So, you want to buy your own home? I mean, who doesn’t?
The safety and security of having your own roof over your head, and not worrying about having to pay money away to a landlord and not having a future asset to show for it, is clearly a desirable and financial sensible thing to aspire for, in many ways inspiring talk of the family home being the great Australian dream.
Unfortunately though, after the tough times thrust upon us from COVID-19 and the recent acceleration of property prices, the dream is starting to move out of reach for many. According to CoreLogic, housing values have risen 10.2 per cent since the COVID low in September 2020, and Westpac's economics team expects further gains ahead this year and next.
However, the good news is that in addition to the current record low interest rate environment, the federal government is providing more assistance to some.
In the recent federal budget, the government announced, or expanded upon, a number of measures that are designed to help Australians towards the purchase of their first home.
The first of these is the expansion of the First Home Loan Deposit Scheme.
Saving a deposit towards the purchase of a first home can be hard, and sometimes harder than paying of the debt once you have managed to secure the loan. Traditionally, most borrowers have required a 20 per cent deposit to avoid taking out lender’s mortgage insurance (LMI) with their loan, which essentially insurers the lender in the event you default and adds to the total cost of the mortgage.
To alleviate this, the government launched the First Home Loan Deposit Scheme a few years back with the aim of providing a government guarantee for qualifying individuals with a deposit as low as 5 per cent of the property price, thus avoiding the need for LMI. And the good news from this year’s budget is that an additional 10,000 spots for accessing this guarantee have been announced for the 2021-22.
It’s worth noting a number of qualifying conditions do apply, with more information available at the National Housing Finance and Investment Corporation website.
The second key announcement was a new initiative called the Family Home Guarantee.
This works similar to the First Home Loan Deposit Scheme, with the focus being on eligible single parents with children. Qualifying individuals will have the opportunity to build a new home or purchase an existing home with a deposit as low as 2 per cent, subject to the ability to service the home loan. From 1 July 2021, 10,000 Family Home Guarantees will be made available over four financial years.
The third announcement was an extension to the existing First Home Super Saver Scheme.
Under this scheme, which is not limited to a number of places, it is possible to access some of your accumulate superannuation savings to apply towards the purchase of your first home. There are rules, of course, with how it works, such as needing to make voluntary contributions to super in the first place, as you can't access the superannuation guarantee contributions from your employer, and there is a limit of $15,000 of eligible contributions you can make each year (whether through salary sacrificing or personal after tax contributions).
Under the existing scheme, you can access up to $30,000 of your accumulated super. But from 1 July 2022, this jumps to a maximum of $50,000. For a couple, this adds up to $100,000 towards the deposit for a home loan. An additional advantage with this scheme is for parents or grandparents who want to help children or grandchildren but are concerned about just handing over the cash.
Which of these could help you achieve the Australian dream of owning your own home?
Of course, it differs for everyone. But the best place to start might be to speak with a financial adviser, mortgage broker or banker to assist in determining the right strategy for you.
This article was prepared by Bryan Ashenden, Head of Financial Literacy and Advocacy at BT, a part of Westpac Banking Corporation ABN 33 007 457 141, AFSL and Australian Credit Licence 233714. The information in this article is general information only, it does not constitute any recommendation or advice. This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to these factors before acting on it. This document provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. This document may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, the Westpac Group accepts no responsibility for the accuracy or completeness of, nor does it endorse any such third party material. To the maximum extent permitted by law, we intend by this notice to exclude liability for this third party material.