you like, which is the first home guarantee. Can we start with that, which I think might be the most widely used option? Is that fair? And can you explain how that first home guarantee 5% deposit scheme actually works?

Yeah. And like you said, Veronica, you are right. There is so many first homebuyers that I speak to on a daily basis where they think they have to wait for longer to speak to us first as a broker and then they don't know their options that they can get in sooner.

So it is well worth coming and speaking to your broker and also getting that team around you to start that process. But like you said, the first home 5% deposit scheme. So That 5% deposit scheme is the most widely used option for first home buyers.

Now, what it is, it's a federal government initiative run by Housing Australia, which allows eligible first home buyers to purchase a property with just 5% deposit, avoiding paying lenders mortgage insurance. Now, it's a real benefit to avoid mortgage insurance.

Usually that's charged when you have less than a 20% deposit and it's added on top of your loan amount. Now, for example, on a $900,000 purchase, it can be $20,000 or more.

And as I mentioned earlier, it's usually added to your loan. That means you're paying interest on it as well. So that scheme removes the need to be charged in this mortgage insurance. And the way that that's removed is the government are acting as a guarantor kind of behind the scenes.

So they cover up to 15% of the property value. So the lender is able to treat you like you have a 20% deposit. Now, what that means for first home buyers is you have no lender's mortgage insurance. You get access to competitive interest rates and you own 100% of the home.

So it's really helping you get into the market sooner without having to spend years saving that bigger deposit and without that extra cost of lender's mortgage insurance as well. And like you mentioned, it is the most commonly used scheme that we see with first homebuyers.

It doesn't mean it's the only option, but it is the one that's the most common to use as a first homebuyer.

You still got to pay it back though, don't you? And then you've got a bigger mortgage.

Yeah, that's exactly right. So you are borrowing. The risk is, there is a bit of risk with it just with borrowing that higher loan amount. So like I said, you can borrow with a minimum 5% deposit, which means you've got a loan to value ratio of that 95%. And that is really important.

We're having conversation with first home buyers as well as, yes, you can get in with a lower deposit, but if you've saved more than that initial 5% deposit, how can you use that kind of extra amount to save to protect yourself from the very beginning? So creating buffers, stress testing your budget.

It's really important to kind of have that upfront protection as well as then getting that income protection and other insurances in place just because you are leveraging a high loan amount from the very beginning as well.

I do like how you explain that.

A lot of people, even when you were a first-time buyer, now you've got a house, unless you're really understanding what the option was before the scheme and what the options are after the scheme and know how big of a shift it is, you sort of don't really understand.

I think a lot of people in the market obviously aren't first-time buyers or they haven't got kids going through the process and even then they don't even know what they're doing. So before the scheme, it'd be worth just...

explaining what was the option prior to that and just how much it reduced the sort of deposit hurdle.

And then also the benefit for first time buyers, because it's quite a big shift that then those numbers really make sense to a lot of people and they go, oh, wow, that means I could buy with a much smaller deposit.

And that means that a lot more people can actually enter the market that maybe wouldn't have been able to before.

Yeah, so usually what happened before the scheme is that you would be aiming for that 10 to 12% deposit to save. So you get it under that 90% loan to value ratio. You would have the cost of lenders mortgage insurance that's added on.

Now that would be depending on the lender that you choose and your purchase price and your deposit size as well. But what that means is putting it into context. So you would have to say, let's say you saved a 10% deposit on a $700,000 property. You've got $70,000 saved as your deposit.

Now, if you use the first home guarantee scheme on that same property, you're only saving half of that. So that's where that real amount comes in.

You're able to kind of get into that property sooner, avoid completely paying lender's mortgage insurance, and you're not having to save that extra deposit amount to get it to that kind of sweet spot of that 10 to 12%. Now, there are other options available outside of the scheme, which we'll talk through soon.

That's kind of how it used to work before the scheme was here. Now, If you think about that, to save that amount of money over the years, especially with the day-to-day spending and living and situation at the moment, it would take a lot of years for you to get into the market.

And you start to think about the opportunity costs of, yes, I could potentially get into the market sooner if I had to wait to save that deposit while there's that opportunity cost of prices potentially rising in the areas or the kind of property that you're looking at as well.

Yeah, so you kind of make a good point. So let's say a lot of first-time buyers are at $700,000, a lot of them are lower than that, but some are often a lot higher than that, which sometimes people are crazy.

But when you've got a couple of incomes, they've traveled, they've worked on their careers, they haven't ever bought, and they haven't really focused on savings, right? So they're on good incomes, but they just haven't.

saved you know they've just tried to you know live the good life and you know get experiences and before you know they'd often speak to us and be like well you know you're on 200 grand a year as a couple you could borrow you know 1.2 million you know and they want to live a good life around the city right for example you know because they've been renting in these areas as well and we would say well your deposit you need is really 120 130 plus stamp duties you need like you know close to 200 grand they're like i can't get you any of that

but I've got 80. And then often now they're looking at and going, well, yeah, I'll pay stamp duty, but I need a 5% deposit. Well, 10% on 1.2 is like 120. So it's sort of, they're getting much closer than what they were before.

And even a lender's mortgage insurance on a 1.2 purchase would have been you know, two to sort of two and a half percent probably. So they saved 20 grand of lenders mortgage dues on top of that as well because they wanted to spend a lot of money.

They, you know, they needed a huge deposit, whereas now it's much, much smaller.

So now it's like forced savings. So they get the opportunity to get into the market with a small deposit, but they've got the ability to service a larger loan. So then it just forces them to stop spending.

And their rents constantly got up dramatically, right? That's the thing that before it was easy to rent. You know, if we got kicked out of a rental, it was okay. But rents are up 40%. Vacancy rates are really tight.

So I think they're like, oh, maybe we don't want to do this long term. And even though, you know, a mortgage is expensive under higher rates, I'm paying a lot of money in rent as well. I mean, Jack, can you mind just explaining how the change in October also worked?

Because I think it's important to explain that change as well and why it's also been very advantageous for first-time buyers.

And just before I talk about the changes, definitely, Chris, I just wanted to mention as well, when we're talking deposits as well, yes, with the 5% deposit scheme, you can buy with a minimum loan deposit of 5%.

Then you've got to factor in all the other upfront costs, like you mentioned, your stamp duty, your legal costs and things like that. If you're looking at a property price, it's not just I need to save 5% and I'm ready to buy.

There's all them other extra costs that are on top of that as well. So that's where coming and talking with a broker early, you can sit down, work out what them other costs are involved and get the kind of targeted savings amount as well.

With the changes that you were talking about, so the major changes happened in October 2025. So there was three major changes. The first one was the income cuts were removed. So they were previously $125,000 per financial year for singles and $200,000 for couples. Now there's no limit.

And then there was property price caps. So in most major cities and regional areas, they have increased. And then the place limits were removed. So previously, there was a limit on how many places could be used each financial year. And now there's unlimited spots.

So kind of before October, then higher income earners were locked out entirely. And the price caps in some cities were pushing buyers towards cheaper properties and weren't really in align with the market at that time. Now, these changes have opened up a lot more accurately.

and made the scheme a lot more attractive for first home buyers as well with the changes that happened in October.

So did you get bowled over in the rush?

Yes, it was actually more of a rush before the changes came.

So originally they were saying that it was going to come in from the 1st of January and then all of a sudden the government were like, no, we're bringing this forward to October and it was like a month before them changes come in.

So yes, we did find a lot of first home buyers coming, even first home buyers that we'd spoken to who were waiting to save more or were looking at different options were then like, okay, with these property price changes, we might be able to buy the quality asset that we're looking at or that price that we're looking at.

We were doing a lot of numbers, a lot of reworks on what does the changes, what do they look like? And then waiting for that October 1st date to roll around to kind of get them first home buyers pre-approved and in a position ready to purchase as well.

Did you notice, you know, it's funny, um, spoken to a number of agents sort of across different cities and some were reporting there was increased first homebuyer activity even before October 2025, sort of preemptively, like from the buyers that were able to buy without needing this 5% deposit guarantee.

You're nodding there, so if anyone's listening to this and not watching on YouTube, you know that Jack's vigorously nodding. So it really has pulled forward demand. It pulled forward that demand, and then it's pulled forward this demand from people who weren't ready beforehand. Was that really noticeable?

was. And like you said, there was two kind of camps that first home buyers found themselves in.

It was the ones who were trying to get a property before potentially there was more demand that come into the market with the first home buyers that were locked out with them current kind of scheme rules with the income caps and things like that, that I mentioned.

So there was that kind of urgency for people to try and buy before the rush. And that's what they were expecting, rush, more demand, prices increasing in the areas that we're looking in. And then we had the other first home buyers who were like, oh, well, I want to get everything organized.

So I'm in the market as soon as I possibly can be with that pre-approval organized as soon as I can after that 1st of October. So it was interesting to kind of add them different kinds of conversations as well, because in this kind of first home buyer space, we really talk.

about slowing down and making really good decisions and not trying to rush towards schemes or using schemes or if there's a potential deadline like this, not just trying to buy something to tick that box before that expected increase comes. So it was really interesting to have them conversations on a daily basis.

It would be in the morning, we'd be talking about slowing down and then there's other people who would be wanting to kind of get organized for that 1st of October. So yeah, there was them kind of two camps that we were talking through.

I think, is it fair, Jack, though, that, you know, even in July, August, their awareness that the 5% deposit scheme changes that were going to happen in January was really quite low. Like, it wasn't in the media, and we spoke about it on the pod, and it was... But it wasn't that.

And then all of a sudden, the government sort of, hey, this is coming. And instead of January, it's going to October.

And then it exploded, not just from first-time buyers hearing about it on the news and in the papers and things like that, which is one of the challenges we're going to talk about further on.

But also our clients and investors started coming to us and saying, well, that's going to push up the market. That's a great opportunity. I'm going to buy what the first-time buyers are going to get.

And we saw a real shift in our clients also saying, well, I want to take advantage of this from an investor point of view.

That's exactly right, Chris. Like there's so many people that were looking at these kind of scheme changes. And like you said, it was very much not marketed. There wasn't much said about it. It was like January 1st, that's when it's going to happen. And that was kind of left.

It's just they announced it was happening in October. Obviously, we've talked about them two first home buy camps. But like you said, we had investors coming in. And then what we've found is first home buyers and investors are ever more competing with the same properties.

And the investors were seeing that as an opportunity, even down to the real estate agents seeing it as an opportunity. Okay, well, the scheme price are going to increase to this amount in my area. I'm gonna start kind of getting in more touch with that. Yeah, adjusting my prices to that.

And what we've seen was a lot of competition that happened from the very beginning. And like we've already said, it was leading up to October, but then especially when that October 1st date kind of come around and we were hearing it from clients all over.

Yeah, there's a lot of people at open house. There's a lot of competition. It went from kind of first home buyers being able to go out on a few weekends and see a lot of good properties and feel really confident with being able to put on offers and potentially secure that property

to being like, wow, there were so many people there. There was that demand factor where if you had a finance clause or you had these kind of extra conditions, it was just like, we're not even going to look at your offer no matter the price kind of thing.

So who's actually eligible or who's not? Just who's not eligible? I think it sounds like everybody's eligible almost.

Yeah, pretty much, Veronica. So look, the eligibility, the main points that you need to kind of tick off as you're an Australian citizen or permanent resident, you're a first home buyer or you've not owned a property in the last 10 years.

So it also does help people get back into the property market if they've been locked out for that time. You must move in within six months of settlement. Now that's going to be the case on established properties, but that's kind of more for new builds. Your deposit must be genuinely safe.

So you must hold that in your account for at least three months to tick that box. And then that property must fall under the relevant price caps for the area. So with the scheme, with the price caps, what they do is they break it into two parts.

They've got your capital cities and some certain regional areas in certain states. And then you've got your regional areas that are under a certain cap. So there's a price cap tool on their website that you can search and you can search up the postcode you're looking in.

And that'll give you the cap that you need to purchase for under four. Now, this is an important one. You must live in the property as a principal place of residence while using the scheme. So that means as long as you're on the scheme, it has to be your principal place of residence.

You can't change it to an investment property or anything like that unless you're kind of taking on their lender's mortgage insurance and things like that. Though you can rent out a room as long as you remain living in the property.

So I had an in-depth conversation with kind of the scheme providers and they've said that you can rent out that room as long as you are still living in that property. So that can help with mortgage repayments. Like we said, higher loan amounts can be them higher mortgage repayments.

So that definitely does help out a bit as well.

I'm sure that is misunderstood by a lot of people because there's often, you know, as I said, my other hat on Homebuyer Academy, you know, we talk to people who

think that you just to get the scheme various schemes that you just need to live in a property for six months and even then it's usually 12 months so often they get that wrong but with this so basically while ever you have less than 80%

equity, you need to be in that property or you need to then make up whatever the LMI is or the lender's mortgage insurance on the difference to an 80% of whatever equity you have if you want to move out and make an investment property. Is that, have I read that right?

Yeah, that's right, Veronica. So yeah, this is an important consideration because you're right. A lot of people don't think about it. They just attach it to like the stamp duty and the grant. I've got to live in it for 12 months and then I'll be able to do this.

And we've had conversations with first home buyers who have come in with that mindset. I'll use the scheme, live in it for 12 months and then I'll flip it to an investment property. It'll help me get in now.

But you've really got to consider this scheme is it is promoted for real owner occupiers, people who want to live in that property. So this is where we're slowing down conversations. How can we use the scheme to help you get in to buy that property with that mind frame of

the next five to 10 years. You want to be living in it. You want it to suit your lifestyle changes because that's also another thing that first home buyers are going through at that time of life. There's a lot of changes, family planning, career changes. There could be lifestyle shifts as well.

So yes, the scheme helps you get to the market, but it's also about how to use that as a tool for that longevity as well and and kind of extending that runway of your first property.

Now, when I say runway, that means that you're able to live in that property for as long as possible before you need to upgrade. Because as we know, most first home buyers aren't going to stay in their first home forever.

But if you're living in that first property for as long as possible, especially when you're using the scheme, you have to live in it as your owner occupy. You might as well be looking at that asset quality kind of point of view and choosing a property that suits you for them lifestyle changes.

So you're not getting two years down the track. and then having to upgrade and sell because it is very expensive to buy and sell. And because you're using a scheme like this, you're starting with that high loan to value ratio. So you don't have much equity to use for that next property.

So it's just important considerations to understand. That is one of the most important ones. You have to live in it while you're using the scheme.

Because I would imagine that even if you do get a bit of equity, say you get, you know, I don't know, 79% equity or something like that, or 81% equity, then when you go to upgrade, you're going to probably have to take out lender's mortgage insurance for your next property, right?

That's exactly right. So this is why kind of coming back to that, trying to get this first property, if you're using the scheme to last you as long as possible, to give that property the most time to grow in value.

Yes, we're not going to sit here and try and predict property prices and how will they increase. But if you're giving that kind of property that time in the market to grow in value, it's just putting you in the best position.

And yes, you might need to upgrade to get to that better property and use lender's mortgage insurance. But if that property has suited you well, You've used the scheme and it's suited for your lifestyle upgrades and you haven't had to move around. You haven't lost too much money in that process.

It's well worth kind of using to get in, but using it in that conscious way of like a tool rather than, oh, I can get in with a 5% deposit. I'm just going to buy and not think about how this actually looks for the future as well.

So we definitely are having them conversations around if you purchase for this project, to get to that 80% because it's obviously a combination of paying down your loan, which is the slower kind of way versus the property increasing in value. So what does that look like?

How would it look to get off the scheme as a first point of view? And that's usually around the average from their report in the last financial year was about 20, 29 months was the average for using the scheme.

And then from there, that's when you can start talking about them different options of how to upgrade, how to structure the next property if that's what you're up to on your timeline as well.

Well, the transaction cost is a big one, right? Because like, if you're not paying any transaction costs to buy under the 95% scheme, that de-risks you dramatically because you're not paying, often you're not paying stamp duty. You know, it depends on different states.

This is, you know, all over the, you know, do your own, and Jack could explain it all, but it would take us a while, but go around, obviously they're paying stamp duty concessions.

But you also, you don't have to sell in order to buy. So when you buy the first property, you've got no selling costs.

Well, you still have to pay your agents.

No, you don't know when you buy.

Oh, no, when you're first, when you're buying. When you sell that property, you will, right?

Yeah, when you upgrade, there's an additional cost you haven't even thought about.

Yeah, yeah, that's right. So when you're buying, you haven't paid stamp duty, which is a huge saving, like 5%. You're not making any money until it grows 5%. So if it doesn't go up in value, you're underwater, like 5% of that property value straight away in stamp duty.

And then you've got lender's mortgage insurance, which is usually... probably two to 3% on top of that. So your cost to purchase was probably about eight. Then, you know, other sunk costs and stuff like that.

So sometimes you're up to 10% of the property value when you first buy a spending without even just to get the keys. Whereas in this case,

In this situation, no stamp duty, no lender's mortgage insurance, and there may be some sunk costs, which you can try to minimize by making sure you don't buy a high-density apartment with building issues or something. You'd be really careful.

And then you know you're buying into a market where there's a lot of momentum because this scheme exists. So that also de-risks you, unless they pull the scheme.

Well, it de-risks you unless you're buying at the very top. Because if you're buying at the very top, then you're probably paying an overinflated price, then you've got this hard ceiling, and then it's going to take a long time before that property breaks that ceiling in terms of value.

You know, which is 1.5 in Sydney-ish, you know, 1 million in Melbourne, Brisbane, and it can keep going down. But you're right. Like, if you are buying, your demand is sort of decreased after that sort of cap limit. What do you reckon, Jack? I mean, we're only like a fraction, right?

Well, you know... Maybe helping 50 first-time buyers at the moment, right? And not all of those are using the 5% deposit scheme, right? I would say it's a third. What do you think?

Yeah, and look, that's on par with what the report said from last year. About a third of our clients probably use the scheme. And then that's what the report from last year, one in three first-time buyers were using the scheme.

So you've got two-thirds of first-time buyers who aren't using this scheme as well. Yes, it's marketed well. It is a common pathway that we do see, especially at that kind of entry-level price. And like you were saying, Veronica and Chris, get a cap on them price limits as well.

So sometimes you've got to be careful with them because in the areas that you're looking, you're already starting your first offer kind of at them price caps. You can't really go any further there.

And you've got to think in the future when you're trying to sell that property, who are you trying to sell it to? You're probably most likely selling it to first home buyers like yourself who potentially are using the same price caps that you entered in.

So you kind of got that cap limit that you need to be careful about. But yeah, as you said, Chris, there's other ways that you can get in as a first home buyer. Now, another key one is a guarantor loan.

So that's where a family, usually a parent uses equity in their own property to help you get in the market with little to no deposit. It is a great option for first home buyers. You just need to be careful though, because the guarantor does take on the risk with doing that.

If you as the buyer can't pay back your loan, the guarantor is then they're putting your place to pay that back. So it really is important. The guarantor needs to seek that legal advice. There is a few kind of different steps that you need to take. And like,

we've kind of talked about before chris as well if you're the first of your family going through that and a guarantor is your option it also is a good conversation to have with the family because you've got siblings that are following you as well right you don't just want to go in guns blazing yep we're just going to do a guarantor i have to think about how it's going to affect not only you but then the future kind of situations as well not only for your parents but then your siblings and stuff as well so it

needs to be really carefully considered.

We're not doing many of those, Jack, though, in fairness. They've really dropped off with this scheme. And so it's not like the other two thirds is going guarantor. A lot of people are using 90% NOLMI as well because they're working in accounting or medico or lawyers.

And that allows them to not have to worry about the scheme as well. But a lot of them, which I want to take it out of your mouth here, Jack, but it's like early inheritance, right? Like the intergenerational wealth is really high. What do you think about that, Jack?

Yeah, definitely. I think pretty much on par. You've got the first home guarantee scheme of one third. And then if you were to kind of break that down, the next, the more common scenario is that early inheritance.

Like it's having conversations with first home buyers and they've got $300,000, $400,000, $500,000 in a deposit.

from that early inheritance. Straight away, you don't need to use the schemes. You're not looking at the schemes. You're not looking at these LMI waivers. The conversation then shifts, right? You've got that big deposit. Now, how are you able to use that strategically for your first home?

Yes, you want to be looking at your property price and what works in your budget with your loan repayments and things. And with a deposit size that big, you can definitely reduce your loan repayments. But What are some other things that you can use that money in a strategic way?

Creating them buffers and then cash buffers to start with. Getting a buyer's agent on board as well. So as your first home, like we've talked about, it's very overwhelming. There's a lot of decisions to make.

If you can take some of the emotional kind of decision making and pressure off yourself and off your shoulders, if you do have that large deposit, definitely speaking to a buyer's agent.

Veronica, obviously in your house, but yeah, speaking to a buyer's agent and getting their ex-he's helping because yes, it's important the way we structure the loan.

It's important the lender that we choose, but the most important thing is the property that you are buying as your first home because like we've mentioned throughout this episode, it's going to set you up with them future moves, future steps when you're likely wanting to upgrade one day.

And the way that you kind of purchase that first home and that kind of quality asset and you're thinking about things like buyer pools, who's going to want to buy this property off me one day? How's that going to increase the demand when I do want to sell one day?

It's so important to kind of get you into the first home, then also set them future steps up as well. I'm on a personal mission to help more people make better property decisions.

You know, most people don't realise that they can cost themselves hundreds of thousands of dollars over the medium to long term when they make property decisions without all of the information that they need.

And what I do is help people with tricky real estate problems, which often masquerade as simple questions like, should I sell my investment property because the interest repayments are hurting or should I buy before I sell or the other way around?

You can connect with me and access all of the tools that I've created to help you make better property decisions at veronicamorgan.com.au. And there you will find resources for first home buyers, details about my buyer's agent mentoring program.

You can connect with my Sydney based property management and buyer's agency teams, Australia wide vendor advocacy, or ask me for introduction to the small group of buyer's agents that I would personally recommend across the country. That's veronicamorgan.com.au.

If you're considering a property move such as buying your first home, upgrading, renovating or investing, the team here at Alcove would love to help you think through your decision and get the finance right. Please go to alcove.com.au to reach out.

I think I would just add a caution there because not all buyer's agents will actually help you to get safely on the property ladder. I think you have to be very, very careful. I've actually got a free questionnaire, things to ask buyer's agent. You don't even have to give me an email address.

You go to veronicamorgan.com.au and you can download that. I don't even need to know who you are. You get it for nothing. I'm not trying to track you down. Because I really do care about all buyers, really, but first-time buyers in particular not getting bad advice.

And look, it's one reason we created, Megan and I created Homebuyer Academy, was because a lot of first-time buyers can't afford a buyer's agent. But I think the worst thing, you know, we've had... People do our course. They know more than some of these buyer's agents after they've done our course.

So I think the worst thing really is when somebody goes and pays somebody to help them and that person actually stitches them up.

All in good faith, often completely unwittingly, but sadly our barrier to entry to get into the market is so low that there's people out there that just really have no idea what they're doing. So we're very, very careful.

If you're going to go and use a buyer's agent, certainly a good one, an experienced local professional can really give you an advantage. But I have to step in and caution people on that one.

Of course, Veronica. And look, I just want to mention as well, like I've been so lucky to be able to work with buyer's agents like yourself and other top buyer's agents in Australia who are then local experts.

When I say go and use a buyer's agent, I'm meaning kind of that experienced professional, not just... Any buyer's agent who's registered, definitely do your research, check properly first before you engage in that professional.

Yeah, we've been sort of going, so Jack and I worked together on our first time buyers. We sort of go through and Jack will make sure we get the loans right and we structure it right. And, you know, the loan gets approved and, you know, it's all great.

And make sure the strategy's sound and they've considered all their options and everything. we get to the point where they're trying to buy property. And this isn't all guns and roses. That's the right saying. But this isn't all great. This is first time buyers are loving this right now.

First time buyers are struggling. This is tough. I just had a client that called today. I've been doing quite a few with Jack and it's so hard. The budget, particularly when you're single, And a lot of younger people are, right? And they still haven't met their match.

And even if they've got someone they're dating, it's too early to tie your finances together.

And when you've got one income and you can borrow five times your income right now, and then when you know that the bottom end of the market has not just been going up faster for the last quarter, it's been going up for the last three, four years.

And so the bottom market's been going up. So all the stuff that first home buyers want or can afford because of their borrowing capacity, that's been going up while the rest of the market, particularly the housing market in Sydney and Melbourne has sort of been plateauing, right? And Brisbane...

Perth, Adelaide, the whole market's been going up. So that's a different story, but it's really hard.

It's worse, but it is actually worse in those three cities because it's already competitive. And then you've got this sort of on steroids for first home buyers and a lot of investors, maybe not so much Brisbane these days, maybe not even Adelaide, but certainly in Perth still it's seen as affordable.

And so you've got this hugely competitive space where first home buyers are competing with investors. as well. And we've seen it every week, Homebuyer Academy, so our people that do the first homebuyer course, we do a weekly campfire. So it's a live mentoring session.

They can jump in, they can show us their links to properties they're looking at buying. We prep them for auction or making offers and all that sort of stuff. And we get to see in some markets how difficult it is for them to get over the line. And these

People have got all the advantages because, you know, we're coaching them through this and they know the order to do things. And they're still getting, you know, it's still challenging, really challenging.

And there's plenty of times when they're not buying the property and missing out and they're learning along the way and we're guiding them. But God, it's so hard. And we really notice the difference in Melbourne.

For example, at the end of 2024, we could sort of feel that things were going to shift in the Melbourne market at that price point. And that certainly took off again in that lower price point. I think the cap in Melbourne is $900,000, isn't it? And so, yeah, it is not easy.

It's just, you know, getting the money sorted is just the beginning of the challenge, isn't it?

Yeah. And that's the irony is you go in the market, right? There's a lot of other first time buyers that got access to money too. And the government said, you know, it's going to have a 1% impact on prices. Brisbane went up 7% at the bottom end last quarter.

So, you know, Melbourne and Sydney, it was like one or 2%, right? But that's in a quarter and you know, a lot of other cities are even higher than that. So like it's had more than a 1% impact in a quarter. And we're only just getting started with the change to the scheme.

And what your role is, I guess, Jack, and what you're seeing as well with all your clients is that, you know, we're having to, you know, we know that it's pre-approvals aren't just all of a sudden buying. It's a real patience and persistent game right now.

And not just going and rushing and buying anything because you can still buy pretty average properties like that's possible. But if you are trying to overlay and buy a good property, it's actually really hard because there's very little ones that are staying on the market very long.

Yeah, and that is what we're saying. We're encouraging buyers from the very first call that we have, what's getting clear on your goals and your why and what you want to buy.

And what we're seeing is when they get to that kind of property purchase stage and they know exactly kind of what property they want, which area they want to be in, you're talking about kind of percentages with the increases there.

But what we're hearing from first home buyers is, well, there was 40 other people at this open home. oh, wow, I didn't need to get an offer into the agent because it was already off the market. Oh, the price guide was $700,000 to $800,000, but it's gone for $900,000.

They're not accepting offers for $900,000, $850,000. So there's that patience with empowering the first home buyers to kind of know what they want. But then there's that real patience that we're encouraging, especially in this time, because you've just added so much demand, demand, demand to increasing this kind of scheme.

And then you've also got the investors coming in at the same time. So it's about kind of being patient. We're seeing a lot more kind of pre-revals roll over. So pre-revel last year, 90 days, but then we're extending a lot of them. And that's okay.

It's okay to encourage our first home buyers to take that time and not just because you're in the market, you just have to buy something and tick that box. That's what we're trying to avoid. But yes, it is very difficult.

We're hearing a lot about how there's a lot more people at open homes. It feels like that first home buyers potentially can start feeling locked out.

But again, it's about coming back to their goals, their vision and what they want to achieve out of this purchase and being really patient with that at the moment currently.

One of the tenets that we have at Homebuyer Academy is if it's easy to buy, it's probably going to be hard to sell. And if it's hard to buy. It can often be easier to sell. And that is because we're talking about demand here.

When you've got lots of demand for a property, it's really difficult to buy a property, but it is easy to sell. Now, the problem with that, when you're in an inflated market at a certain price point, is that everything becomes hard to buy.

And so then the skill becomes, how do I discern the type of property in a slower, normal market would be hard to buy? versus the stuff that's easy to buy.

And I think that's the scary thing for first home buyers if they're wise to this, because they've got to become very discerning to go, I know I've got to compete.

I know I'm going to have to pay sort of more than I probably want to for a property, but I have to now be very clever as to which property I'm prepared to do that for and not just do it for anything. to get myself on the ladder.

And I guess that's sort of what you're talking about there as well. It's not so much just about, oh, not compromising on things that you wouldn't compromise on before. It's about making sure that you also buy a good asset because this has a job to do.

It has a job to be your home for as long as it could possibly be. But also, like you said earlier, most people's first home is not their forever home. So therefore, they're going to have to upgrade at some point.

But there is a new scheme coming in, right, which is called the Help to Buy. Now, this is really different, completely different. Do you want to take us through this one?

Yeah. So the Help to Buy is very different to anything else we've kind of talked about today. And it's really important that first homebuyers understand that difference before kind of considering it. Now, look, the simplest way to explain it, comparing it to the 5% Posit scheme, so the

In that 5% deposit scheme, the government's acting as that guarantor and you own 100% of the property. Now, with this help buy scheme that the federal government have launched in December 2025, they actually co-own the property with you.

So what the government does is they can get up to 30% of the purchase price for established properties or 40% for new builds, which reduces the amount you need to borrow it. So you're not paying anything back on their contribution. You're not paying any repayments or any interest.

You contribute a minimum of 2% deposit plus all your normal upfront costs. But the important part is because they've contributed to the purchase, they're also entitled to that same percentage of the property's value when you sell or refinance, including any growth that's happened over that time.

And it is also income and perhaps to be aware of now for the income, it needs to be under $100,000 for singles each financial year and under $160,000 for couples or single parents. And at the launch, there's only 10,000 places available.

So it's not available also in WA or Tasmania as they're finalizing the legislation in parliament as we speak. And your options are limited from the beginning. There's only two Commonwealth Bank. compared to kind of the 30 plus lenders that you have on the scheme. So that's really something to be aware of.

The main thing is that they co-own the property with you. They're sharing in that growth. Look, it's a new scheme. They've had it at the state level for quite a while, but this is the first federal help to buy scheme or shared equity scheme.

Sometimes it's just letting these things play out and see how it does play out. Now, there are some specific things that I want to mention that the day-to-day when it feels like when you've got a shared home ownership.

So yes, you live there, you make the mortgage repayments, you maintain the property, but there are some important things that you need to understand before signing up. Now, this is run by Housing Australia, so they can check your eligibility at any time.

So if your income is rising over them caps for two years in a row, whatever the value is of the property at that time, you have to start paying back the government. They've said that your lender will work out what you need to pay back.

Because it's early days, we don't know what that means. Let's say you've got $30,000 sitting in your offset account. Is your lender going to say you need to pay that back by this date? We'll wait and see.

Any renovations you do that are over $20,000, you need to require formal approval and valuations to be done, which you have to pay for to keep that growth.

Now, if you do a renovation in that property under this scheme that's over $20,000 and you don't let them know, they will share in the growth of their improvements. If you let them know, you get to keep the growth that you're adding. But if you don't let them know, they will cash in.

Now, when you do refinance, sell, or you're adding or moving a co-borrower, that also, anything to do with the house, it requires that approval from the government. And like the other schemes, you have to live in the property as your principal place of residence while you're using it. So look,

An example of that is, let's say you brought a $700,000 property with the government contributing that 30%, which is 210,000. If that property grows by $50,000, sorry, to $750,000, let's say after a few years, that government share has also grown by 30% of the 50,000.

So that's that 15,000 that they would have in growth. So their total payout when it comes to sell is now $225,000, not the original kind of amount of that $210,000. Now, that's the kind of key thing.

Yes, if you buy a really good quality asset and it's growing in value for you, so is the government's contribution and then also your payout figure. So it's very important to consider this when you're looking at shared ownership and shared equity schemes like this one.

Have you done any thoughts on the best case or use cases for this?

Look, I have helped a couple of first-time buyers with this. Now, look, for the right person in the right situation, it can generally open that door to what otherwise would be close.

So where it makes most sense is the buyers whose income is genuinely limited and then it's not going to increase in the future. And the scheme is realistically the only way they can buy that really good quality asset or have access to it. Now...

For most first home buyers, I would say, and even with these people that I'm helping at the moment with it, is look at every other option you have first.

On your first home guarantee scheme, the LMI waivers we've talked about, even a guarantor arrangement, because all of those allow you to keep that full ownership of the property and then also the growth of that property as well. Now, That full ownership, it gives you that flexibility with them future moves as well.

And this is where share equity can make sense for people in that situation. But it's a lot more complicated and it's worth reaching out, having an in-depth chat about what are the pros, what are the cons, what's that future timeline look like as well?

Because starting with a scheme and this help to buy scheme can definitely get you in quicker. And it can definitely help you get into the market, but then to get out of that scheme and potentially if you're looking to upgrade in the future, it can make it a lot more complicated.

You know, some buyers, for example, who can't afford a home large enough for what they need, say they've already got kids and they can only afford an apartment, a two-bedroom apartment in the area that they want to live in.

And if a shared equity scheme gave them the opportunity to buy a home that was large enough for them all and they could stay in for a good 10, 15 years and their incomes weren't necessarily going to suddenly skyrocket, I would imagine that would be a really good

scenario that might fit well here, instead of them rent vesting, they could still actually have a home that they could live in. And at least the gain is proportionate.

It's the same percentage as what they're taking, as opposed to some of these, because there's a bunch of private options out there which take a disproportionate share of the gain.

And I've never been a fan of them, I have to say, but this one I could sort of see that there would be times, but I think that they're understanding the constraints And what could well change in your scenario that might suddenly make you ineligible at some future point?

I think they're really important things to understand. So I think if you're talking to a broker about this, you've got to talk to a broker who, it's only one bank, right? Does that mean you have to go direct to the bank?

Yeah, so what it is, you've got Bank Australia and Commonwealth. At the moment, you have to go direct to Commonwealth and Bank Australia, you can use a broker. So it really limits your options if you're using a broker to one option, which is a scary thing, right?

Because you're using a scheme, but you've got to consider you're only getting access to potentially two lenders out of the 50 that we have on our panel. So it's just another consideration. But like you said, Veronica,

There is that situation where it does make sense and it does help them people get into that property, even single parents as well. It's another good kind of scenario where it definitely helps you buy that quality asset and give you that security as well.

Yeah, I mean, a lot of first-time buyers aren't really first-time buyers sometimes as well. They feel like they're a first-time buyer, but...

they kind of feel like they are because they had a relationship, they bought somewhere, they broke, the relationship broke down and, or, you know, they're a single parent or, you know what I mean?

They've had something or, you know, maybe they bought a cheap investment property somewhere that didn't really work and they're really a first home buyer, but they had a property before. Like there's a lot of people that, and then they're not eligible for the scheme, 5% deposit scheme.

And so then it can work for them. I think, yeah, equity schemes, we're very nervous with them just because of all the unknown of how it's going to play out. You know, election cycles, do the banks change their policy? What does it mean? Can you get called out?

And so but I do think that, you know, if we come back in five years time, it's going to be a huge part of the market. I think that the government will basically it's the only way to keep

a lot of this sort of property story going is it's going to potentially be out of affordable for a lot of first-time buyers. So the government's basically going to be coming at investor in residential property. And I think that'll just be part of it because you've seen the states have been doing it.

The federal has been doing it. There's all these like low deposit homelands, which you kind of touched on as well, Veronica.

people who are often from a tech background who, you know, are great at building products and tech who have then gone out to the property market and seen that there's an inefficiency here and how hard it is for first-time buyers.

And they've sprung up this idea to help first-time buyer with some cool brands and some cool marketing and behind this, you know, to play on that gap between what, you know, high income people can, you know, higher income first-time buyers and the deposit hurdle and

But to make that work, they've either got to have a really high cost of funding. They're not getting any scale. There's usually either a higher rate or they're potentially taking equity in the property. But I do think you're going to see lots of these type of products come in as well.

You know, we're trying to take advantage of first home buyers that fill, you know, the 5% deposit scheme card do and the help to buy can't do or equity schemes. And so just be, if you are considering those, I'd also be quite scary or careful.

because you're sometimes some hidden sort of cost to those as well, Jack, don't you agree?

Definitely, Chris. And it's like every option. Yes, there's all these pathways available. There's so many options out there for first-time buyers. And we could keep talking for hours about all the different pathways and what goes on and what you've got available.

It's really coming down to, okay, what is the information here on this certain pathway? How is it going to get me to where I want to be and what actually makes sense for my situation?

You've got to factor in all the different kind of things that were spoken about in this episode just to get really clear on, okay, If I'm going to use this certain scheme, this is what I know I'm up for. This is what I've done all the upfront research. I've slowed down.

I've prepared myself. I've researched it deeply. I spoke to the right support. I spoke to the right people and really make that informed choice before you just jump on. I've got this scheme available to me. I'm just going to use it.

I tell you what's interesting though, as a taxpayer, and because this is the elephant in the room and I like to talk about the other side of these things, you've got a government that is now, well, and state government, some state governments, Victoria's had a shared equity scheme for quite some time, but now you've got a federal government is prepared to go into co-ownership on properties and they're giving you a higher proportion if it's brand new.

And yet they obviously, whoever's done their numbers has failed because they're going to co-invest and they're co-investing to a higher degree on the property type that has the highest proportion of loss-making sales and the lowest proportion of capital growth on resale is brand new, the first time resale of a brand new property, apartments and houses.

So it is sort of, you know, and we could talk about government incentives that promote supply, you know, because there's good policy from a policy point of view and really bad from an individual buyer's point of view. And a lot of the first home buyer state-based grants, the stamp duty,

and other incentives are skewed towards encouraging people to buy brand new as well. We haven't sort of talked about those state-based policies such as stamp duty concessions, et cetera, too much here. But I think that that's something that first-time buyers need to be aware of.

And there probably will be, as this push for supply continues, more incentives that encourage first-time buyers to go brand new and buy off the plan or want to urge extreme caution in this space because there is so much evidence of the risks in that type of property.

But yeah, it's just interesting. As I said, the government's prepared to invest more in these types of properties and they're actually, over time, delivered the smallest in terms of returns. So they're not investing our money wisely.

And this is where as well, Veronica, just that you've got to understand the story like you're saying behind the scheme. What is it promoting you to do? What is it wanting you to achieve out of that? And that's a really good path of understanding.

For example, in South Australia, if you're a first home buyer, if you buy brand new, you don't pay any stamp duty no matter what the price point is. But then if you buy established, you pay full stamp duty no matter even if you are a first home buyer. So you can see.

That kind of example, they're pushing you towards buying new as a first home buyer. So it's just really about understanding how the scheme works or what the pathway is and then what they're trying to push you to do.

And then understanding that, like you said, from an asset quality point of view, what is the data telling me if I buy this certain kind of property?

If we were at lower building costs and developers could make it stack up to produce cheaper apartments right now, we'd absolutely see a building boom and the first time buyer incentives would go through the roof.

It's just the good thing about this policy, they are introducing at a time when developers can't make the off the plan sort of sector sort of fire up. But I agree with you. I think that's exactly where we're going.

And, you know, that's the biggest, the biggest concern I've got with this game is that a lot of first time buyers are getting pre-approved. They're getting ready to buy and then their friend or their colleague or their parents.

And then they've also seen FOMO because the prices have moved so much in the last three months they've been looking. And they can't find anything good. And they've even seen the poor properties go up right now.

And they're just going and buying, you know, a high density apartment in an area that's not scarce. Often we're building issues. So all the government's done is just basically handballed. All the investors have bought cheap apartments in the last boom. I just handballing them off to all these sort of desperate first-time buyers.

And they don't know what they're buying. You know, they're just buying as part of this scheme. And, you know, and, you know, five, 10 years later, they go, oh, hang on a sec. That didn't really benefit me.

That's the real challenge with this policy is it's really just stitching up those first home buyers. And I'm not a fan of the 5% deposit scheme at all, really. I am a fan of it if it's for smaller sort of lower incomes, particularly sort of singles and single parent families.

And there's a lot of people who have been marginalized over the last few years because their incomes just can't afford to enter the market. And This is a way for them to finally get rental and home security for them, which they really need.

But the expansion of it since October, I think it's just absolutely ridiculous. And whatever benefit there was has been gone up in prices to offset that benefit. And those people often those on higher incomes and higher purchase prices probably would have got there as well.

I would have found other ways to get there anyway. You've just said, hey, you don't need to do that hard work. You can enter now. Then you flooded more in the market at one point. And you just pushed up prices. And then they haven't really won.

The only ones who maybe won is the ones who got in early in pre-October. And that was the ones who, so it's not been a very successful scheme in my eyes. But, you know, the government are out there sort of peddling how successful it's been because people are taking it up.

Well, of course people are taking it up because it's just so advantageous. But that doesn't mean that it's successful.

Like anything in property, it really needs to be measured five or 10 years down the track and then we can work out how successful it's been. Hey, Jack, do you have a property Dumbo for us? Because we like to end the episode with an example.

We've been talking about lessons I guess people can learn from, but do you have a particular story for us?

Look, not really particularly with our first home buyers. There's a lot of stories that come to mind just with that pressure like you talked about, Chris. A lot of first home buyers get into that market, they've got that pressure from the family, just buy something.

We did it 30 years ago, it worked out for us. It's really kind of around that kind of pressure that they're feeling just to purchase. We really encourage you to slow down.

There are some certain purchases or properties that I've seen first home buyers looking at purchasing, whether that be rural, way out on track just because someone said that that would be a good investment in the future. You've just really got to talk to the right people, slow down and think carefully.

What does that actually look like for me in the future? And how easy will this be for me to sell when I want to upgrade?

So yeah, just not really a certain story, Veronica, but yeah, just kind of first home wise acting under that pressure rather than just slowing down and working it out properly for their goals and their needs.

Brilliant. Thank you. I'm hoping this has been a very informative chat for our listeners if they've been wondering about these new schemes and some old schemes that we've talked about as well. So thanks for coming on, Jack. Thanks for having me.

I appreciate it. If you have a question that you'd like us to answer in an upcoming Q&A episode, you can send us a voicemail or written question via the website, theelephantintheroom.com.au, or you can email us directly at questions at theelephantintheroom.com.au.

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