The 2022 Federal Budget was handed down on 29 March, with a few strong themes in evidence. The cost of living featured heavily, as did help for first home buyers. If you’re about to dip your toe into the housing market, this might be the Budget you were waiting for.
Here’s what you need to know.
Help for first home buyers
It’s well understood that the main barrier for most first home buyers is the deposit. To avoid lenders mortgage insurance, a buyer needs to find 20% of the value of their home. On a $600,000 property, that’s $120,000 - a substantial amount if you’re also paying rent.
To help combat the problem, and get more people into their own homes, the government has created or expanded three schemes for first home buyers. Depending on your circumstances, you may be able to buy a home with as little as a 2% deposit. Be aware, though, that eligibility criteria and price caps apply.
Don’t let the deposit hold you back from buying your first home. This federal budget could see deposits dropping to as little as 2% for first home buyers.
1. The First Home Buyers Deposit Scheme
First created in 2019, the First Home Buyers Scheme (FHBDS) allows eligible first home buyers to build or buy a new home with a 5% deposit and no lenders’ mortgage insurance (LMI).
In the 2021-22 financial year, there were 10,000 places available, all of which were taken up promptly. The current budget expands the scheme to make a further 35,000 places available in the 2022-23 financial year.
To be eligible, you must buy an existing or new residential property. These include:
If you’re eligible, the family home guarantee offers more flexibility for single parents looking to put a deposit on a home.
2. The Family Home Guarantee
The Family Home Guarantee Scheme is more limited in scope, but offers even more flexibility. For single parents who meet the eligibility criteria, the scheme offers an opportunity to buy a house with a tiny 2% deposit. Since the government guarantees the remaining 18%, there is no requirement for lenders mortgage insurance.
There are 5,000 places per year over the next three years to 2025.
To be eligible, buyers must be:
Australian citizens of adult age
Earning $125,000 or less
With dependants in their care
3. The Regional Housing Scheme
A new Regional Housing Scheme (RHS) is designed to encourage construction of new homes in regional areas and ease housing pressure.
The Regional Housing Scheme is similar to the First Home Deposit Scheme, in that it allows buyers to purchase with as little as 5% deposit and no LMI. It is available both to first home buyers and to anyone who hasn’t owned a home in the past five years.
However, it is only available for new homes.
House and land packages
New builds on existing land
Newly built homes (generally, homes built in the past year and which have not been occupied since completion).
This year’s budget’s significant tax cuts will help you cut costs and save for your home deposit faster! Featured here: Granville, Smiths Lane, Clyde North.
Additional criteria and price caps
For all three of these schemes, some additional criteria apply. The property must be owner-occupied after settlement; the scheme is not available for investment properties.
The price of the property is capped and varies depending on location. For buyers looking at established homes, the caps may pose a problem in several states. Melbourne properties are capped at $700,000, which is substantially below its median house price of $780,000. Sydney buyers are even worse off, with a cap of $800,000 and a median house price of $1.02 million.
However, new house and land packages can be found for well under the cap, and may also be eligible for first home grants, which can be used in conjunction with the schemes.
More money in your pocket
To help you cut costs and save for that deposit faster, the Budget also includes tax cuts and a reduction in fuel excise.
The low-and-middle-income tax offset will be boosted this year by $420, with a possible tax return of up to $1,500 per individual as compared to previous years.
And since global instability has led to sharply increased fuel rises, petrol and diesel excise will be cut in half for six months. This drops it from 44.2 cents/litre to 22.1 cents/litre, taking the pressure off at the pump.
Find out if you can afford a home with the help of our in-house construction finance specialists. Ready to buy? Get in touch with us on 1300 535 416 to enquire about our house and land packages.