12.04.2019 Buying Tips

Help For First Home Buyers

Help For First Home Buyers

If you are looking to buy your first property in Sydney there are a number of government initiatives that can offer critical financial help to get you on your way.

The First Home Super Saver Scheme is one key measure, among others. Here’s what you need to know.

What is the First Home Super Saver Scheme (FHSS)?

The FHSSS is designed to help Australians boost their savings for a first home by letting them build up their deposit inside of their superannuation. The FHSSS applies to all voluntary superannuation contributions and can be withdrawn to use toward your home deposit. This could boost your savings by as much as 30% compared to saving through a standard deposit account.

Are you eligible?

You can take advantage of the FHSSS if you are 18 years of age or older, have not used the scheme before, and have never owned property in Australia. If you meet all of the eligibility criteria you can utilise the scheme even if you are buying jointly with a partner who is not eligible.

How does it work?

You can contribute up to $15,000 a year or $30,000 in total. Any voluntary contribution you make counts, so speak to your employer to set up a salary sacrifice arrangement. Alternatively, you can make contributions directly into your fund yourself. ‘Concessional contributions’ (salary sacrificed contributions) are taxed at the standard 15%, while after-tax contributions are not taxed.

When you’re ready to withdraw your money to buy your first property, the ATO can tell you the maximum amount you can withdraw minus taxes owing, which is generally your marginal tax rate less a 30% rebate. You can also withdraw ‘deemed earnings’ at a set rate; last year this rate was 4.7%.

What can you buy?

You can buy a ‘residential premises’ – or land on which you will build a home – with your FHSSS savings, so the property must be intended as your first home and not an investment property. This means you must occupy your new property for at least the first six months in the first year after its purchase or construction.

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Other Help for First Home Buyers

First home buyers in NSW have access to other government assistance too. You may be entitled to a concessional rate or exemption on paying transfer duty (also known as stamp duty) under the First Home Buyer Assistance Scheme.

The First Home Owner Grant gives eligible first home buyers a one-off payment of $10,000 toward their purchase price for buying or building their first home when they buy a brand-new home that is valued under $750,000.

What Can You Buy?

These benefits are designed to improve housing affordability and help more Australians get into the property market. As such, there are limits on the value of property that you can buy. While this will limit your options in blue chip areas such as the Eastern Suburbs, with some research and searching, you should still be able to find a quality unit to buy that is not only an excellent entry point into the property market but will also have good potential for capital gains. As always, it’s best to look for a centrally located property in a desirable area close to good public transport and amenities.

Better Lending Conditions

While there’s still increased scrutiny by lenders following the Royal Banking Commission, which may make it take longer to get your loan approved, lending conditions have relaxed somewhat. Interest rates are also now at an all-time low, making servicing your mortgage likely less of an issue than saving your initial deposit, which is where these schemes can really help.

If you’re looking to buy or sell in Sydney’s eastern suburbs contact my team today.