Final touches on $25,000 HomeBuilder scheme announced

, , ,

The “crucial final touches” on the federal government’s $25,000 HomeBuilder scheme have been revealed. Will your build be eligible?

When the federal government announced its $25,000 HomeBuilder scheme in early June the immediate reaction from many was ‘you little beauty’, quickly followed by, ‘wait… will my project even be eligible?’

It’s a question that’s lingered for a few weeks, however we now have more clarity.

And the good news is that the Housing Industry Association (HIA) – the construction industry’s peak national body – has welcomed what it’s labelled the federal government’s “crucial final touches” on the scheme.

So what are these final touches? Let’s take a look.

More wiggle room for finance and building approvals

It looks as though homeowners now have a little more wiggle room when it comes to having their finance, building proposals and other legal requirements approved.

One of the biggest criticisms of the scheme when it was first announced was that homeowners needed to get everything approved and construction commenced within a fixed three-month timeframe.

Now, the scheme’s official FAQ on the Treasury website still states that construction must commence within three months of the contract date.

However, it now adds a provision for cases where approvals are unexpectedly delayed.

“States may exercise discretion where commencement is delayed beyond three months from the contract date due to unforeseen factors outside the control of the parties to the contract. For example, delays in building approvals,” Treasury states.

Here’s what the HIA adds on the update: “Recognising that a fixed three-month timeframe to commence building work did not reflect how dependent home builders are on other players, like the banks, the councils and building certifiers, is extremely important.”

Off-the-plan apartments and townhouses

Off-the-plan apartments and townhouses that don’t exceed $750,000 are eligible for HomeBuilder.

But what was doing a lot of people’s heads in was the timing of it all: did it simply need to be an off-the-plan purchase? Could construction have already been underway?

Well, we now have some clarification.

To qualify for the scheme the first box to tick off is that you need to sign the contract to buy the off-the-plan dwelling on or after 4 June 2020, and on or before 31 December 2020.

The second box is that construction needs to commence on or after 4 June 2020, and no later than three months after the contract is signed.

If, however, you sign the contract to buy the dwelling after 4 June 2020, but construction commenced before 4 June 2020, then the home won’t qualify for HomeBuilder.

Now, as mentioned in the above section, keep in mind that states and territories may exercise discretion where the commencement of construction is delayed beyond three months and it’s outside your control.

However, you’ll definitely want to ensure you do your due diligence on the project’s estimated construction date to give yourself the best possible chance of receiving the $25,000 grant.

Payments expected to be aligned with first home owner grants

Last, but certainly not least, Treasury released more information on the timing of the $25,000 payments.

“It is expected that, where possible, states and territories will align the HomeBuilder application processes with existing processes for first home owner grants (or similar),” Treasury states.

Basically, this means the ball is now in the court of state and territory revenue offices, which will soon outline the final details of how applicants can apply as well as the timing of the payments.

And the good news is the HIA is optimistic.

“HIA has been working closely with state and territory revenue offices and we look forward to receiving these details soon, which will assist home buyers and builders to begin taking full advantage of the grant,” the HIA said.

Get in touch

As mentioned above, while the federal government has provided its final touches on the scheme, we’re still waiting for each state and territory to confirm their own final touches.

But if it looks like you’ve ticked the above boxes and you want to start looking at financing options for your HomeBuilder project, please get in touch.

As with most things in life, the more organised you are, the better!

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

You might be closer to your first home deposit than you think

, ,

You’ve probably heard the federal government is giving $25,000 grants to eligible Australians looking to build or substantially renovate their homes. Today we’ll look at what that means for first home buyers when combined with state and territory schemes.

If you’ve been umming and ahhing about purchasing your first home for a while now, we have great news: you’d be hard-pressed to find a time when there were more government incentives to help you enter the property market.

For starters, there’s the federal government’s First Home Loan Deposit Scheme, which can help you buy your first home with a deposit of just 5% without having to pay lenders mortgage insurance (LMI) – so that’s one major cost out of the way.

But you’ll still need that 5% deposit, right?

Well, each state and territory (except ACT) has a first homeowner grant program, with most grants between $10,000 and $20,000.

On top of that, the federal government will give eligible Australians $25,000 to build or substantially renovate homes as part of the new HomeBuilder scheme (however, at this stage it’s still unclear whether or not this amount can go towards your initial deposit).

Last but certainly not least, most states and territories have stamp duty discounts or exemptions for first home buyers too, which can save you tens of thousands of dollars – another hurdle cleared!

Below, we’ll break down exactly what’s on offer in each state and territory and just how much these government initiatives could help put you within reach of a deposit on your first home.

NEW SOUTH WALES

First homeowner grant: $10,000 for new homes valued up to $750,000.

First Home Loan Deposit Scheme: LMI saving of up to $10,000.

Stamp duty: exemption on homes up to $650,000, partial concession on homes between $650,000 and $800,000.

With HomeBuilder, you could have: up to $45,000 in government support + stamp duty exemption.

VICTORIA

First homeowner grant: $10,000 (urban) and $20,000 (regional) for new homes valued up to $750,000.

First Home Loan Deposit Scheme: LMI saving of up to $10,000.

Stamp duty: exemption on homes up to $600,000, partial concession on homes between $600,001 and $750,000.

With HomeBuilder, you could have: between $45,000 and $55,000 in government support + stamp duty exemption.

QUEENSLAND

First homeowner grant: $15,000 on new homes valued at less than $750,000.

First Home Loan Deposit Scheme: LMI saving of up to $10,000.

Stamp duty: exemption on homes up to $500,000, partial concession on homes up to $550,000.

With HomeBuilder, you could have: up to $50,000 in government support + up to $15,925 in stamp duty concessions.

WESTERN AUSTRALIA

First homeowner grant: $10,000 on new or substantially renovated homes valued at less than $750,000 south of the 26th parallel (latitude), or less than $1,000,000 north of the 26th parallel. WA also offers $20,000 grants for new homes built on vacant land or off-the-plan single-storey developments.

First Home Loan Deposit Scheme: LMI saving of up to $10,000.

Stamp duty: exemption on homes valued at up to $430,000, partial concession on homes up to $530,000. An off-the-plan unit rebate is available for more expensive homes.

With HomeBuilder, you could have: up to $65,000 in government support + applicable stamp duty concessions.

SOUTH AUSTRALIA

First homeowner grant: $15,000 on new homes valued up to $575,000.

First Home Loan Deposit Scheme: LMI saving of up to $10,000.

Stamp duty: full concession on off-the-plan new or substantially refurbished apartments up to $500,000.

With HomeBuilder, you could have: up to $50,000 in government support + stamp duty concession.

TASMANIA

First homeowner grant: $20,000 on new homes (reduced to $10,000 from 1 July 2020).

First Home Loan Deposit Scheme: LMI saving of up to $10,000.

Stamp duty: a 50% discount on stamp duty for established properties valued at $400,000 or less.

With HomeBuilder, you could have: up to $55,000 in government support.

AUSTRALIAN CAPITAL TERRITORY

First homeowner grant: none.

First Home Loan Deposit Scheme: LMI saving of up to $10,000.

Stamp duty: first home buyers in the ACT pay no duty so long as their household income is below $160,00-$176,650, depending on how many dependents you have.

With HomeBuilder, you could have: up to $35,000 in government support + stamp duty exemption.

NORTHERN TERRITORY

First homeowner grant: $10,000 for new homes.

First Home Loan Deposit Scheme: LMI saving of up to $10,000.

Stamp duty: you can get up to $18,601 off your stamp duty costs.

With HomeBuilder, you could have: up to $45,000 in government support + up to $18,601 in stamp duty savings.

Get in touch

So, that covers the first home buyer schemes. If you think you might be eligible, the next thing to organise is financing your new home.

And that’s where we come in. Lenders will still want you to show some sort of genuine savings before they’ll approve a loan application, and we can help you get everything in order for that assessment process.

So if you’d like help obtaining finance to pay for the first home of your dreams, get in touch with us today – we’re here to help you any way we can.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

First home loan deposit scheme reaches capacity (for now)

, ,

The 10,000 guarantees available via the new First Home Loan Deposit Scheme have been filled or reserved, but for those who missed out there’s a second chance coming soon in July.

There have been 5,500 guarantees issued under the federal government scheme, while another 4500 borrowers have guarantees reserved in the coming months.

The scheme, which was launched on January 1, can allow first home buyers with only a 5% deposit to be eligible to purchase a property without paying for lenders mortgage insurance (LMI).

This guarantee gives first home buyers a leg up into the property market, as it can save you as much as $10,000 in LMI insurance.

Get ready for round 2!

Now, even though the scheme kicked off at the beginning of this calendar year, the next phase is set to begin when the new financial year ticks over on July 1.

And you’ll want to be organised when July rolls around.

Let us explain why.

The 10,000 spots in the scheme are broken up into two lots of 5,000 – one half for two major lenders (CBA and NAB), and one half for 25 non-major lenders.

If you’re interested in applying through one of the two major lenders, it’s important to note that they go pretty quick.

In fact, 3000 of these 5000 spots were reserved in the first 10 days of the scheme being launched back in January.

With that in mind, if you’re interested in applying for the scheme through a major lender you’ll want to get in touch with us now so we can start getting organised.

Are you eligible?

In order to be eligible, first home buyers can’t have earned more than $125,000 in the previous financial year, or $200,000 for couples (and both buyers need to be first home buyers).

There are also property price caps for different cities and regions across the country, which you can find out more about here.

Also, even though you may have a 5% deposit saved for a house, you still need to obtain finance approval from a participating lender.

And that’s where we can help.

We’re more than happy to run through the scheme in more detail and, if you’re eligible, help you apply for finance with one of the scheme’s participating lenders before places fill up again.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Goodbye stamp duty?

, , ,

The dreaded and controversial stamp duty tax could soon be a thing of the past, with calls for it to be abolished gaining momentum.

The Property Council of Australia is the latest body to add their voice to the chorus this month after both the NSW and Victorian state governments ramped up calls for stamp duty reform.

Axing the controversial tax is a key measure being proposed in the Property Council’s Seven Point Plan for Economic Recovery, released this week, to help kickstart economic recovery across the nation.

“Stamp duty is a terrible tax,” the Property Council’s chief executive Ken Morrison recently explained to the AFR, “every economic analysis puts it at the top of their list of worst taxes. For every $1 raised it does about 80c of harm.”

What is stamp duty and how much does it cost?

Stamp duty is a government tax on certain transactions, including when you buy a motor vehicle, an insurance policy, or for the purposes of this article: a piece of real estate.

In a nutshell, state treasurers and many economists want reform in this space because stamp duty is volatile – it rises during property booms and shrinks during downturns.

Now, how much it costs will depend on where you live, and the value of the property you’re buying.

Most states have stamp duty exemptions or concessions in place for first home buyers, but that doesn’t help out those looking to expand their property portfolio.

The tax also acts as a barrier to older Australians who want to downsize and unlock their wealth.

So how much does stamp duty usually cost? Well, as luck would have it, Domain just released a summary of the stamp duty costs for median-priced homes in each capital city:

Sydney: $49,586 (house) or $28,942 (unit)
Melbourne: $50,171 (house) or $28,328 (unit)
Hobart: $18,847 (house) or $15,351 (unit)
Adelaide: $23,663 (house) or $12,522 (unit)
Perth: $19,063 (house) or $10,679 (unit)
Canberra: $23,914 (house) or $9396 (unit)
Brisbane: $12,165 (house) or $4342 (unit)
Darwin: $4,868 (house) or $0 (unit)

Those figures are for non-first-home buyers who are purchasing established properties.

So what would replace stamp duty?

The NSW government is considering a broad-based property tax (aka land tax).

Victorian Treasurer Tim Pallas meanwhile, says a review of the state’s revenue base after the COVID-19 pandemic is needed, but he’s not sure that switching from stamp duty to land tax is the way to go.

“It’s a bit like a Mills & Boon novel: it might be satisfying and uplifting to read, but getting to that point without causing major trauma to the community is a very serious consideration,” he said.

Another option being floated by the Property Council is to replace stamp duty revenue by broadening the GST base.

What to do in the meantime?

As mentioned earlier in the article, most states and territories already have certain exemptions and concessions that apply when it comes to stamp duty, particularly for first home buyers.

Generally, it depends on the price of the property you have purchased, or if it was off-the-plan, as to whether you’ll be eligible.

And obviously, the less stamp duty you pay, the more of your hard-earned-money you can put towards your home loan deposit.

So if you’d like a hand figuring it all out please get in touch – we’re happy to help you crunch the numbers.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Wait, the bank can do that!?

, ,

Every now and then a bank does something that bucks the trend and takes customers by surprise. Today we’ll look at two cases that recently made national headlines and how you can reduce your chances of getting caught out.

While the below two examples may not relate to your home loan specifically, they do serve as important lessons nonetheless.

Why? Because there’s every chance banks will make other changes to loan products in the months ahead as COVID-19 continues to put pressure on the economy.

MEa culpa

The first example we’ll discuss today is ME Bank’s decision to reduce limits on its customers’ redraw accounts without giving any prior warning.

The move came as a complete shock to customers, with many publicly expressing their anger at no longer having access to thousands of dollars needed to help them get through difficulties they were facing due to COVID-19.

While ME Bank says it stands by the decision, it admits it messed up and didn’t do the right thing by its customers in terms of communicating the move.

“The job we did to explain a complex product, what we were doing and why we were doing it, was simply not good enough,” ME Bank said in a statement.

“Please accept our most heartfelt apology.”

The financial regulator APRA has since gotten in touch with ME Bank to request a “please explain”, as have the trustees and chief executives of major super funds that are ME Bank’s shareholders.

So, what’s the take-out?

Well, redraw accounts certainly have their benefits.

But like most products, they can come with certain terms and conditions that can catch you out, such as the example highlighted above.

So when you’re deciding on a home loan product for you and your family, we can inform you of any catches buried deep within the T&Cs that you should be mindful of.

CBA automatically reduces monthly repayments

The other big move made by a lender this month is Commonwealth Bank automatically reducing repayments for 730,000 of its customers to the minimum required under each loan contract.

The bank recently sent an email advising its customers of the change, saying customers must opt-out if they wanted to continue to make repayments above the minimum amount.

This goes against the grain of what usually happens, which is where the onus is on the customer to contact the bank and ask for their monthly payments to be reduced when interest rates fall.

Now, on the face of it, it kinda looks like good news, right?

After all, CBA says the move will release an average of $400 a month for customers and inject up to $3.6 billion cash into the economy over a 12-month period.

But as ANZ CEO Shayne Elliott pointed out in November, he strongly believes in not automatically reducing the repayment amount because it allows customers to repay their debt sooner, and pay less interest over the life of the loan.

“It’s the responsible thing to do, as a bank. It’s in [customers’] best interest in the long term to repay their debt,” he says.

Put yourself first

CBA and ME Bank justified their moves by saying they were implemented to “help” and “protect” customers.

But the best way to truly help and protect yourself is by being proactive and informed – not relying on the banks to roll out one-size-fits-all policies they say are in your best interests.

For families doing it tough right now, CBA’s decision to automatically reduce payments will come as a welcome relief.

But if you were meeting your monthly repayments fine until now and would like them to stay as they were, then it’s important to let CBA know so you don’t pay more interest on your loan over the long run.

If you’d like a hand reviewing your loan and exploring your options in light of COVID-19, please don’t hesitate to get in touch – we’re always here to help when you need us.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.