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5 leg ups to get you into your first home

·3-min read
Aerial view of Australian suburb.
Five leg ups for getting into your new home (Source: Getty)

Incentives to stave off the coronavirus crisis have seen property prices forge higher, perhaps seemingly out of reach.

And in that respect the end of the HomeBuilder grant is not all bad.

What remains are giveaways and concessions – some of them new or extended – that can help you attain your home ownership goal.

If you like, these are leg ups on to the property ladder. The first three are also good for people worried about prices running away from them while they scrimp and save.

1. First Home Loan Deposit Scheme:

The first home loan deposit scheme has been extended for another year, with another 10,000 places announced.

This allows eligible first homebuyers to purchase a property with only a 5 percent deposit. The government goes guarantor for the remaining 15 percent that exempts you from paying extortionate lenders’ mortgage insurance.

The program is available to households earning less than $125,000 a year.

2. The Family Home Guarantee

This one builds on the home loan deposit scheme, but specifically for a single parent. This time you are able to get into the property market with a deposit of just 2 per cent to ensure there is housing affordability where the capacity to build a deposit is reduced.

You guessed it: the government goes guarantor in this circumstance for 18 percent.

As such, it’s called the Family Home Guarantee.

Again, the annual income threshold is $125,000. But with 10,000 loans available, they will go quickly.

There are some 37 lenders from which you can get the original first home loan deposit scheme and we could presume that similar lenders will offer this one.

3. The Super Saver Scheme

The First Homebuyer Super Saver Scheme is to be expanded. This scheme allows you to shovel extra money into super, on a voluntary basis, specifically designated for a house purchase.

While previously it allowed deposits of $30,000 over two years, from July 2022 it will be increased to $50,000 over those years. You get to withdraw that plus earnings, less tax.

The beauty of this is that your savings build in a concessional tax environment. So quicker than outside of super.

You would also hope that earnings would be greater than the paltry ones you can get in the bank right now.

A further positive to this is that it doesn’t erode your compulsory contributions, welcome news when young people in particular – more than 1million of them – accessed the $20,000 of super available for COVID hardship.

4. First Homebuyer Grants

Not new but certainly extremely helpful are various first homebuyer grants and stamp duty concessions across the states and territories.

Depending on where you live and whether you build or buy a new home, you may qualify for up to $20,000 in cash and waived stamp duty, which represents a significant cost saving.

So, far from the news on the homebuyer front being gloom and doom, there are some good new developments.

Usually, however, the time to buy is when you’re ready, not rushed.

5. Follow a formula

Ok this is not strictly a leg up, but it’s vital for your future financial security to follow my formula to find your safe borrowing ceiling.

It’s an amended formula though for the fact that prices are currently growing so fast.

Indeed, many first homebuyers are purchasing with a smaller deposit to stop chasing prices and bring forward purchases.

While I’d normally advocate a 20 per cent deposit, keeping a cap on your borrowings is probably the more crucial factor today.

You do this by applying a simple test: are the repayments on what you want to borrow no more than one-third of your before-tax salary or salaries?

Borrow more and that puts you, under the official definition, in mortgage stress.

So, all is not lost to first homebuyers. And your first property could even be gained.

Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me, available at www.nicolessmartmoney.com. Follow Nicole on Facebook, Twitter and Instagram.

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