With house prices skyrocketing again in 2021, breaking into the property market is as hard as it’s ever been. In an effort to combat this, the state and federal governments have several initiatives in place to help first home buyers get their foot in the door sooner.
We’ll break down each of the most useful first home buyer schemes available to Victorians so you can get a leg up on the path to property ownership.
First Home Owner Grant
The First Home Owner Grant (FHOG) scheme has been in place nationwide since 2000, initially aimed to help offset the effect of GST on house ownership.
The grant is a one-off lump sum for first home buyers that have bought or are building a new home valued at $750,000 or less.
The grant does not have to be repaid and is not taxable, with the grant size and eligibility criteria differing from state to state.
For Victorians, the First Home Owner Grant is worth $10,000, available for the purchase of a house, townhouse, apartment or unit that has been built within the last five years and is being sold for the first time.
As well as the above conditions, the following nationwide rules will also determine your eligibility for the scheme:
- You must be a permanent resident or Australian citizen of at least 18 years of age.
- You must not have previously owned or co-owned a home in Australia.
- You must not have previously received a First Home Owner Grant.
- You must be buying the property for the purpose of living in it, not as an investment.
- You need to live in the home for at least six months after purchasing it.
- You must be a natural person (ie: not a company or trust).
To apply for this grant, you can lodge an application with the state revenue office or ask your home loan provider to lodge it for you.
First Home Loan Deposit Scheme
The First Home Loan Deposit Scheme (FHLDS) is another federal initiative designed to help first home buyers break into the property market sooner.
Usually when buying a home, most banks and lenders require at least a 20% deposit from a home buyer to avoid requiring lenders mortgage insurance (LMI). To take out a loan with a deposit less than 20%, lenders mortgage insurance is usually needed in order to protect the lender in the case that the borrower is unable to make their repayments.
Under this scheme, the NHFIC will provide a guarantee for eligible first home buyers of up to 15% of the property’s value. As a result, eligible applicants can take out a home loan with a minimum deposit of 5%.
The First Home Loan Deposit Scheme essentially works with the government underwriting a loan instead of the lender.
Before deciding whether to apply, there are a few important considerations to keep in mind.
Firstly, the FHLDS has capped its eligible number of home buyers at 20,000 each financial year, with half allocated for purchases of new homes and the other half allocated for purchases of old homes.
The scheme will also only underwrite loans for ‘entry’ properties, meaning that high-end property purchases won’t be eligible. For Melburnians, the FHLDS caps an eligible property’s value at $700,000 for established homes and $850,000 for newly built homes.
Other eligibility criteria includes:
- You must be an Australian citizen of least 18 years of age.
- You must not have previously purchased a property or been guaranteed by the FHDLS.
- For singles, your taxable income must be less than $125,000 per annum. For couples, your combined taxable income must be less than $200,000 per annum. (Note, couples are only eligible for the scheme if they are married or in a de facto relationship.)
- You must move into the property within six months of ownership and continue to live in the home for as long as the home loan has a guarantee from the NHFIC.
- You must have a deposit between 5% and 20% of the property’s value.
The NHFIC have appointed 27 participating lenders that will approve loans under this scheme. To apply, you can do so directly through one of these lenders or ask to do it through your mortgage broker.
First Home Buyer Duty Exemption
Stamp duty is the mandatory government tax on certain purchases, including buying a home or an investment property.
Luckily for Victorians, you might be eligible for a first home buyer duty exemption or reduction which can potentially save you tens of thousands of dollars.
For first home purchases valued under $600,000, qualifying buyers will be completely exempt from paying stamp duty. For first home purchases valued between $600,001 and $750,000, a sliding scale of concessional duties may apply.
To be eligible, you must meet the same criteria as the First Home Owner Grant. However unlike like FHOG, duty exemptions and concessions are available for purchases of both new and old homes.
Otherwise, to calculate the cost of Stamp Duty for your next property, you use use our free Stamp Duty Calculator here.
First Home Super Saver scheme
The First Home Super Saver (FHSS) scheme is another initiative aimed at incentivising the younger market to enter the property market sooner.
The scheme enables eligible individuals to save up for their first home inside their super fund, whilst utilising the concessional tax benefits of superannuation.
Under the scheme, you can voluntarily contribute up to $30,000 (a maximum of $15,000 per year) into your super, which can then be taken out and used to put down a deposit when buying your first home.
From July 2022, the FHSS maximum release amount will be increased to $50,000 to accomodate the rise of house prices.
These contributions include any made by salary sacrificing or any voluntary contributions you make after tax.
Eligibility for the scheme is determined by the following factors:
- The home you purchase must be located in Australia.
- You must not have previously owned a property.
- You must be at least 18 years of age, although you can make eligible contributions before this age.
- You must not have previously made a FHSS release request.
- You must occupy the premises you buy, or intend to as soon is practicable.
- You must intend to occupy the property for at least six months within the first 12 months that you own it, after it is practical to move in.
For more information or advice on what government schemes can benefit you, reach out to your accountant or trusted professional.