First Home Saver Accounts - are they worth it?

Font size :
The old adage that ‘slow and steady wins the race’ has never been more fitting than when used to describe first homebuyers. After all, unless you’re lucky enough to be gifted a hefty deposit, it’s slow going trying to save enough cash to invest into your very first home.
Enter the First Home Saver Account (FHSA), a program designed by the federal government to provide Australians with a simple, tax-effective way of saving for their first home, through a combination of co-contributions and low taxes.
When the FHSA program was launched the in 2008, the announcement was almost immediately overshadowed by the doubling of the First Home Owners grant.
Suddenly, there was no need to cobble together a deposit in small increments over several years, as state and federal governments were handing out combined grants and packages worth tens of thousands of dollars to encourage homebuyers to act right away.
But now that the FHOG is back to $7,000 and the economy has regained some stability, it might be worthwhile revisiting the FHSA to see if it can help you take one step closer to your home ownership dream.
How it works
The program encourages you to save money by matching your own contributions with a 17% government co-contribution.
Essentially, the more money you save, the more the government will contribute, up to a certain limit each year. The maximum annual government contribution is currently $850 – equal to 17% of $5,000 – although this amount is increasing to $935 (17% of $5,500) for 2010-11.
You’re not liable to pay any tax on your account earnings, and you can set up an FHSA with any participating bank, credit union or building society. Also, you can still apply for a First Home Owners Grant if you have a first home saver account.
To be eligibly to open an account, you must:
  • be aged 18-65
  • have a tax file number
  • not have previously owned a home in Australia that has been your main residence, and
  • not have previously had a first home saver account
  • make contributions from your after-tax income – you can’t salary sacrifice into a FHSA
The downsides
The FHSA offers a great opportunity to save towards your first home, but there are some potential negatives to be aware of.
The account works under a system known as the ‘four-year rule’. This means that you have to contribute at least $1,000 per year into your account in at least four financial years (not necessarily consecutive years) before you can withdraw the money to buy a home.
Therefore, you have to keep the account open for at least four financial years before you can access the money, the only exception being if you are aged 60 or older, in which case you can withdraw money at any time.
Also, if you change your mind and don't want your account anymore, you can’t simply close the account and withdraw your cash: your only option is to transfer the entire account balance to your superannuation fund.
If you plan on buying your first home within the next few years or you need more flexible access to your cash, then the FHSA may not be right for you. For more information and further details about eligibility and frequently asked questions, click here.

With interest rates at their lowest for more than 50 years, there are some great rates available. The best thing to do is to compare rates from all the lenders. Let us help take the leg work out of doing this - Compare Home Loans now

Mortgage News and Articles

How to tell when a housing market is cooling How to tell when a housing market is cooling

You need to check clearance rates, listings, and the price gap, among other factors Read more

Growing demand for green apartments in Sydney Growing demand for green apartments in Sydney Both owner-occupiers and investors favour eco-friendly buildings for their energy-saving features and reduced environmental footprint ... Read more

Are property investors as rich as they appear? Are property investors as rich as they appear? A multi-property portfolio doesn’t guarantee easy millions ... Read more

Be proactive about getting a better mortgage deal Be proactive about getting a better mortgage deal Apathy could be costing you a considerable amount of money over the lifespan of your loan ... Read more

More mortgage news and articles

Sponsored Links

Wednesday, Sep 20, 2017
Top Featured Rates
Top Bank Rates

Get help choosing the right home loan

Let us help you find the right home loan for your needs.

Tell us a bit about your circumstances:
  • Purpose of mortgage
  • Household Income
  • How much do you want to borrow?
  • How much deposit do you have?
  • How much is your house worth?
  • How much do you still owe on your mortgage?
  • What type of mortgage do you have?

  • How much is your new home?
  • How much do you want to borrow?
  • How soon do you want a mortgage?
  • First name
  • Last name
  • Where do you live?
  • Phone number

Special Offers

Related Keywords