With soaring property prices, Australia is one of the most expensive countries to live in and own a home. A combination of record-low interest rates, low supply of homes being sold and the first home buyers’ fear of missing out are all fuelling the demand and the rise in the price of homes.
The biggest hurdle of first home buyers is saving enough money for a deposit.
It has never been a good time for first home buyers to enter the market With the First Home Super Saver Scheme as a way to save for the deposit. The First Home Loan Deposit Scheme requires only a 5% deposit from first home buyers. Meanwhile, the Family Home Guarantee will help single parents at home ownership with just a 2% deposit.
1. FHLDS (New Homes) extended for 2021 to 2022
Another 10,000 places will boost the government’s FHLDS (New Homes). The First Home Loan Deposit Scheme was introduced in January 2020 and was extremely popular for first home buyers. As part of this scheme, the buyer only requires a 5% deposit and the government will act as guarantor for the remaining 15%. As a result, first home buyers avoid paying loan mortgage insurance. This scheme is available through Commonwealth Bank, National Australia Bank and 25 other participating lenders. You will need to act quickly with almost all spots secured after becoming available.
2. First Home Super Saver Scheme (FHSSS)
This scheme was introduced in the Federal Budget in 2017 but has been expanded to allow first home buyers to release up to $50,000 from their superannuation, up from the previous $30,000. This scheme allows eligible first home buyers to dip into their superannuation and withdraw up to $50,000 to use as a deposit towards an owner-occupied purchase. The increase will take effect from 1st July 2022. The scheme allows first home buyers to make voluntary contributions to their super either before or after tax and use these savings towards their deposit.
The First Home Super Saver Scheme could boost your savings up to 30% faster for most first-time home buyers rather than saving through a standard deposit account. This is due to the concessional tax treatment and the higher rate of earnings often realised within superannuation.
3. Family Home Guarantee/ No Deposit Home Loan
This “guarantee” aims to help single parents get into home ownership. The guarantee enables eligible single parents to build or buy a new home with only a 2% deposit. You will need to be able to service the loan to be eligible. Places will start to become available from 1st July 2021. However, only 10,000 places will be available over four years nationally, so you will need to act quickly for this.
Yes, getting a foot on the property ladder can be challenging, but this should not deter first home buyers. About a third of millennials and a quarter of all Australians plan to buy a property in the next two years. Many will be using the lockdowns in 2020 to up the ante on their savings. There is no better time than now for First Home Buyers to dive in and make that commitment – if possible.
Contacting a mortgage broker early in your search is often a wise idea as it may allow the broker time to understand your circumstances and potentially help prepare you for a successful loan application when the time is right.
(Maria Papa is a senior finance expert specialising in home loans, investment loans, self-employed loans, Lo Doc loans, car loans, personal loans and loan protection. She has offices in Sydney and Melbourne. If you have questions, call Maria at 0430 144 008 or email her at firstname.lastname@example.org.)
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