Help for first home buyers: what the government is giving out

Financial assistance for first home buyers has multiplied, so it pays to understand what is available and how to get help.

Nine straight interest rate rises from the Reserve Bank of Australia have left first home buyers on high alert to spot every opportunity to save money.

With rise number 10 tipped to be announced on Tuesday, buyers are being urged to examine the growing range of government incentives and discounts available.

This financial assistance can be complex and confusing, with federal and state-based schemes each with their own rules, but understanding them deliver rewards, mortgage specialists say.

Ubank’s chief product officer – lending, Kanishka Raja, says despite daunting cost-of-living pressures and an uncertain economy, people with big financial goals such as buying a home remain determined.

Research from ubank has found seven out of 10 young adults are looking to buy property in the next five years, although less than half are confident that they can do it.

SAVING HARD

“In our research we found that people are doubling down on their savings at the moment, with young Australians estimating that they have an average $37,921 worth of personal savings,” Raja says.

“We also found that those who intend to buy a property in the next five years have more personal savings than those who don’t – $44,606 compared to $19,393.”

John Paul Smith is saving with his wife for their first home. Picture: Lyndon Mechielsen

Raja says key schemes include first homeowner grants, which vary between states and can be more than $20,000 in some cases, stamp duty concessions offered by state governments, and the First Home Guarantee Scheme – previously known as the First Home Loan Deposit Scheme.

“This was launched in 2020 and allows first-time home buyers to put a down deposit as low as 5 per cent without paying lenders mortgage insurance,” he says.

Oracle Lending Solutions managing director Angelo Benedetti says interest in government incentives has surged “because it is making a huge difference”.

He says the First Home Guarantee scheme is particularly popular because it enables people to secure lower interest rates as well as paying a smaller deposit.

“Everyone’s clutching for whatever they can get,” Benedetti says.

GOOD ADVICE

He says people looking to use incentives should research what is available in their state, “shop around” and seek professional advice if needed.

“Brokers are across it and have to deal with so many different clients on a daily basis.”

Potential borrowers should also aim to minimise their liabilities.

“Afterpay and credit cards have a huge negative effect on your affordability – close them or reduce the limits substantially,” Benedetti says. People should also be able to prove they have been saving money over at least a three-month period, he says.

Raja says research and understanding eligibility criteria is important, and people should take time to compare incentives to determine which one delivers them the most value.

“Consider the long-term financial impact,” he says. For example, buying a home with a 5 per cent deposit means higher repayments over the life of the loan.

John Paul Smith, 34, hopes to buy his first home with his wife within two years, despite it feeling “tougher than ever to buy a home in Australia”.

“House prices have gone up so much since when our parents bought their first homes – everything has gone up when you think about it, and wages unfortunately in some industries haven’t gone up as much,” he says.

Smith says he is unsure what incentives will be available when he is ready to buy.

“I think incentives can be a huge help and a good idea if it makes sense for you and whatever your goals might be,” he says.

Kanishka Raja from ubank says consider the long-term impact of government incentives.

KNOW THE INCENTIVES

• First Home Guarantee Scheme: first home buyers can purchase property with just a 5 per cent deposit without having to pay expensive lenders mortgage insurance. Caps on places, purchase prices and applicants’ incomes apply.

• First Home Owner Grants: These differ between states and are typically $10,000 to $20,000 and for new homes, with varying conditions.

• Stamp duty discounts: offered by state governments, typically for new home purchases. The NSW government allows buyers to swap the upfront transfer duty to an annual property tax.

• First Home Super Saver Scheme: Allows people to save their deposit inside their superannuation, where there are lower tax rates.

• Shared equity schemes: The federal government’s Help to Buy scheme is scheduled to start in July, but several state government housing bodies also offer options where they contribute to the purchase price then share in future capital growth.

Originally published as Help for first home buyers: what the government is giving out