First Home Saver Accounts
The First Home Savers Account is an exciting innovation of the Australian government that first home buyers have been slow to warm to.
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It has long been recognised that putting a substantial deposit together is one of the hardest and most tedious aspects connected with home buying. This is even more true today that it has been in the past, as ever since the fear of watching the home loan market collapse in the USA, at the beginning of the Global Financial Crisis (GFC), lenders in Australia have been unwilling to offer loans with less than a 20 percent deposit.
No deposit homes are harder to find than hen’s teeth and if you are able to secure a loan only requiring a ten percent deposit you will most likely have to take out a lenders mortgage insurance. A substantial cost that you are well advised to avoid if you can. Many lenders will not even accept the First Home Owner Grant money as part of the deposit as they prefer to see a pattern of saving over a reasonably long period of time as an indication of your financial discipline.
The First Home Saver Account was launched by the Australian Government in October 2008. It is meant to assist first home buyers save as much of a deposit to put down on their first home as is possible. This is done by only taxing the interest in the account at 15 percent. The government itself contributes directly to the money being saved by paying an amount equal to 17 percent of up to the first $5,000 deposited into the account each year. This means that a single account holder saving just $5,000 annually will receive an $850 government contribution and a couple able to save $10,000 a year will get a $1,700 boost. This assistance along with the first Home owner grant of $7,000 when the time comes to buy your first home is a considerable contribution from the government.
First Home Saver Account eligibility
To be eligible to receive the First Home Saver Account you must be:
• Able to provide your tax file number.
• Never to have had a First Home Saver Account before.
• Have never previously brought or built another home in which to live.
• Be over the age of 18 and under the age of 65.
First Home Saver Account features include:
• The account must remain open for at least four years and the money deposited has to occur over four separate financial years, not necessarily consecutive years.
• The account, which can be accessed through most of the major banks, credit unions and building societies, is presently capped at $80,000 and the funds saved must only be used to buy your first home. If you wish to discontinue the account before the four year minimum is reached the funds in the account will be rolled over into your superannuation fund.
• Interest that builds up in the account is only taxed at 15 percent no matter what your personal tax level is. Withdrawals from the account are tax free when used to purchase your first home to use as your principal place of residence.
As an example of how the First Home Saver Account works you can open an account with your bank, credit union or building society and religiously deposit an amount of $5,000 every year for a total of four years. During this time the government will have contributed an amount of $850 each year also. When the four years is up you will have saved $20,000 yourself and the government will have put in a total of $3,400.
These two amounts total $23,400 and the interest that would have accrued would bring the amount in the account to $26,352. If your lender allowed you to add the $7,000 from your First Home Owner Grant you could then approach them with a grand total of $33,352. Enough for a 20 percent deposit on your first home valued at around $150,000. If you saved as a couple the amounts would double and you could have your deposit for a home valued at over $300,000.
You can not open a joint First Home Saver Account. If you are a couple you will both have to open separate accounts and the end result will still be better. If you only had the one account, in one partners name, any saving over $5,000 made each year would not attract the government contribution. Separate accounts will give you that added benefit. Other people can help you to save by depositing money into your account on your behalf.
Related posts:
- Starting a First Home Saver Account
- First Home Saver Account Changes To Benefit More Aussies
- First Home Saver Account Scheme (FHSA)
- Guide to First Home Saver Accounts – Compare & Apply Online
- Rams Rent Saver
- Save for Your Deposit with the Virgin Saver Account
- Virgin Home Loans, Credit Cards and Savings Accounts
- Home Lenders Mortgage Insurance for First Time Home Buyers
- No Deposit Home Loan – An Option For First Home Buyers
- First Time Home Buyers Guide
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