Buying your first home as an older borrower is challenging. A couple on an average income now needs more than 8 years to save for that 20% deposit. A couple in their 50s do not have that much time to save for a deposit. By the time they have saved the 20% deposit, they’re too old to get a home loan or the prices of properties have gone up that what they’ve saved may not even be enough for a decent deposit.
If you’re a mature age borrower, the fear is if there is a bank out there who will lend to you at your age knowing that you will be retiring in 20 years’ time. The good news is that there are ways to buy your first home sooner than you think.
For those with less than the 20% deposit, the government has introduced grants and schemes that will allow first home buyers, older borrowers included, to purchase a home with as little as a 5% deposit. Second, if you’ve been putting away a percentage of your income to your super on top of the superannuation guarantee contribution, then you can pull this money out of your super to be used as a home deposit.
With rising interest rates, your other fear is if you will be able to afford the repayments of the mortgage. A 30 year loan term means a lower repayment compared to a 20 year loan term. If your loan amount is $500,000 on a 30 year loan term at 3%, your monthly repayment is $2,108 compared to $2,773 on a 20 year term. You can still get a 30 year loan term as long as you can prove to the bank that you have the capacity to service the loan even after retirement.
Buying your first home is both exciting and scary. As your broker, I am here to help you every step of the way. I will explain to you what all these acronyms mean – FHOG, FHLDS, FHSSS and FHBAS.
The biggest hurdle of first home buyers is saving enough money for a deposit. With the First Home Super Saver Scheme as a way to save for the deposit, with the First Home Loan Deposit Scheme requiring only a 5% deposit from first home buyers and with the Family Home Guarantee aimed at helping single parents at home ownership with just a 2% deposit, it has never been a good time for home borrowers in their 50s to enter the market.
1. FHLDS (New Homes) extended for 2021 to 2022
The governments FHLDS (New Homes) will be boosted by another 10,000 places. The First Home Loan Deposit Scheme was introduced in January 2020 and was extremely popular for first home buyers. As part of this scheme, the buyer only requires a 5% deposit and the government will act as guarantor for the remaining 15%. As a result, first home buyers avoid paying loan mortgage insurance. This scheme is available through Commonwealth Bank, National Australia Bank and 25 other participating lenders. Interested, read our article about the First Home Loan Deposit Scheme and how it works. You will need to act quickly with almost all spots secured after becoming available.
2. First Home Super Saver Scheme (FHSSS)
This scheme was introduced in the Federal Budget in 2017, but has been expanded to allow first home buyers to release up to $50,000 from their superannuation, up from the previous $30,000. This scheme allows eligible first home buyers to dip into their Superannuation to withdraw up to $50,000 to use as a deposit towards an owner occupied purchase. The increase will take effect from 1st July 2022. The scheme allows first home buyers to make voluntary contributions to their super either before or after tax and use these savings towards their deposit.
For most first home buyers, the First Home Super Saver Scheme could boost your savings up to 30% faster, compared with saving through a standard deposit account. This is due to the concessional tax treatment and the higher rate of earnings often realised within superannuation. You can read more about the First Home Super Saver Scheme here.
3. Family Home Guarantee
This “guarantee” is aimed at helping single parents into home ownership. The guarantee enables eligible single parents to be able to build or buy a new home with only a 2% deposit. You will need to be able to service the loan to be eligible. Places are now available since the 1st of July 2021. However, only 10,000 places will be available over 4 years nationally. So you will need to act quickly for this also.
There are also First Home Owners Grant available in every state and territory and stamp duty exemptions for first home buyers. In NSW, first home buyers can qualify for the $10,000 FHOG if they purchase a new property for $600,000 or buy land and build a home for $750,000.
The First Home Buyers Assistance scheme provides first home buyers an exemption from transfer duty on new homes valued at less than $650,000 and concessions for new homes valued between $650,000 and $800,000. No duty is payable by eligible purchasers buying a vacant block of residential land valued at up to $350,000, while concessions are available for vacant land purchased for between $350,000 and $450,000.
At Maverick Finance, we have seven FHLDS participating lenders in our panel. We have two major lenders – NAB and CBA and non-major lenders – Auswide, MyState, Teachers Mutual Bank, Firefighters Mutual Bank and Health Professionals Bank. Contacting a mortgage broker early in your search is often a wise idea as it may allow the broker time to understand your circumstances and potentially help prepare you for a successful loan application when the time is right.