How to buy a home before you turn 30
Sarah Megginson, Senior Home Loans Editor at Finder
The first half of this year will be remembered as the year property prices in Australia really boomed. If you already own a property, this is great news – your wealth is growing!
If you’re a first home buyer watching on from the sidelines… well, that’s another story altogether.
A booming property market can make you feel like your dreams of owning your own home are slipping away faster than ice cubes on a December day. Fortunately, it doesn’t have to be the case. In fact, you could buy your own home with as little as $15,000 in savings.
For first-timers, there are loads of incentives, schemes and grants that can help you get your foot onto the property ladder. If you can commit to saving just a small deposit, you could be well on your way to making an offer on your first parcel of bricks and mortar.
First home owner grants
Many first-time buyers are eligible for a cash grant known as the First Home Owner’s Grant. These grants differ in every state and territory, and can be worth up to $10,000 – even more in some cases, such as in Victoria, where you’ll get up to $20,000 to purchase a new property in a regional area.
To qualify, you often need to purchase a new or off-the-plan property, rather than an established home, and there is usually a limit on the overall value of the property. In Sydney, for instance, the limit is $750,000 for a house and land combined. Check your eligibility and see how much you’re eligible for the first home owner’s grant in your area.
Potential first home buyer saving: Up to $20,000.
Stamp duty savings
Stamp duty is one of the biggest costs associated with buying a property. It’s a tax levied by state governments and usually costs up to 5% of the property’s purchase price, depending on your state or territory.
Luckily, many first-time buyers can avoid stamp duty completely or get a big discount. In Queensland, for example, first home buyers don't have to pay stamp duty on properties valued below $550,000. On a property purchase price of $525,000, for instance, the buyer would save $9,625. Learn more about the stamp duty exemptions and concessions in your state or territory, as the discounts and concessions vary.
Potential first home buyer saving: Up to $24,585 (depending on your state).
The First Home Loan Deposit Scheme
If you only have a 5% deposit saved and you're a first home buyer, you could be eligible for the First Home Loan Deposit Scheme (FHLDS), a federal government initiative designed to help people own their own home. Under this scheme, eligible borrowers can borrow 95% of their property value with just a 5% deposit and have the government guarantee the remaining 15% of the deposit.
This allows you to avoid lenders mortgage insurance (LMI) costs, which can be significant. On a $500,000 home purchase price, a 5% deposit equates to $25,000. Normally, you would have to pay LMI of around $14,000 to get this loan (you can add the LMI to your loan and pay it off, or pay the fee upfront). The FHLDS offers a massive saving to first home buyers and can help you get into the market sooner.
Potential first home buyer saving: $15,000+, depending on the value of the loan (purchase price caps vary from state to state).
Other incentives for first-time property buyers
There are also a couple of other programs you could be eligible for, including the First Home Super Saver Scheme, which allows first home buyers to make extra payments into their superannuation and then withdraw them to use for a home deposit. This ends up saving you in tax while helping you build your deposit.
There’s also the Family Home Guarantee, announced in the 2021 Federal Budget. Up to 10,000 single parents with at least one dependent (2,500 per year over four financial years) will be eligible to buy a home with a deposit of just 2%, which means for the purchase of a property worth $700,000, the homebuyer will need to save a deposit of just $14,000.
Let’s tally up the savings so far. If you’re a first-time buyer and you’ve found a new apartment to buy worth $500,000, you’ll get:
- Up to $10,000 towards the property purchase with the First Home Owner’s Grant (more if you’re buying in a regional area)
- An exemption on stamp duty, saving you $9,000+
- An exemption on LMI, saving you $12,000+
On a $500,000 home, you only need a deposit of $25,000 under the FHLDS. With $10,000 from the first home owner’s grant, that means you only have to save $15,000 to buy your first home. If you’re splitting the purchase with someone, your goal halves again to just $7,500.
You should probably budget a few thousand dollars extra for moving costs and legal fees, too. But overall, the message is clear: with access to all of these schemes and grants, the potential of becoming a first home buyer could be much closer than you think.