This year’s Budget has been a bonus for home buyers with a number of measures aimed at helping Australians into a property of their own. But as the old saying goes: “God helps those who help themselves!”
And even with Government help, potential homeowners still have to save up a large amount to get a deposit. Right now there’s still plenty of lenders prepared to do an 80:20 deal, where the borrower has to find 20 per cent for 80 per cent of the purchase price loan.
So if you’re buying an $800,000 home, you’ll need $160,000 as a deposit. That’s why the bank of Mum & Dad has become the 10th biggest mortgage ‘bank/lender’ in the country!
“Parental contributions are averaging more than $89,000, an increase of nearly 20 per cent in the past 12 months, and enough for a 20 per cent deposit in most of the nation’s postcodes outside Melbourne and Sydney, according to an analysis by researcher Digital Finance Analytics (DFA),” the AFR told us in March this year.
There are 3 things that the recent Budget offered homebuyers, but are they enough?
The Government will extend the construction commencement requirement under the existing HomeBuilder program from the existing six to 18 months.
An additional 10,000 places will be made available in the First Home Loan Deposit Scheme (FHLDS), or “New Home Guarantee”, a scheme that allows first home buyers/builders to borrow more than 80 per cent of the property’s value with only a 5% deposit, without paying lenders mortgage insurance.
Other initiatives include establishing a Family Home Guarantee Scheme, a program similar to the FHLDS above to allow eligible single parents with dependents to enter or re-enter the housing market with only a 2 per cent deposit.
So how do borrowers save the rest? With term deposits paying less than 1 per cent interest?
The answer is super easy - use your super to save!
All homebuyer savers should think about using the First Home Super Saver Scheme, which has been changed so someone could save $50,000 into their super funds and then draw it out plus earnings. It was only $30,000 but the change means a couple could end up accessing $100,000 of their savings out of their super for a deposit.
There are a few little issues you have to understand and here they are:
You can’t use the super paid in concessionally by your boss under the Super Guarantee levy, which from July 1 will be 10 per cent of your pay.
There’s a $15,000 limit per year that you can dump into your super but that might change when the politicians vote on it and so it might be raised.
Why is super the best way to build your wealth for a deposit? Well, good super funds return 7-8 per cent a year and some even do better, so it will turbo charge your saving.
And who knows, it might stop your Mum and Dad having to be the bankers.