Understanding first home buyer support options

If you’re a parent considering helping your child buy their first home, you’re not alone. With property prices continuing to rise and the cost of living putting pressure on savings, many young Australians are finding it tough to crack the property market. The good news is there are several government schemes designed to make things easier and provides ways for you to support your child without putting your own financial future at risk. The following initiatives can offer valuable first home buyer support.

Stamp duty savings

Stamp duty can be a major upfront cost, but each state offers relief for first home buyers. Here’s a quick breakdown:

• Victoria: No stamp duty for homes up to $600,000, and discounts for homes between $600,001 and $750,000.
• New South Wales: Exemptions up to $800,000, with concessions available for properties up to $1 million.
• Queensland: Exemptions for homes up to $700,000, and concessions for homes between $700,001 and $800,000.

These savings can make a big difference, especially when combined with other first home buyer support options.

First Home Owner Grants

If your child is buying a brand-new home, they may be eligible for a First Home Owner Grant. These grants are offered by state governments and don’t need to be repaid, which can help boost a deposit or cover upfront costs. The home must be newly built and not previously lived in.

• Victoria: $10,000 for new homes valued up to $750,000
• New South Wales: $10,000 for new homes valued up to $600,000, or for land and build packages up to $750,000
• Queensland: $30,000 for contracts signed between 20 November 2023 and 30 June 2026. $15,000 for contracts signed after 30 June 2026 (property must be valued up to $750,000).

These grants can be combined with stamp duty concessions and other schemes to help your child get into their first home sooner.

First Home Guarantee Scheme

This federal scheme helps first home buyers get into the market with just a 5% deposit, without having to pay Lenders Mortgage Insurance (LMI). The government guarantees up to 15% of the property’s value, which means your child can borrow up to 95% of the purchase price.

To qualify, they need to be an Australian citizen or permanent resident, over 18 years old, and earning under $125,000 (or $200,000 for couples). The property must be owner-occupied, and applicants must either be first home buyers or have not owned property in the past ten years, including vacant land.

There are only 35,000 places available each financial year, and applications must go through participating lenders. Once approved, the spot is valid for 90 days. Buyers also need to have a minimum 5% deposit plus enough to cover stamp duty and other upfront costs. Maximum purchase price caps apply and vary by state, so it’s important to check the limits based on location.

For example, if your child is buying a $650,000 home in Victoria and has $46,000 saved, they could borrow the remaining $617,500 under this scheme, saving thousands in LMI and getting into the market sooner. However, they’ll still need to meet serviceability requirements for the full loan amount.

First Home Super Saver Scheme (FHSS)

Another way your child can save for a deposit is through the First Home Super Saver Scheme. This allows eligible first home buyers to make voluntary contributions to their superannuation fund, which can later be withdrawn to buy a home. Contributions can be made before-tax (concessional) or after-tax (non-concessional), and benefit from favourable tax treatment, such as a 15% tax rate on concessional contributions and a 30% FHSS tax offset when withdrawn.

The scheme allows up to $15,000 in voluntary contributions per financial year, with a maximum of $50,000 that can be released in total. It’s a smart way to save more efficiently, especially for those with a longer-term plan to buy, and is another form of first home buyer support worth considering.

Family Security Guarantee

If you’re open to helping more directly, this option allows you to use the equity in your own home to guarantee part of your child’s loan. You don’t need to hand over any cash, and you can choose how much of the loan to guarantee.

This can help your child avoid LMI and even borrow up to 100% of the purchase price, including costs like stamp duty and legal fees. However, it’s important to understand the risks. You’ll be liable for the amount you guarantee, and if your child can’t repay the loan, your property could be at risk. It may also affect your ability to borrow in the future. It’s a smart option to seek expert financial advice from our team.

Take John, for example. He wants to buy a $300,000 home with a $15,000 deposit. His parents offer a $56,500 guarantee using their home equity, which lowers the loan-to-value ratio and saves him nearly $6,000 in LMI.

Seek professional financial advice

Helping your child buy their first home is a generous and meaningful step, but it’s important to make sure it’s the right move for everyone involved. If you’re considering any of these first home buyer support options, we recommend speaking with one of our financial advisers. They can help you understand the risks, explore the best strategies for your situation, and make sure your support doesn’t come at the cost of your own financial security.