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Here at Aveling Homes, our in-house finance department are experts in finance for first home buyers. If you have questions, we have all the answers.
The First Home Owners’ Grant explained
To assist first time buyers like you secure your first home, the West Australian Government will pay $10,000 towards the purchase price. This is not a loan. It’s yours! To qualify for the First Home Owner’s Grant, you must not have previously owned a residential property, you must be over 18, you must be a permanent Australian resident and you must live in the new home for at six months within the first 12 months from handover. And the Grant is payable on house and land packages valued up to $750,000.
You might not need to pay Stamp Duty
As a first home buyer, the State Government will waive Stamp Duty on the land component when the land purchase price does not exceed $300,000.00.
Keystart is perfect for those struggling to save a deposit
As with the Grant, Keystart finance is a government initiative to assist people just like you get into your first home. If you qualify for Keystart, you’ll only need a minimal deposit and no genuine savings. Those eligible for Keystart do not need to pay Lenders Mortgage Insurance either. And if you have a default, then don’t worry, we’ll see if we can take care of that as well.
If you have some savings, low deposit finance might be for you.
If you have a clear credit history and evidence of good savings, a low deposit home loan from Aveling Homes licensed Mortgage Broker, HLC, might be a smart option for you. Low deposit finance is where you use your savings as a deposit for your new home – reducing the amount you are borrowing. Remember, by combining the First Home Owner’s Grant with your savings, you could have the deposit you need.
Guarantor home loans are a very popular option
If your parents own their own property, we can show you how to use the equity in their property to help you secure yours. Basically, your parents will be offering their property as security for your first home mortgage.
First Home Loan Deposit Scheme
The federal government's First Home Loan Deposit Scheme will guarantee mortgages for first home buyers who have only saved a 5% deposit, effectively helping them buy sooner without paying lenders mortgage insurance premiums.
The First Home Loan Deposit Scheme will come into effect from January 2020.
The First Home Loan Deposit Scheme explained
- If you've saved 5% of the purchase price of your property the government will guarantee the remaining 15% of the deposit.
- You still need to borrow 95%, but you can avoid LMI.
- Your mortgage needs to be an owner-occupied loan with principal-and-interest repayments.
- Eligible first home buyers can't be earning more than $125,000 a year ($200,000 combined for couples).
- Access to the scheme is limited to 10,000 borrowers.
- The value of eligible homes under the scheme varies by state and city/region (see below).
- The scheme starts on 1 January 2020.
What are the benefits of the scheme and who is eligible?
5% deposit home loans already exist, but you generally need to pay LMI when borrowing more than 80% of a property's value.
LMI can be expensive. If you bought a $400,000 property with a 5% deposit ($20,000) you'd be looking at a $12,768 LMI premium.
The First Home Loan Deposit Scheme removes this cost, so you're saving money and also time. You can save a 5% deposit in a quarter of the time it would take to save 20%, after all.
There is a downside, however. Saving a smaller deposit and borrowing more money means paying more interest over time.
Only Australian citizens are eligible (not permanent residents). You will need to be a first home buyer (if you own an investment property you won't be eligible) earning $125,000 ($200,000 for a couple) a year or less.
The scheme is limited to 10,000 borrowers.
The scheme is open to a range of property types, including apartments, townhouses, house and land packages and existing houses. It is not limited to newly-built or off the plan purchases (unlike some first home owner grants).
Couples must be married or in a de facto relationships. Friends, siblings and so on cannot qualify for this scheme together.
Property value caps
To be eligible for the scheme you must be purchasing a property valued at or below the following thresholds:
$400,000.00 Western Australia
First Home Super Saver scheme
The First Home Super Saver scheme allows you to save money in your super for a deposit to purchase your first home. The scheme taps into super’s tax breaks to give your deposit a healthy boost.
An overview of how the scheme works
The new First Home Super Saver (FHSS) scheme allows you to voluntarily contribute up to $30,000 to your super and withdraw this amount (plus earnings, less tax) to buy your first home. Voluntary contributions include before-tax contributions, such as salary sacrifice, and after-tax contributions. The good part is that because you’re saving through super, you pay less tax than saving outside super, which means you can build a bigger deposit more quickly. If you’re a couple, you can both use the scheme so you could double the amount you save to $60,000. From 1 July 2017 you could make additional voluntary concessional (before-tax) and non-concessional (after-tax) contributions into your super fund, to save for a deposit on your first home.
What are the tax savings?
Before-tax contributions are taxed at 15% in super, whereas when you save outside super you pay tax at your marginal rate (up to 48.5%). After-tax contributions, which have already been taxed outside super, are not taxed again inside super. To show you how much tax you could save, take a look at the following example.
Example: Lee earns $85,000 a year, which means her marginal tax over $37,000 is 34.5%, including Medicare Levy. If Lee saves $5,000 outside super, she pays 34.5 cents in tax for every dollar, or $1,725. By contributing the $5,000 to super, however, there are tax benefits. Firstly, she only pays 15% tax on the contributions that she makes to super, not 34.5%. This means the $5,000 inside super would attract tax of $750, instead of $1,725. That’s a difference of $975, simply by moving the savings into super. What about tax on the way out? Like most super savings, tax is payable on the way out. But when it comes to withdrawing the FHSS savings, there’s a 30% tax offset. This means that when Lee releases or withdraws her contributions, she will be taxed at her marginal rate of 32.5%, plus the Medicare Levy (2%), less a 30% tax offset. So in total, she will pay another 4.5% tax when she withdraws her savings plus any earnings, as calculated by the ATO
Am I eligible?
To qualify, you must:
- be over 18 years of age
- have not previously owned property in Australia, unless the Australian Taxation Office (ATO) deems you have suffered financial hardship
- live or intend to live in the premises you are buying as soon as practicable after purchase, or live in the property for at least six months of the first 12 months you own it
- only use the scheme once, which means you can only make one withdrawal from super, to be used as a deposit for your home.
How much can I save for a deposit?
Contributions are capped at $15,000 per year and the lifetime maximum you can save through the scheme is $30,000. This means even if you make voluntary contributions of more than $15,000 in a year, only $15,000 can be counted towards the scheme. And once you reach $30,000 you can still make voluntary contributions, but they won’t count towards the scheme. These contributions, plus any others you or your employer make, must fall within the annual contribution limits for the year, which for 2018-2019 are: 5 $25,000 for before-tax (concessional) contributions 5 $100,000 for after-tax (non-concessional) contributions
Example: Monica is saving towards a deposit and wants to buy a new home in 2 years’ time. She contributes: 5 $25,000 in Year 1 ($15,000 counted towards FHSS scheme) and 5 $5,000 in Year 2 ($5,000 counted towards FHSS scheme). At the end of the second year Monica can withdraw $20,000 for her deposit, not the $30,000 she has contributed in total. That’s because $15,000 counts towards the scheme in Year 1 and $5,000 in Year 2.
How do I access my savings?
From 1 July 2018 you can apply to the ATO to request a FHSS ‘determination’. The ATO is responsible for deciding what counts towards the scheme.
Apply to the ATO to withdraw your contributions . You can apply online using your MyGov account linked to the ATO. The ATO will advise us of the amount that can be released when you apply to withdraw your FHSS savings and you will receive a ‘determination’ from the ATO, which tells you how much you can withdraw.
It is important to note that you can only use the scheme once, which means you can only request one amount to be released that will go towards your deposit. However, you may have more than one super fund, which you withdraw FHSS contributions from.
The ATO will issue a release authority to us to send your FHSS withdrawal amount to the ATO. The ATO will advise us of the amount that can be released when you apply to withdraw your FHSS savings and you will receive a ‘determination’ from the ATO, which tells you how much you can withdraw. It will take approximately 25 business days for us to release your money and for the ATO to pay it to you. Before the ATO send the balance of the released amount to you they will: 5 withhold the appropriate amount of tax 5 offset the remaining amount against any outstanding Commonwealth debts. The released amount is adjusted for contributions tax by the ATO, which means you are eligible to receive: 5 85% of the before-tax contributions you’ve made 5 100% of the after-tax contributions you’ve made. plus associated earnings determined by the ATO: 3% on top of the 90-day bank bill interest rate, less tax equal to your marginal tax rate, plus the Medicare Levy (2%), less 30% tax offset. If the ATO is unable to estimate your expected marginal tax rate, withholding tax of 17% will be applied.
A payment summary will be sent to you showing your assessable FHSS released amount. This amount comprises your before-tax contributions and the associated earnings on before-tax and after-tax contributions. You will need to include this amount as assessable income in your personal tax return for the financial year you request the release. Remember, the tax payable on this assessable amount will receive a 30% tax offset.
What happens if I don’t buy a new home with the money?
If you don’t sign a contract to purchase or build a home within 12 months of accessing your FHSS contributions, you can either: 5 apply for an extension of 12 months from the ATO 5 recontribute the money into your super, or 5 keep the money, but it will be subject to an additional flat tax rate equal to 20% of the assessable FHSS released amount
What else do I need to consider?
It’s important to consider whether the scheme is right for you. Before you participate in the scheme you may like to consider: 5 The type of home you want to live in. The scheme only allows you to buy ‘residential premises’ with your savings. This excludes houseboats, motor homes, or any premises that can’t be occupied as a residence, such as vacant land, unless it is to build your home. 5 Investment earnings on your FHSS amount are calculated by the ATO, not the performance of your super fund.
Got a question about finance? Call us now on 6144 1000 and we’ll set you straight.