Although mortgage rates might be relatively cheap compared to many years in the past, first home buyers have the opportunity to save money in a first-time savers account while taking advantage of great tax breaks at the same time.
Your mortgage broker in Rockingham, for example, will be pleased to give you details about this little known legacy from Kevin Rudd, which is currently paying around 21% interest a year.
How Good is the Deal?
The deal is set to pay 17% above the normal interest rate. Your savings will be taxed at a flat rate of 15% which is half the average current tax rate, but information about the deal isn’t easy offered by all of the banks and savings institutions.
Just 1 in 10 of first home buyers has opened up a first home saver account. More people choose to use a standard deposit account for their savings, but you’ll compare a 5% rate that would have to run for 14 years to see it doubling in value, even when overlooking the tax situation. Compare this to a first home saver account and the government adds $1020 to $6000 of your savings; all for free.
The deal doesn’t stop there; you can get three more of the grants when you save $6000 over the next three financial years. The deal maxes out at $1020 which makes it worth 17%, and that is added to whatever rate the savings account is paying anyway, which currently is around 4% with most institutions.
Double the Offer
Where two of you are going to be buying a property together you can both open a separate account which effectively doubles the gift from the government. There are a number of rules and regulations that you need to adhere to, and you’ll need to save at least $1000 a year in each of four separate financial years to make the most of the deal.
You can’t get at your money during the savings period, to maintain the government’s free gift, but when you do, it must be paid out towards your first home property purchase.
Some people will argue that you should be saving properly for years so you can put a larger deposit down on your property when you do finally buy.
The government scheme works across financial years, so to be really clever you’ll need to be saving for two years and two days to get three year’s grants.
Some banks don’t offer the accounts because they feel that customers have found them not to be flexible enough and too complicated for many. Nevertheless, if you do apply the rules, you could be speaking with your mortgage broker in Kwinana sooner than you originally thought so that you can set your first mortgage in place, using your savings as a large part of your deposit money.