Buying your first home? Let's get you in the property market.
Buying a new home is very exciting. It is also likely to be the largest financial decision that you are ever likely to make. That's why getting the right finance product can save you thousands of dollars over the life of your loan.
If you have never owned a home before there are a number of grants that you can take advantage of to make your transition into the property market as cost effective as possible.
Yellow Loans specialises in helping first home buyers achieve the Australian dream and own their own place to call home, where you can benefit from capital growth, equity and most of all create memories.
Below you will find some information that will help you identify if you are eligible for a first home owners grant as well as what other support borrowers have when purchasing their first property.
First Home Owners Grant
What is the First Home Owner Grant?
The First Home Owner Grant is a lump sum of cash available to first home owners to help with the cost of buying a first home or vacant land to build a home on. The Grant doesn’t have to be repaid, and it’s not taxable, but there are strings attached.
How much is the First Home Owner’s Grant?
We all like free money, and that’s exactly what the First Home Owner Grant (FHOG) is – a lump sum of cash to help with the purchase of your first home. The First Home Owner Grant is funded by state governments, so different amounts are available in each of state and territory. Exactly how much you will receive depends on where you are buying.
Am I eligible for the First Home Owner Grant?
There are different rules depending on the State that you are in, but the basic First Home Owner Grant conditions are:
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You must be a permanent resident or an Australian citizen. If you’re co-buying with someone
else, at least one of you must be a permanent resident or Australian citizen -
You must not previously have owned or co-owned a home in Australia or have received an
Australian First Home Owner Grant in the past. -
You must be buying a home to live in – not as an investment property
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You need to live in the home for at least six months after purchase,
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You must be a natural person (not a company or a trust), and
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You need to be aged over 18.
Other conditions may apply depending on your state/territory. In many states, the First Home Owner Grant is only available if you buy or build a new home. In some states, you may not be eligible for the FHOG if you pay over a certain value for your first home.
As each state has its own set of rules for the First Home Owner Grant, it is important to understand the guidelines that apply for your area.
Can the First Home Owner Grant be used as a deposit?
Yes! The whole purpose of the First Home Owner Grant is to help you manage the costs of owning a home, though it may not be enough to form your whole deposit.
Your application for the First Home Owner Grant usually only takes a week or two to be processed, however exactly when you receive the Grant depends on whether you are buying or building.
If you’re buying a home that’s already built, you’ll usually receive the funds when the property settles – that’s the stage when all the paperwork is completed and the keys to your home are handed over to you.
If you’re building a new home, the First Home Owner Grant is usually paid when you first drawdown your loan – and that’s typically when the slab is laid.
How can I apply for the First Home Owner Grant?
Applying for the First Home Owner Grant is easy, and we can guide you through the paperwork.
Basically, there are two ways to apply for the First Home Owner Grant. You can apply through your lender at the same time you apply for your home loan – this is where we can help. Or you can apply directly to the state government body (usually the Revenue Office) that handles the First Home Owner Grant in your area.
Are first home buyers exempt for stamp duty?
Some states offer generous savings on stamp duty for first home owners, others do not offer concessions on stamp duty at all. In a number of states, saving on stamp duty are only available if you buy or build a new home.
This makes it important to know whether stamp savings are available to first home buyers in your part of Australia – stamp duty can be expensive, and you may need to add the cost to your home buying budget.
First Home Loan Deposit Scheme
What is the First Home Loan Deposit Scheme?
The government’s scheme is designed to allow easier and faster access to the property market for first home buyers. The scheme will do this by allowing first time buyers to purchase a home with a deposit as little as 5%, while avoiding lenders mortgage insurance (LMI). Most banks and lenders require a minimum deposit of 20% of the property’s value for the borrower to be exempt from LMI. The scheme allows first home buyers who can’t reach this threshold to take out a loan if they have saved at least 5% of the value of the property they are buying. The government will underwrite the loan so that borrowers do not have to pay LMI.
How does the First Home Loan Deposit Scheme work?
You will need to apply for the scheme through one of the scheme’s participating lenders, or authorised representatives and demonstrate your eligibility. If you are approved, you can then take out a home loan with a lender and the government will act as your guarantor. Although your lender will still do their normal checks on your financial situation, this will make it easier to get a loan without having saved for a 20% deposit.
What are the risks of the First Home Loan Deposit Scheme?
There is a risk in taking out a loan with a smaller deposit, since the amount left owing is obviously going to be larger. Because of this, your mortgage might end up lasting longer than it otherwise would. The standard maximum loan term is 30 years, and your mortgage is not likely to be extended beyond this. However, if you are to take out a larger loan over the same loan term, your minimum repayments will obviously need to be larger. This means that a mortgage taken out under the government’s 5% deposit scheme could put more pressure on borrowers and make it harder to pay back a home loan.
Am I eligible for the new First Home Owner Scheme?
The scheme is open to individuals who are earning up to $125,000 per year, as well as couples with combined earnings of up to $200,000. To apply for this scheme you will need to provide your most recent notice of assessment from the ATO to prove you meet the income requirements. To be eligible, you must be a genuine first home buyer and have not owned property in Australia prior and must show that you have saved at least 5% of the value of the property you are purchasing. This scheme is only open to Australian citizens that are 18 years or older.
The government has also capped the number of homebuyers it will support so even if you are eligble you may still miss out if the caps have been filled.
Not all properties will be eligible to be purchased under the government’s home deposit scheme. The scheme will only underwrite loans for ‘entry properties’, excluding high-value properties. An ‘entry property’ has been determined by the government through the price caps, to ensure the scheme is only available for the purchase of a modest home, or the purchase of land and construction of a modest home. There is no fixed maximum value for properties eligible under the scheme, as price caps will be determined relative to the property’s local market and dependent on if you are applying under the new home guarantee scheme or not. You will need to check what the property price cap is in your area.
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