Getting into the property market has never been harder.
The multiples of income needed to save for a deposit and to pay for even the most humble property in Australia’s major cities has climbed to record highs.
So it is vital to start as young as possible if getting your own home is a driving force and to combine as many investment tricks as possible to turn this long term dream into a reality.
One of these strategies could be using the superannuation co-contribution to turbocharge super savings from the moment a young prson starts working.
It may only be a small casual job but as long as a young person is earning something, they are eligible for a government contribution of $500 a year on top of a $1,000 contribution to super—or a parent or grandparent who is helping out contributes on their behalf.
The full amount of $500 is payable on incomes up to $47,488 and then phases down to cut out entirely at $62,488 so this strategy can usually be used for a number of years to really give the super amount a kick along.
Withdrawing Super to Buy a House
That’s all well and good, I hear you say, but now the money is stuck in superannuation until the young person turns 60 – how does this help them buy a house?
This is where the second arm of the overall strategy kicks in.
The next scheme that is used is the First Home Super Saver Scheme.
This allows people to make voluntary contributions to super and later withdraw those contributions, plus associated earnings, to help buy their first home.
At the moment up to $15,000 of contributions per year can count toward the scheme, with a lifetime withdrawal limit of $50,000.
Key Scheme Restrictions
There are two important restrictions to this scheme to note here.
Firstly, the money cannot be withdrawn under the First Home Super Saver Scheme until the person turns 18.
The second is that any super that is not withdrawn under that scheme will remain preserved and can’t usually be withdrawn until retirement age, usually around 60.
Neither of these restrictions should be a problem for our young property dreamer who can leave the super account to grow as they get closer to pulling the trigger on buying a property.
5% Deposit to Make the Jump
The final scheme that can be used to help our young homebuyer is the 5% Deposit Scheme, which allows eligible first home buyers to buy a home with a deposit as low as 5%.
While buying a home with such a small deposit is not for the faint hearted given the large size of the loan, under this scheme there is no need for the borrower to buy expensive lenders mortgage insurance.
This is a considerable saving because this insurance is often added to the mortgage and compounds for many years and also only covers the lender, not the purchaser.
This scheme has been expanded and now offers unlimited places, no income caps and higher property price caps.
The application for the scheme is made through the lender so make sure your lender supports the scheme before choosing them.
Possible Stamp Duty Savings
A further possible advantage might be offered by the state government, depending on which state the person is buying in, with some schemes available to reduce or even eliminate the charging of stamp duty on a first home so check out this as well.
None of this makes buying a first property easy or makes much of a dent on the purchase price.
However, by using as many different government schemes as possible, a young person who is really focused and driven towards buying a property can maximise their chances of getting on the property ladder.
