3 thoughts on “A Guide to Saving Money (and Getting Free Money) to Buy a House

  1. The only reason you would not do this (speaking as an expert on housing policy) is if you want access to your money before the five years elapse, since that is the minimum period for a withdrawal. You also have to confident that your income will be enough to put in at least $1,000 in each of those five years, or else willing to wait even longer to access the money. It locks you into a particular process of buying – save for at least five years, then buy. You would need to weigh this up against other pieces of free money the government is giving away at the moment – like the current State scheme to give people $10,000 if they build a new house. This scheme may not be there in five years when you can withdraw you FHS account. The other thing you need to weigh up (if you have the flexibility to do so) is the relative cost of renting over those five years, compared to paying a loan over those same five years. I haven’t tried to do this calculation and it would depend on how much rent you’re paying and how much you would have to pay to purchase, as well as the interest rate etc. Sorry, the more I think aobut it the more complicated it gets. Your brilliant mathematical mind could probably design a spreadhseet to do this calculation for different scenarios – key variables would be rent, purchase price, interest rate, rate of property value increase (decrease) and the amount of deposit at purchase.

    • Yeah, it is a bit fiddly and it does lock you in, but I think you can still get your money to go towards a mortgage if you buy a house in under four years, so maybe it’s still a good deal because of the interest (and it doesn’t disqualify you for the other first home buyer incentives).

      As an interesting aside, I read somewhere on the barefoot investor blog that when the government increases incentives for buying/building new houses, people buy when they really shouldn’t and as a result end up having to sell up due to too much debt or facing significant mortgage stress (can’t quite find the article, but it’s similar to this one http://www.barefootinvestor.com/press-release-pusher/). I hadn’t really thought of it that way before…

      • Yes, the incentives are mostly geared to proping up housing prices rather than helping home buyers (aside from the saver accounts) – the government tripled the first home owners grant during the GFC because if house prices dropped too much recent buyers would have loans greater thant he value of their property, and the banks would have losts of unsecurec credit on their books as a result and the finqncial system would get even worse. The result was that prices stayed high, which is sad for those who haven’t bought yet.

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