First-home buyers can now use their super to save for a house deposit, thanks to…
This is not your usual property investment article – no fads, no get-rich-quick schemes, and no equity schemes. Ultimately, it is a reminder that the only way to get your first home, independently, is to save and sacrifice. But thankfully, there are a few things I can tell you about which make the journey just that much easier.
After leaving the nest at age 20, I have recently bought my first property at age 21, which is 15 years younger than the current mean age of First Home Buyers in Australia. It’s an ideal property and suitable for where I am in my life – a two-bed apartment in the blue-chip suburb of The Hill (in Newcastle) – close to the beach, the CBD and University. In fairness, I have worked full-time for a few years whilst completing my degree, but I never realised that buying a property is seriously achievable if you do your research.
These five steps helped me to get on the property ladder 15 years earlier than the rest
1. Save a 5% deposit
This is all you need, a minimum 5% deposit! If you are looking at a $400,000 unit, then this equates to $20,000 (plus legal, moving etc. costs – so let’s call it $25,000). Roughly, that is $250 per week saved over two years.
Biggest tips for saving:
If you are unaccountable with your card, record every transaction.
Reduce expenses where possible, for example, learn to love 7-11 coffees and meal-prep every single Sunday.
2. Consider salary sacrificing.
The First Home Super Saver Scheme allows First-Home Buyers to contribute into superannuation, realise a tax saving, then withdraw up to $30,000 of these funds in the future to use towards a property. Plus, this can be a forced savings measure since your work will deduct it each pay cycle into your superannuation account.
3. An income over $55,000
That is all that is needed. Based on this mortgage calculator1, a bank would be willing to lend you enough to finance that $400,000 unit.
4. Get a spot in the Government’s 5% Deposit Home Loan Scheme
This scheme offers 10,000 places every financial year to first home buyers. Essentially, the Government acts as a guarantor for your 5% deposit, letting you avoid thousands of dollars in LMI. To gain a spot, you will likely have to put your name on a wait list for a few weeks or months or search for a second-tier lender who has available spots
5. Start inspecting
Once you get your pre-approval, it is time to begin the fun of exploring the local property market, giving up your Saturdays and chatting to agents. Although you only have three months under the 5% Deposit Scheme, it should be enough time to find a property that is good enough to let you climb onto the first rung of the property ladder. Once you find that property, you will also be exempt from stamp duty, provided you meet a few easy criteria, saving you potentially thousands of dollars – not a bad result.
You may have a few objections…
“I want to keep my lifestyle” you might be thinking as you read this – that’s fair enough, I thought the same. But ultimately, I would rather the income I earn be used for something worthwhile, and have something to show for the 38+ hour weeks at work. It does not mean a lifestyle overhaul – just a few strategic decisions.
“I will end up paying heaps of interest to the bank.” You will be paying more interest to the bank. But I theorised that, if I could get onto the property ladder five years earlier but pay more interest, I would potentially benefit through capital growth over the long run.
“Buying is much more expensive than renting.” Debatable… A mortgage on a $400,000 property, with a 5% deposit, would roughly be around $360 per week. Although there are a few more outgoings to pay when you are a property owner, it is still very comparable to the $350-400 per week you would be paying as a tenant for a very similar property. Plus, this way you are paying your own mortgage and increasing the value of your assets – not your landlord’s. Also, you do not risk eviction if your landlord wants the property back or sells it on at a later date.
If you need a Wealth Creation strategy to help you get on the property ladder or add to your portfolio, speak to one of our Financial Advisers to find out how we can assist you. We have offices located in The Junction (NFPG), Erina (CCFPG) and Sydney CBD (SWA)– your first appointment is complimentary, so you have nothing to lose.
Happy house hunting!
1: moneysmart.gov.au. (n.d.). Mortgage calculator – Moneysmart.gov.au. [online] Available at: https://moneysmart.gov.au/home-loans/mortgage-calculator.
The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group They cannot be reproduced in any form without the express written consent of the author. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice. Newcastle Financial Planning Group, Central Coast Financial Planning Group and Sydney Wealth Advisers are subsidiaries of Coastal Advice Group which is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.