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New financial year brings more support for first homeowners

The new financial year has ushered in an unprecedented level of Federal and State government support for first home buyers.

The new financial year has ushered in an unprecedented level of Federal and State government support for first home buyers.

On July 1, the Federal Government opened up 40,000 new places under its First Home Guarantee Scheme, which allows first home buyers to purchase a home with a deposit as low as 2 per cent.

The new Federal Government has also announced a Help to Buy shared equity scheme, where it will help eligible first home buyers by contributing up to 40 per cent towards the purchase of a new home.

The additional support from the Federal Government comes as the NSW Government announced its First Home Buyer Choice program, which is designed to reduce the upfront cost of purchasing a property for first home buyers. It too has announced its own shared equity scheme.

Here is a summary of some of the new and existing schemes available to first home buyers:

New Homes Guarantee scheme

Administered by the Federal Government’s National Housing Finance and Investment Corporation (NHFIC), the New Home Guarantee scheme is open to individuals earning up to $125,000 a year or couples earning up to $200,000 who are looking to purchase their first home.

Under the scheme, first home buyers can apply for a loan through one of the scheme’s 32 participating lenders for the purchase of a property, in the case of Sydney, worth up to $900,000.

Home buyers usually are required to pay lenders’ mortgage insurance (LMI) if they purchase a property with a deposit of less than 20 per cent. But under the scheme, the NHFIC guarantees up to 15 per cent of the value of the property, meaning approved buyers only need to pay a 5 per cent deposit and avoid paying costly LMI insurance.

The number of places under the scheme has now been expanded from 10,000 to 35,000 a year. An additional 5,000 places are open to single parents who will only be required to pay a 2 per cent deposit towards the purchase of a property.

“We expect many more Australians to be able to bring forward buying a home under the expanded scheme,” says NHFIC CEO Nathan Dal Bon.

Help to Buy scheme

The Federal Government says its new Help to Buy scheme will see eligible first home buyers in Sydney save up to $380,000 on the purchase of a newly built home or apartment. Open to 10,000 applicants a year, the scheme will see the Federal Government contribute 40 per cent to the purchase of a new home or 30 per cent to an existing home.

Successful applicants will only require a 2 per cent deposit towards the purchase of a property worth up to $950,000 in Sydney, again removing the need of costly LMI insurance.  To be eligible for the scheme, applicants must earn less than $90,000 a year or $120,000 for couples.

Homebuyers are not required to pay any costs related to Federal Government’s share in their property, significantly reducing the costs of their mortgage.  

First Home Buyer Choice

The NSW Treasurer Matt Kean says the First Home Buyer Choice scheme set to commence in January 2023 will save young people “years of waiting to achieve their aspirations of home ownership”.

The First Home Buyer Choice scheme offers people buying their first property the option of paying an upfront transfer duty (previously known as stamp duty) for properties worth more than $800,000 or an annual property tax.

For owner occupiers the annual tax is $400 plus 0.3 per cent of the land value of property, while the annual tax is $1,500 plus 1.1 per cent of the land value of an investment property.

Offering one example of how the scheme would work, the NSW Government says an eligible first homeowner buying a $750,000 apartment, would incur a concessional rate of stamp duty of $20,870 or an annual property tax of $1,210.

First Home Buyer Assistance Scheme

The NSW Government provides concessions and even exemptions on transfer duty for first home buyers purchasing properties less than $800,000.

As part of its First Home Buyer Assistance Scheme, first home buyers do not have to pay any transfer duty for new homes valued under $650,000.

The scheme allows first home buyers apply for concessional transfer duty rate if the purchase price is between $650,000 or $800,000.

Shared Equity Scheme NSW

The NSW Government in early 2023, will introduce further support first home buyers who are nurses, teachers and police; single people 50 years or older; or single parents, as part of its trial Shared Equity Scheme.

As part of the trial, the NSW Government will contribute up to 40 per cent in sharing in the ownership of a new dwelling or 30 per cent of an existing dwelling worth up to $950,000 in Sydney.

To be eligible, the gross income of an applicant must be no more than $90,000 a year or $120,000 for couples. The scheme, open to 3,000 applicants a year, again saves first-home buyers paying LMI insurance and only requires a 2 per cent deposit. 

While buyers are responsible for the council rates, home loan and strata costs of their property, no repayments or interest is required on the share of the property owned by the NSW Government.

First Home Owner Grant

First introduced in 2000, the First Home Owners Grant is a $10,000 lump sum available to people buying newly built or off-the-plan houses, townhouses or apartments worth up to $600,000.

While the grant is not means-tested, it requires applicants to occupy their homes within 12 months of construction or purchase with a minimum occupancy period of six months.

First Home Super Saver Scheme

Since 2017, first home buyers have been allowed to build a home deposit inside their superannuation accounts by up to $15,000 a year or $30,000 in total.

The First Home Super Saver Scheme effectively allows first home buyers to build a home deposit quicker given their extra super contributions are taxed at the concessional rate of 15 per cent. Buyers can then withdraw the savings when they are ready to buy their first property. The key requirement is that applicants must live in their home for at least 6 months in the first year after purchase or construction.

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