Wednesday, October 1, 2008

Extra money towards your first home

The burden of saving for your first home has never been greater but, for those saving to purchase in a few years time, the job might be just a little bit easier. From today the federal government’s First Home Saver accounts become available.

If you're saving to buy or build your first home then a first home saver account may suit you. The accounts are complicated by a few rules and regulations but in essence they allow you to attract a contribution from government of up to $850 a year and the tax on the interest you earn is capped at 15 per cent (the same as your superannuation).The overall account balance will be limited to $75,000 and a minimum of fours years needs to pass before the money can be withdrawn to buy a home. The real bonus is that operating one of these accounts doesn’t disqualify your eligibility for the First Home Owners Grant Scheme (FHOG).

To earn the maximum government contribution you need to have saved $5000.00 per year yourself. The contribution is calculated as 17 per cent of the amount saved in each year (17% of $5000.00 = $850.00). If you can achieve this for 4 years you will have $23,400.00 saved which includes the government contribution plus any interest you have earned (less some tax at the lower rate). Add to this the FHOG of $7,000.00 and you’ve got yourself a tidy deposit of just over $30,000.00.

This represents a 6 per cent deposit on a home with a price of $500,000. With the recent exemptions from government stamp duty on homes up to this amount, $30,000.00 will go a long way towards getting you into your first home.

1 comment:

Tom Thorne said...

This sounds good for home buyers. Is there anything to watch out for? Even with this, I hope first time home buyers don't overextend themselves.