Single parents and first-time home buyers will benefit from a significant budget boost.

The government budget this year benefits single parents saving for a home and first-time home buyers. Today, we'll go over the three strategies that can assist them get into the real estate market faster.

In recent months, there have been hints that first-time buyers are starting to leave the market, as investors return in large numbers to take advantage of the market’s bullish price outlooks.

So, in this year’s federal budget, the focus was on giving first-time buyers and single parents a significant advantage in the housing market, which we’ve broken down for you below.

1. Single parents can buy a home with a 2% down payment.

If they qualify for the federal government’s new Family Home Guarantee plan, single parents looking for a home will only need to save a 2% deposit to get into the market.

The program allows eligible single parents with children to borrow with a deposit of less than 20% and avoid paying lenders mortgage insurance (LMI) because the government will guarantee up to 18% of the loan.

The scheme, which will begin on July 1, 2021 and operate for four years, will offer an initial 10,000 spots.

Here’s an illustration of how it works.

Mary is a single mother of Johnny and James, two small sons. Mary has located the perfect home for $460,000, but she is having trouble saving money for the required $92,000 deposit (20%) while paying rent.

Mary could move into her dream home sooner, with just a $9,200 deposit, thanks to the Family Home Guarantee and the success of her lender application (2 percent ).

2. With a 5% deposit, you can buy or build your first house.

Thanks to an extension of the First House Loan Deposit Scheme (FHLDS) for new buildings, those looking to build their first home with just a 5% deposit may soon be able to do so.

From July 1, the federal government has declared that an additional 10,000 slots in the plan would be available for new construction.

These 10,000 seats are in addition to the 10,000 spots reserved for current property purchases under the scheme, which will be available beginning July 1.

So that’s a total of 20,000 spots across new and current builds!

The FHLDS enables eligible first-time buyers to enter the property market sooner by requiring only a 5% deposit and eliminating the need for LMI.

Depending on the house price and the deposit amount you’ve saved, you may save anywhere from $4,000 to $40,000.

By contacting us or visiting the NHFIC website, you can learn more about the FHLDS and its eligibility conditions.

3. By salary sacrificing in your Super account, you can save a deposit.

From July 1, 2022, the First House Super Saver plan will allow you to contribute up to $50,000 in voluntary superannuation payments to a first home deposit. Only $30,000 could previously be issued for the purpose of purchasing a first house.

The hike will expedite homeownership for first-time buyers, and the government acknowledges that deposit requirements for home purchases have risen over time as house prices have risen.

Here’s a simple illustration of how the concept works.

Sue is an occupational therapist with an annual salary of $80,000 who wants to purchase a new home.

She puts $12,500 of pre-tax income into her superannuation account each year through salary sacrifice.

Her balance rises by $10,625, after concessional contributions tax. Sue is eligible to withdraw $45,226 in contributions as well as the presumed earnings on those contributions after four years.

Sue’s marginal tax rate is minus a 30% tax offset, thus withdrawal tax is calculated at a concessional rate of 4.5 percent. Sue now has $43,191 to invest toward her first home purchase.

Sue’s partner, Rob, earns the same salary as Sue and contributes $12,500 to his superannuation fund every year for the same four years.

Sue and Rob have a total of $86,382 to put toward their first home, which is $20,838 more than they would have if they had saved in a traditional savings account.

Get ready to apply

While the two LMI-related schemes will be accessible on July 1, it is critical to begin preparing for them now.

In prior years, the FHLDS’ 10,000 slots have been snapped up in a matter of months, and we’ve had a number of prospective applicants come out to us after it’s too late.

So, to avoid disappointment, contact us soon so that we can assist you in getting everything in place before the plans begin in the new financial year.

To learn more, contact Premium Finance Group Australia at (07) 4720 8888 or email us at finance@pfga.com.au

Disclaimer: The content of this article is general and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your situation and may not be relevant to circumstances. Before taking any action, consider your particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced, or republished without prior written consent.

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