Australia is currently experiencing a housing affordability crisis, especially for the younger generation who find it difficult to raise the 25% required funds to purchase their first home.
There has been a lot of discussions about this but nobody has really come up with a practical approach to solve the problem. In my opinion, allowing first home buyers to access their superannuation could be an answer.
It may be a good idea to allow first home buyers to access super balance through loans and use it as a deposit on their first home purchase.
It could be through a 10-year fixed interest-only loan from their super funds, which would assist with the initial 25% deposit to buy their first home. The loan’s interest rate would be calculated at the current market fixed rate and capitalised to be payable in a 10-year loan period.
Young people could also be incentivised to save for their deposit by allowing tax-free status for employee contributions into a new “first home buyers deposit reserve” within their superannuation fund for the first 10 years of employment.
It may be capped at $5,000 p.a. with a maximum of $50,000.
First home buyers may also be allowed access to their employer contributions for the first five years of the loan period to assist them with their monthly mortgage payments.
It would be paid back to the super fund at the end of the loan period.
Lastly, all loans should be fully repaid with interest to the super fund after 10 years.
There should be a strict oversight on the commercial loan agreements and document registrations between the first home buyer and the super funds.
The Government must work closely with banks to protect the principal loans and guarantees and make sure that the property cannot be transacted or offered for other security without formal release letters.
Protecting the principal loan to the member will ensure that the asset and monies are protected and paid back to the super fund in 10 years.
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