Tag Archives | first home buyers

First Home Buyers are Getting Older

First Home Buyers are Getting Older In recent years an interesting worldwide trend has developed: first home buyers are getting older.

In the US, Canada and Australia, debt is weighing down many who are trying to get a foot onto the property ladder, with one in five borrowers spending more than half their income on their mortgage repayments.

High debt levels have seen aspiring first home buyers doing so later in life. The average age of the new home buyer has risen from 27 in the 1970’s to approximately 30 in the 2000’s.

In Australia the average first home buyer’s age is 28.6.

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First Home Saver Funds are on the House

New rules for first-home saver accounts allocate leftover money to the mortgage.First-home saver accounts (FHSAs) offer a rewarding approach to saving for a home loan deposit but not many first-home buyers take them up. Criticised as complex and inflexible when they appeared on the market in 2008, FHSAs have attractions that are usually overlooked when people are looking for a savings vehicle.

But be warned: you may have to hunt about for a first-home saver account. Only 18 financial institutions offer them and most of them are credit unions. ANZ is the only one of the big banks to offer an FHSA. The most active participants have been ME Bank and AMP Bank.

In the scheme, as it first appeared, first-home buyers have to contribute a minimum of $1000 a year to their FHSA over four financial years to qualify for concessional tax treatment and government contributions and cannot put the money to a home purchase until after that time has passed.Interest earned on FHSA account balances is taxed at 15 per cent (interest earnings are usually taxed at the taxpayer’s marginal rate).

The government makes a contribution over the four years.Initially, the government contribution was 17 per cent on the first $5000 deposited each year, meaning account holders could qualify for up to $850 of government funding a year.That contribution threshold is indexed and has gone up to $5500 this year, which means FHSA account holders are eligible for a government top-up this year of $935 (17 per cent of $5500).

Withdrawals are tax-free but can only be used to go to the purchase of a first home.

If you change your mind about buying a house, you have to transfer the balance of the account into your super fund. You will not be allowed to open another first-home saver account after this.If you are older than 60, the balance can be transferred directly to you.

To qualify for the concessions, the customer must make personal after-tax contributions of at least $1000 a year over four financial years. Account balances are capped at $80,000. The cap is indexed and went up from $75,000 last year to the present level.

Commentators have argued that a big drawback with the scheme is that first-home buyers are required to keep their money on deposit for four years. This is a difficult condition to agree to if they are shopping for a home.

The government made changes to first-home saver accounts last year, with the aim of making the scheme more flexible. Under the old rules, if the holder of a first-home savings account bought a house before the four years was up, the money in the FHSA would go into their super account.The government has not changed the four-year qualifying period but now it will allow people to buy a home and then put the money saved in the FHSA into the mortgage after the qualifying period has ended.Rates on some FHSAs are comparable with high-yield online savings account rates. ME Bank is offering 5.5 per cent on its account.

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Understand Your Contract and Save Future Hassles

Understanding and negotiating suitable terms of contract is an important step in the purchase process when buying property. Buyers should be aware of all inclusions and any easements or covenants on affecting the property and proposed settlement or completion dates.

Ensuring that the contract accurately reflects the purchaser and seller and defines the correct property is of vital importance and will eliminate the need for costly changes to the agreement at a later date.

It may seem trivial, but entering a contract that contains a simple error such as an incorrect spelling of a name – where it doesn’t match other identification documents such as drivers’ licenses or birth certificates – can in fact create undue stress and issues down the track.

Similarly, where a contract doesn’t specify a complete list of inclusions, problems can occur upon settlement when items that the purchaser assumed were included are in fact no longer with the property.

Your solicitor or conveyancer should undertake thorough searches on your proposed purchase and make sure that you can “perform” within the terms of the contract.

Your legal representative should ensure the following:

  • Any land tax adjustments.
  • That completion dates are suitable to the purchaser, particularly if they are selling another property in order to buy.
  • Inclusions match the buyers’ expectations.
  • Any release of deposit clauses are accurate and workable.
  • Development consents where the building has undertaken recent additions.
  • Drainage and sewerage diagrams.
  • A survey of the building ensuring that it does not encroach on an adjoining allotment.
  • Confirmation of vacant possession if required.

Your legal representative will be well-versed with the contract and will understand all the clauses that affect your purchase. You need to liaise with them in terms of the inclusions, your expectations and suitable settlement time.

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