The property market is pretty hot right now and whilst it can feel hard for buyers to secure a property, first home buyers (FHBs) are feeling it even more, especially if struggling to save a deposit with surging property prices.
The recent Federal Budget has extended schemes to help FHBs save money for their deposit through their super, and help FHBs with a low deposit purchase a home sooner. They’ve also added a new program to help single parents buy their first home or re-enter the property market with a low deposit.
What are these programs you ask? See below!
First Home Loan Deposit Scheme (FHLDS)
The FHLDS has already been in place since last financial year, however, in the recent budget, the Federal Government has allocated an additional 20,000 places for the 2021/22 financial year.
How does this scheme work?
Usually, FHBs with less than a 20% deposit need to pay the one-off cost called ‘Lenders Mortgage Insurance’ (LMI). Under the Scheme, eligible FHBs can purchase or build a new home with a deposit of as little as 5%, with the Federal Government providing a guarantee to the lender of up to 15%.
The government effectively covers the cost of LMI that is normally required by homebuyers who do not have a 20% deposit.
There are currently 27 participating lenders across Australia offering places under the FHLDS and lenders criteria still apply.
Property price thresholds/caps do apply. The FHLDS can be used in conjunction with the Federal Government’s First Home Super Saver Scheme (FHSSS), and with local State and Territory grants and concessions.
New Home Guarantee
This scheme is a temporary extension of the FHLDS.
The New Home Guarantee (NHG) was introduced in the previous budget to boost construction and new home builds.
The recent budget extended the NHG into a second year, with the government providing another 10,000 places for the 2021/22 financial year which can only be used by FHBs for new homes.
Higher price caps apply compared to the main FHLDS, as this program is designed to encourage FHBs to buy new housing which generally has a higher price. The same eligibility requirements apply as under the main FHLDS.
Family Home Guarantee
The Family Home Guarantee (FHG)is a new deposit program to support single parents with dependent children to build a new home or purchase an existing home with a deposit as little as 2%. The individual’s income needs to be less than $125,000 p.a. to be eligible.
The government will provide a guarantee to cover up to 18% of the property purchase price. The government effectively covers the cost of LMI that is normally required by homebuyers who do not have a 20% deposit.
The FHG is not limited to single parents who are FHBs, so it also helps single parents who have previously been owner occupiers and are looking to re-enter the housing market.
The Federal government will provide 10,000 guarantees over 4 years to single parents with dependents starting July 1st 2021.
First Home Super Saver Scheme
The First Home Super Saver Scheme (FHSSS) has been in place since 2017/18 Federal budget but has now been amended to increase the amount that FHBs can withdraw from their super savings under the scheme.
The scheme lets FHBs save for a deposit inside their superannuation account, helping them save for a deposit faster due to the tax treatment of superannuation.
The government is increasing the maximum amount of voluntary contributions eligible to be released under the scheme to $50,000 (from $30,000).
FHB can make up to $15,000 per financial year voluntary before-tax contributions and voluntary after-tax contributions into their super fund to save for a first home.
To be eligible, FHBs must either live in the premises they are buying or intend to do so as soon as practicable, and also intend to live in the property for at least six months within the first year of ownership.
The ATO notes eligibility is assessed on an individual basis, meaning couples, siblings or friends can each access their own eligible FHSSS contributions and pool funds together to buy the same property.
The ATO website notes FHBs can start saving under this scheme by entering into a salary sacrifice agreement with their employer or by making voluntary personal super contributions.