How does the First Home Super Saver scheme work?
You can make voluntary contributions into your super fund for the purposes of saving for a home deposit, up to $15,000 per year and up to $30,000 in total. Those contributions will be taxed at 15% (which is almost certainly likely to be lower than your effective tax rate). If you're a salaried employer, you can arrange for this to happen through salary sacrifice, to ensure you're paying the lower rate right away.
When you want to withdraw the money for a deposit, it will be taxed at marginal tax rates, minus a 30% offset. Note, you can only withdraw contributions identified as part of the scheme, and the "deemed earnings" on those contributions; you can't touch your super otherwise.
Even with those two taxes, that's likely to be a more effective strategy than saving in a traditional bank account, especially given current lower interest rates. Government estimates suggest this will typically boost the amount of deposit saved by 30%. "This is due to the concessional tax treatment and the higher rate of earnings often realised within superannuation," the announcement notes.
Who will this affect?
The new scheme could be beneficial for anyone saving for a first home. Subsequent home purchases aren't eligible. If you're already making voluntary contributions to your super, note that the overall cap of $25,000 a year for all voluntary contributions still remains; if you put $15,000 into your super for your deposit, you'll only be able to put $10,000 in as a top-up for your long-term superannuation during that year.
This won't necessarily get you a whole deposit, however. In capital cities, $30,000 (or $60,000 for a couple) still might not comprise the 20% deposit you'll want to accumulate to avoid expensive lenders mortgage insurance in many markets, so you'll need to save outside the scheme as well.
WHO SHOULD OPEN A FIRST HOME SUPER SAVER?
IF you’re planning on buying a home in the next few years, and you already have a decent deposit saved up, you’d have rocks in your head if you didn’t open one up.
That’s because it’s worth $12,628 extra to an average earning couple , compared with saving in a basic bank account.
WHO SHOULD NOT OPEN A FIRST HOME SUPER SAVER?
ANYONE with a longer timeframe — who isn’t planning on buying for up to five years. Parents, grandparents — don’t open one up for young kids.
Sure, but there’s one more risk with this scheme that I haven’t mentioned yet — and it’s a doozy. What happens if you meet and settle down with someone who just happens to own their own home already?
Under the current rules, the money you’ve saved up can only be used as a deposit for your first home.
So, because your partner has already bought a home, you’ll be forced to keep that money locked up inside your super and won’t be able to access it.
If you would like to speak to us about how this will affect you contact us via our contact page.
Borrowing criteria relaxed for First Home Owners
THOSE struggling to buy their first home have been given an extra boost with the WA Government increasing the First Home Owner Grant as well as Keystart lending criteria.
The grant has increase by $5000 up from $10,000 and will take effect from January 1,2017 for 12 months.
The metropolitan income limit for Keystart loans has been increased by $20,000 and will also come into affect in the new year.
Video: A national report has found first home buyers in Perth are able to save for a deposit quicker than those in any other state
The lending criteria for loans was tightened in the 2014-15 Budget to help pay Government's debt but the Barnett Government claims the "recent success" of selling off part of Keystart's 1.35 billion loan book has allowed it to broaden its criteria.
WA Premier Colin Barnett says both measures will not only help struggling first homebuyers enter the market but also stimulate the construction sector and create more jobs.
"We are conscious about housing affordability and this boost will provide more families an opportunity to get into the housing market," Mr Barnett said. "We are committed to creating and supporting jobs for West Australians, so this carefully targeted measure will not only provide more employment opportunities for every tradie in your neighbourhood, but we expect an extra 650 WA first homebuyers to buy or build a new home."
Treasurer Mike Nahan said the 12-month boost to the grant, coupled with the existing transfer duty assistance provided to first homebuyers, was one of many measures the Barnett Government was introducing to support the State's economy.
First homebuyers who purchase vacant land to build their home on will continue to pay no duty on purchases up to $300,000, and pay a reduced amount of duty on land up to $400,000, Dr Nahan said.
"Those buying an established home or a newly constructed home also pay no duty for homes up to $430,000, and reduced transfer duty on homes up to $530,000," he added.
Finance and Small Business Minister Sean L'Estrange said the new $5,000 boost payment would apply to contracts entered into between January 1, 2017 and December 31, 2017 for the purchase or construction of a new home, as well as owner builders who lay foundations of their home between those dates.
He said homes must be completed within certain timeframes. Construction must start within 26 weeks from signing the building contract and be finished within 18 months.
Those buying a new 'off-the-plan' home, including apartments, will need to make sure construction is completed by June 30, 2019, he added.
As with the existing grant, the boost will also apply to new homes up to the value of $750,000 (or up to $1 million if the home is located north of Shark Bay).
Under the changes, Keystart's metropolitan income limits will rise up to $20,000:
Singles - up to $90,000, previously $70,000
Couples - up to $115,000, previously $95,000
Families - up to $135,000, previously $115,000
Changes also mean property price cap in the Pilbara and Kimberley will rise from $500,000 to $650,000 for Keystart borrowers.
Article sourced from The West.
Ready, set, mortgage:
Get your finances in order
Buying a home could be the largest transaction of your life. Applying for a home loan can feel overwhelming – particularly if you’re new to the property market.
Understanding how lenders assess your credit history, how much you can afford to spend on loan repayments, and the size of the deposit you need is essential before you start the home loan application process.
Here are four essential questions to ask yourself before you start house hunting.
1. What’s your credit rating?
When you apply for a home loan, your home loan provider will assess your credit history. You could lose points for late bill payments and bad debts. It pays to see where you stand with a free credit report. This will detail your current position and give you the opportunity to correct any errors.
You’ll likely lose points for late bill payments and bad debts.
2. How much can you afford?
To get a good idea of how much you can realistically afford to repay, make a budget. Track your day-to-day living expenses and subtract them from your income. Don’t forget to allow for a rainy-day fund and other little extras, such as holidays or nights out.
You can put your budget figures into a mortgage calculator for a general idea of how much you could borrow and what the repayments would be.
Also, bear in mind that while interest rates are low right now, it’s possible they’ll go up in the future. Keep some room in your repayment budget to cover potential interest rate increases.
3. How much deposit do you need?
Home loan providers recommend that you save at least 20% of the purchase price for your deposit, although some lenders will accept as little as 5% deposit.
If you can’t manage a 20% deposit, you may be required to pay Lender’s Mortgage Insurance (LMI). And the smaller your deposit, the more you’ll need to borrow and the more interest you’ll pay in the long run.
The smaller your deposit, the more interest you’ll pay in the long run.
4. What associated fees will you need to pay?
When you buy a property you may have to pay stamp duty. Rates differ from state to state, but are usually in the vicinity of 3% to 5% of the purchase price*.
You’ll probably need to pay a conveyancer to prepare your legal documents for the settlement process, and possibly a builder and pest inspector to check over the property before you sign the contract.
Meet with a finance broker
Meeting with a home loan specialist before you begin your search might be helpful, as they may be able to give you a rough estimate of these costs. You can then factor them into your budget and, if necessary, revise your budget or savings goal.
Applying for a home loan doesn’t have to be stressful.
Build a strong credit history, save for a deposit, consider the associated fees and don’t overextend yourself. These are the first steps in the home loan application process.
If you would like further info please get in contact with the team at Silver Fern Finance. Contact details can be found here.
Perth property decline ‘close to bottom’ says Property Council of WA
Perth Now - 18th January 2016
Property Council WA executive director Joe Lenzo
PERTH’S property slump is close to the bottom and gloomy market confidence is not an accurate reflection of long-term values, according to the Property Council of WA.
The council released the results of its ANZ/Property Council Survey exclusively toThe Sunday Times this week, revealing that consumer confidence levels have dropped for the eighth consecutive quarter.
The survey of more than 400 Perth property professionals found a rise in industry confidence only in the commercial retail and retirement living sectors.
Confidence in residential property fell 24.8 per cent in the past 12 months.
With a rating of 100 considered “neutral” by the council, overall confidence in WA was down to 96, with the state going from the most confident in Australia to the least.
But Property Council WA executive director Joe Lenzo said despite the short-term struggles, the market was close to bottoming out.
House capital growth expectations: Over the next 12 months in the state you primarily operate, how do you expect capital values to change for residential.
“Property is cyclical and nobody can call exactly when the bottom will come,” Mr Lenzo said.
“But it is true to say some of our residential members are starting to see investor bargain hunters.
“There are also some pockets, specifically around transport hubs or retail precincts, that are continuing to see good capital growth.”
PropertyESP director Samantha Reece agreed that despite talk of low confidence, there were still areas expected to perform well in the next 12 months.
“It is very dangerous when property predictors talk about the Perth market declining, because as with all generic statements, there are anomalies,” Ms Reece said
“Perth at the moment is undergoing an investment overload, with key projects such as Perth Stadium, the Perth Freight Link and Elizabeth Quay.”
Ray White chief executive Mark Whiteman said he believed there would be increased investor activity in 2016.
“When the share market is struggling, investors always move to property because bricks and mortar are seen as a safer bet ... I think we’ll see some of that happening,” Mr Whiteman said.
“Foreign investors are also continuing to take an interest in Perth. They have more of a global view and those looking at the bigger picture are able to see WA as a very stable bet.”
Melinda Di Biase, who has just bought an apartment in Scarborough, said research gave her the confidence to go ahead with the purchase. Picture: Matthew Poon
Melinda Di Biase recently bought an off-the-plan apartment at the Psaros Sundance project in Scarborough.
She said buying in a sought-after location had given her confidence in the property’s long-term value.
“I didn’t take the purchase lightly,” Ms Di Biase said.
“There were many calls to financial planners and accountants.
“I try not to buy on impulse, and after a year of research, I felt confident that this was the right choice for me.”
Link to original article from Perth Now.