If you’re an aspiring first homebuyer, you’d be forgiven for crying into your smashed avo, lamenting the current state of housing affordability in Australia. But fear not – there is hope on the horizon, in the form of three first homebuyer schemes that may just be your ticket to home ownership.
First Home Super Saver scheme (FHSS): Australia-wide
The FHSS invites first-timers to save for their home deposit within their superannuation, taking advantage of generous tax concessions along the way. Introduced in the 2017-18 Federal Budget, federal treasurer Scott Morrison has made the bold claim that “most first homebuyers will be able to accelerate their savings by at least 30% using the Scheme”.
So how does it work? Essentially, it allows you to sock away up to $30k individually (or $60k as a couple) in pre-tax dollars. For instance, if you pay income tax of 32.5%+1.5% Medicare Levy, $30k of your pre-tax income is equivalent to only $19,800 post-tax.
Poof! Like magic, an extra $10,200 is available for you to use as a home deposit.
For unexplained reasons, you’re only allowed to withdraw 85% of your pre-tax superannuation savings to use as a deposit – just one of many complicated rules around the FHSS that you need to be aware of, says financial planner Sacha Burchgart, founder of Sydney-based financial planning company Burcheart.
“You can deposit up to $30,000 over two years, and then withdraw 85% of that money ($25,500) plus any interest earned on it, to use for a home deposit. In the case of a couple, both partners can save $30,000, meaning a home deposit of $51,000 (85% of $60,000) plus interest can be accumulated,” she says.
“However, individuals can only contribute a maximum of $15,000 into their FHSS account in any one year. This contribution is included towards your concessional contributions, which have an annual cap of $25,000 that cannot be exceeded without penalty.”
Is it complicated? Absolutely. But at the end of the day, there is money up for grabs to put towards your first home. Head to the ATO website to read the fine print and note that eligible participants can apply to have their funds released towards a property deposit from 1 July, 2018.
HomesVic shared equity scheme: Victoria
“We had pretty much given up hope of ever buying a house, until we heard about HomesVic,” shares first homebuyer Rachael Smith*. She signed up for the scheme when it opened in early February and has her hopes pinned on it to get her family off the rental roundabout.
Last year the Victorian Government announced a swathe of measures designed to tackle housing affordability, including HomesVic, a shared equity scheme targeting first homebuyers struggling to save a house deposit.
Smith, who lives in Melbourne’s outer suburbs with her husband and three children, prides herself on being budget-savvy, but says that the property boom over the past few years has effectively priced her family out of the market.
“Between paying exorbitant rent and the rising cost of living, even diligent savers like us are playing catch-up with the market,” she says.
“We are doing pretty well with our savings, putting more than 30% of our income away, but with houses in our area now selling for $900,000 plus, it feels like the goal posts keep moving further and further away.”
To be able to get a foot on the property ladder with a 5% deposit “would be life-changing for us”, says Smith – and this is precisely what HomesVic allows.
Successful applicants who join the scheme will need to fork out 5% of the property’s purchase price in genuine savings, with the Victorian Government contributing 25%. A loan for the remaining 70% is secured from one of HomesVic’s lenders, making the monthly repayments more affordable for the new homeowners.
There’s a raft of eligibility criteria to do with income ($75,000 salary cap for singles, $95,000 for couples), debt (no more than $10,000) and residency (at least 2 years in Melbourne), and the scheme is only available to purchase homes in the government’s “priority” areas.
Plus, participants have to repay the Government’s proportional beneficial interest to the lender within the loan term (plus six months), or two years from repayment of the home loan if the home loan is paid off early.
And, if participants no longer meet eligibility requirements such as when they earn above the income threshold for two years in a row, the Government’s proportional interest will need to be returned. The HomesVic website has more info.
Or, save yourself the trouble and chat to a uno Home Loans adviser about the lenders we work with. uno works with a range of specialist lenders, including those which offer loans to people with 5% deposits – or no deposit (guarantor loans).
First Home Owners’ Grant: Queensland
Originally due to end in July 2017, the Queensland State Government has extended the First Home Owners’ Grant (FHOG), meaning eligible Queenslanders who buy or build a brand new home for under $750,000 could score $20,000 to put towards it. But time is running out, as you must enter into a contract before 30 June, 2018.
Thirty-year-old Matt Erskine*, an HR professional, loves inner-city Brisbane living, but can’t afford to buy a property in the CBD on his single income. Instead of continuing to rent indefinitely, he’s decided to take advantage of the FHOG and is now building in Springfield Lakes, southwest of Brisbane.
“I’m throwing away hundreds of dollars a week in rent and while it’s great to be close to work and the city nightlife, I just wasn’t getting ahead financially,” he says.
“I had a little bit of money saved up and with the $20,000 first home owners grant I’m able to afford a house and land package in Springfield Lakes. The commute will take a little getting used to, but I plan to spend it catching up on reading on the train.”
The property will have two bathrooms and three bedrooms, one of which Matt plans to use as an office – perfect for his future plans to start his own consulting business and work from home.
*Not their real names