Help for First Home Buyers: Federal Budget 2021
by Carlisle Homes
Take advantage of new government schemes announced in the 2021 Federal Budget. Here’s everything you need to know.
Prospective home buyers will get a boost in the latest Federal Budget, which was delivered on 11 May 2021.
Getting into your first home has been supported heavily in this year’s Federal budget. The Budget allows eligible first home buyers to buy with a small deposit and offers tax incentives for savers and downsizers to free up stock.
Buying with a small deposit
The Federal government is providing two sets of guarantees for eligible first home buyers. In both cases, the government guarantees part of the loan so that buyers can avoid lenders’ mortgage insurance.
First Home Loan Deposit Scheme (New Homes)
Under the First Home Loan Deposit Scheme (New Homes), eligible first home buyers can build or buy a new home with a 5% deposit, without the need to take out lenders’ mortgage insurance (LMI).
Originally introduced in 2019, it has been extended to provide 10,000 new places from 1 July 2021 to 30 June 2022. However, while it was originally available for both new and existing homes, now you must buy or build a new home.
Eligibility
The Scheme is open to first home buyers who are:
- 18 or over;
- Earning $125,00 or under (if buying as a single person) or $200,000 or under (as a couple);
- Buying or building a new home;
- Intending to live in the home as their primary residence; and
- Have not owned a home in Australia before.
A new home includes:
- House and land packages
- New builds on existing land
- Off-the-plan homes
- ‘Recently built’ homes. This is defined as any home that was built after 1 January 2020 and has never been lived in.
The price of the property is capped at $850,000 for Greater Melbourne and Geelong, and $550,000 in rural Victoria.
Time frames also apply. For a house and land package, or where there are separate contracts to acquire the land and to build the home, the building contract must be signed after 7 October 2020.
For the next four years you could be eligible for the Family Home Guarantee, even if you’ve purchased property before. If you’re a single parent and sit inside the eligibility criteria, you’ll need a deposit of only 2% to buy your new house.
Family Home Guarantee
The Family Home Guarantee (FHG) works on a similar basis to the First Home Loan Deposit Scheme. The Guarantee allows single parents to buy a home with a deposit of just 2%, with the government guaranteeing the remaining 18% required by the bank.
The FHG offers 10,000 guarantees to single parents over the next four years, or 2,500 places per year.
Eligibility
To be eligible, buyers must be:
- An Australian citizen
- 18 years or older
- Earning $125,000 or less
- With dependents in their care
Under the FHG, buyers may be eligible even if they have purchased property before. They may build a new house or buy an existing one.
Boosting savings with tax incentives
First Home Super Savers Scheme
Under the First Home Super Savers Scheme (FHSSS), first home buyers can make additional contributions to their superannuation fund and then withdraw those contributions for a home deposit. The superannuation must be used for a house you are going to live in, not an investment property.
As superannuation income is only taxed at 15%, this allows buyers to keep more of their money.
Effective from 1 July 2022, eligible first home buyers can make contributions of up to $50,000 for this purpose. This is up from $30,000 under the previous Budget.
Under the FHSSS, you can opt to make additional contributions of up to $50,000 to your superannuation fund and then withdraw the money to put towards a home deposit! This means you can keep more of your money and reach your savings target sooner.
Compatibility with First Home Buyer Grants
There are no changes to existing first home buyer incentives in the Budget. However, it’s worth noting that the new incentives can be used in conjunction with existing grants.
That means that, for example, an eligible first home buyer in Melbourne can use the $10,000 First Home Buyer Grant ($20,000 in regional Victoria) towards their 5% deposit on a new house and land package, and still not pay LMI. On a $600,000 package, a 5% deposit is $30,000 — so you’re a third of the way there already!
If you are planning to take advantage of the government schemes, make sure you understand the numbers. Buying with a small deposit can be a great way to get into the market, as long as you can meet the repayments. Professional advice is recommended.
Because Carlisle understands that you need to budget with confidence, we work with trusted land developers to offer a fixed price house and land package for all first home buyers. No hidden extras, no additional costs. You’ll know exactly how much you need to budget, with no nasty shocks at the end.
Take advantage of the latest government schemes and build your dream home sooner than expected! New incentives can be used with existing grants so you can reach your budget goals sooner and still avoid paying LMI.
Want to learn more from the experts? Our in-house construction finance specialists take the hard work out of finding the right home loan for you. You can also visit the Home Files finance section for everything you need to know on loans, budgeting, deposits and more!