Saving for your first home?

We have all sorts of clients from different walks of life.  Some are in business, some retirees, some employees but lately I’ve seen a few that are the children of existing clients who I’ve watched go from school kids to taxpaying adults, some now with children of their own!  I keep thinking surely I can’t be old enough to witness that but apparently I am, lucky I only look about 25 right?  I’ll just imagine you are all nodding your heads in agreeance there.

The best thing about seeing clients who are new to the workforce is their enthusiasm to get going in their lives.  I guess going from a poor uni student to earning a salary helps somewhat and the first thing on the mind of many in this situation is saving for a home.   That’s where I get excited and start talking about First Home Saver Accounts (FHSA).

FHSA are bank accounts where the government contributes an extra 17% interest on the first $6,000 you deposit each year.  In dollar terms, this means you can receive $1,020 from the government by putting $6k into the bank account.  17% is a fantastic return and much better than the standard interest rates!  On top of this, the tax payable on the interest earned is capped at 15% rather than your marginal tax rate.  There are a few things to be careful of which include:

  • having to contribute $1,000 per year over 4 financial years before you can withdraw the funds.  If you buy your home within this timeframe –  once the 4 year period is up the funds can be withdrawn and deposited onto your home loan.  You also can’t continue to contribute once you’ve purchased your home.
  • you must use this money to purchase your first home.  If you never end up buying a home, the funds are allocated to superannuation which means access to these funds will usually occur at the end of your working career.
  • the maximum the account can be is around the $90k mark and once it hits there, you can receive interest but can’t contribute further.

If you are interested in starting a FHSA, most banks, building societies and credit unions offer this product.  I believe that if you are saving for a first home this should absolutely be a consideration and this calculator can assist you in calculating the additional return you will receive over your savings timeframe.  As always, any questions – please ask 🙂

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