October 4 2008: First Home Saver Account
On Wednesday, the Australian Government introduced a new commitment to helping young Australians buy their first home in what is increasingly a difficult property market stemming from the housing shortage. This is the type of government commitment that influenced my vote for the Australian Labor Party in last year’s election, as the type of election promise that would influence me most.
I have the aim of putting a deposit on my first home within the next six years, by the time I’m twenty-eight, with an eye to having it entirely paid off by the time I’m forty. Getting a 100% home loan didn’t even cross my mind, as I’ve been brought up to never regard debt as anything but a travesty to Asian thriftiness. My worst-case scenario is to have a 15% deposit (e.g. if a $400,000 home, a $60,000 deposit) before I start house-hunting; a best-case scenario (though, unlikely) would be to have a 30% deposit.
This new commitment from the government makes things a lot easier for myself - for the first $5000 I save in this special account per diem, they’ll add 17%, or a $850 bonus. Over the next six years, if I contribute this maximum contribution amount (that’ll incur a 17% bonus) every year, I’ll have $35,100 in this account. Considering that I’ll most likely contribute more than $5000 a year once I start full-time work, I’ll have probably more like $60,000 in this account within the next six years, more than enough for a deposit on a $400,000 home by the time I’m twenty-eight.
It’s a decidedly better deal than the one I’m getting with my term deposit, so I’m contemplating cancelling the latter, and simply investing everything in this new scheme which will afford me higher returns - especially considering my term deposit currently exists simply for me to accumulate enough savings for a home deposit. Oh, the decision one has to make once one enters their twenties and has to start thinking about things like petrol prices and the mortgage crisis.
Of course, who knows what the property market will be like in Melbourne by that time…
10 Responses to “First Home Saver Account”
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House woes, right?
Things are really bad right now because house prices are so low (recession and all that), but in turn the situation is good for someone like me who is new to the property market. I have no home to sell so I won’t have the same problem as most with equity.
However this means I’ll have to purchase a house within the next year or two in order to snag a bargain - and in a country where even thrifty living is expensive, it’s important to get a bargain on property!
I’m thinking about studying abroad so making a decision is becoming increasingly difficult. I’ll just have to weigh the pros and cons, seeing as either decision will most likely benefit me in some way.
This is why I’ve suddenly decided that I should go study in Oz and we should get a house together ;) Sounds like a plan, right? Hahaha.
Seriously though, I’m not too worried about paying my future mortgage (it’s not as worrying as getting a mortgage with all the banks going bust). Can’t be as bad as my parents who are being forced to move now by my dad’s work and will most likely be paying their mortgage well into their seventies. Sucks to be them.
Reply: The recession hasn’t really hit Australia hard yet, but I’m predicting it will by April next year, meaning house prices will drop by August…which makes me think that maybe I want to have less of a deposit up front, and just commit to buying a home when the prices are low. It’s a lot to consider!
Lil on October 5 2008 #
I am so jealous of your ability to save, I wish I had willpower..or common sense.
Bobbi-lee on October 5 2008 #
That’s a pretty good system you have over there. The Singaporean gov’t has something similar - with strings attached. The gov’t will subsidize the house and lower the downpayment if young people buy houses within a certain distance of their parents’ house. It’s quite an interesting policy.
Ivy on October 5 2008 #
What a fantastic idea! Shame we don’t have something similar in the UK (and even the USA) — it’d probably have helped to stem some of the issues that are all over the news today!
Kelly on October 5 2008 #
It seems that mortgages etc work a lot different there than they do here. Here they check your income (not what you save) and calculate from there what the most amount is you can borrow on a mortgage.
Therefore it’s nearly impossible as a single person being relatively new to the working atmosphere to buy a house. Generally houses here are over 200,000 euros which is for a relatively small house. Unfortunately if you only start working full-time recently it’s way over budget for a lot of people. Including me.
There are some solutions here; you could buy a house together with a corporation, but that means the house is never yours, and if you can’t sell it if you want to move house, or you lose money on the sale there are some hidden traps..
So unless I run into a rich guy soon, owning my own house will still be far in the future for me.
Reply: Oh it’s the same here, being judged by income rather than deposit, but the more of a deposit I have to start with, the less interest I’ll have to pay over time! I’ve thrown a few figures together though, comparing a few mortgage brokers, and even on my part-time pay, I’m eligible for up to $200,000 on a thirty-year loan. Once I start full-time work, depending on my starting salary, I imagine this number could conceivably double.
Chans on October 5 2008 #
i am extremely irresponsible when it comes to saving for such a big thing like a house… so right now i am hoping sometime in the future someone will just hand me one. or one will fall magically on me. that would be great.
Rebecca on October 5 2008 #
Damn. I’ve heard of this new project but haven’t really heard about the details. Sounds pretty damn good though, something I’d definitely be leaning towards when I’m older. At this rate I’m worrying about the market price of houses these days… I mean, we bought ours for $200k, and it’s market value is over double that, and is actually considered one of the cheaper houses in my local street and area. Ouch.
Jess on October 5 2008 #
I am so envious of your ability to save and that you can be thinking this far ahead- its crazy (in the good way)! I hear Melbourne property values are much better than Sydney ones though, so hopefully, when the time comes, you’ll be able to find something.
Carmen on October 5 2008 #
I’ve only briefly read up about this but the first thought is, would there be any value in depositing over $5000 per year in this account? Seen as though the cap is $850. I don’t get why you have to have the account for at least four years before money can be withdrawn, does it mean if I’m able to buy my home in 2 years I’m forced to put that money into super instead?
Reply: Well that was what I was thinking about. At this point I’m leaning towards no longer making any voluntary contributions towards super, towards opening up this first home saver account and only putting in $5000 every year. That way, if I do buy a property in that four years, the money in the home saver account can go towards super, which I normally contribute to anyway…
kat on October 5 2008 #
[...] using that extra $155AUD for something exciting, but it’s probably going to go straight into my savings account for my home deposit. I’m an exciting girl [...]
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