What's on Offer for First Home Buyers and Those Home-Owners Looking to Upgrade

Friday, July 31, 2020
What's on Offer for First Home Buyers and Those Home-Owners Looking to Upgrade

Written by Juanita Wrenn

There has NEVER been a better time to buy a home if you are a first home buyer. This is the first article I have written for the Hudson newsletter for a very long time! Anything relevant to helping the next generation get ahead is something that I am passionate about. I find myself constantly having conversations with my older boys, aged 15, about saving some of their part time cash, the importance of buying a house sooner rather than later and the wonder of compounding interest. I figure if I keep talking they'll listen eventually. They are however, too young to benefit from the current government grants on offer, so I am hoping that this article will help many of our members and their children take the first step to owning their first home instead.

There is so much help that the Government is offering that makes it such an attractive time to purchase a home. There are 3 grants currently on offer, The First Home Loan Deposit Scheme, The First Home Owners Grant and the Homebuilders Grant. For members that have a home already the homebuilders grant may offer some incentive to either upgrade your home or substantially renovate it. I will give a quick run down on the three grants to see if this is something that you or someone you know could take advantage of.

The First Home Loan Deposit Scheme

There is some urgency to reserve your place with a 90 day pre-approval for the First Home Loan Deposit Scheme. The Government released the last tranche of the spots remaining in July, with half of these spots going to the CBA and the NAB. There are 10,000 spots in total. In a nutshell, if you have a 5% deposit, and you have never owned a home before, the Government will effectively guarantee your insurance to the bank. In other words the lenders mortgage insurance (LMI) that you would usually have to pay on the remaining 15% to take your deposit to 20% will be paid for by the government. This not only offers a huge cash saving but it also guarantees a lower interest rate with the bank. Because the government is guaranteeing for you the Bank will offer lower interest rates. A first home buyer, eligible for the first home Loan deposit scheme, could now be offered rates as low as 2.29%.

There are criteria that need to be met in order to qualify for the First Home Loan Deposit Scheme, and these vary in each state. We urge you to contact our finance team to check the rules for your state.

First Home Loan Deposit Scheme

  • Must be your first home.
  • Can be an existing or a new home.
  • Purchase price must fall within limits e.g. Regional South Australia the home must be $250,000 or less. In NSW metro the home must be no more than $700,000. Our finance team can help with each scenario.
  • It is means tested on income, a couple up to $200,000 and an individual $125,000.

On top of this benefit, the Government is also offering the First home owners grant. This grant is different in each State/Territory and the stamp duty concessions vary considerable between states and territories also. Criteria for First Home Owners

First Home Owners

  • Must be your first home.
  • Must be a new home.
  • The amount offered is different each state/territory e.g. QLD is $15,000, $20,000 regional Vic and $10,000 metro Victoria.  Each state /territory also offers concessional stamp duty, with NSW offering substantial savings here.
  • NOT means tested.

Call 1800 804 296 or email finance@hudsonfp.com.au to ask Nicole, Matt, or Heather any more specific information on your state/territory.  We can email you with the information you require or give you a call. Instagram and Facebook for a quick response.

Home builder grant - available to new and existing home buyers that meet criteria

  • $25,000 grant from the government to build a new home or renovate.
  • Is an additional grant for first home buyers to the two grants outlined above.
  • Means tested $125,000 for an individual or $200,000 for a couple.
  • Must be your principal place of residence for at least 6 months straight after build or reno.
  • Renovations must cost between $150,000 - $750,000.
  • Value of new home (or house and land before reno) is less than $1.5 million.
  • Building or renovation must start within 90 days of contract being signed and must be signed by 31st December.
  • Companies and Trusts cannot apply.

Case Study outlining the use of all of the Government Grants - detailed by Nicole Green

Sam and Tracie are first home buyers who have been saving with a view to buy their own home. They have accumulated $33,000 in savings over the past 18 months and they are looking at a new house or appartment for $600,000 in Melbourne.  In the current environment there has never been a better time to buy a first home.   

Income - Sam earns $84,000 and Tracie earns $82,000 - they both work full time.

Expenses - They have two car loans with combined repayments of $950 per month and small credit card with a $3,000 limit.

Savings - they have been saving in addition to paying rent of $550 per week and have $33,000 accumulated. If possible they would like to keep a little bit of cash as a reserve.

The table below shows the different grants available to them and how this would impact their home purchase. They could be paying $690p/w (worst case scenario with minimum deposit) to $485 per week - best case scenario and access to all the Government help.  It's a huge difference - over $10,000 per year in repayments!

Example buying a home in Gladstone Park Victoria….

 

Option 1

Option 2

Option 3

Option 4

 

Buy existing
FHLDS

New Home
FHOG

New Home
FHOG
Homebuilder

New Home
FHOG
Homebuilder
FHLDS

 

 

 

 

 

Type of Home

Existing

New

New

New

Purchase Price

$600,000

$600,000

$600,000

$600,000

Personal savings

$33,000

$30,000

$30,000

$30,000

FHOG

-

$10,000

$10,000

$10,000

Homebuilder

-

$25,000

$25,000

FHLDS (no LMI)

yes

no

no

Yes

Loan Amount

$570,000

$563,000

$547,000

$547,000

Plus LMI payable

nil

$19,252

$16,593

Nil

Total Loan Amount

$570,000

$581,252

$563,593

$547,000

LVR (Loan to value ratio)

95.00%

96.88%

93.93%

91.17%

Variable Indicative interest rate

2.74%

4.62%

2.74%

2.74%

Weekly payment

$535

$690

$530

$514

3 year Fixed indicative interest rate

2.29%

not applicable

2.29%

2.29%

Weekly payment

$505

not applicable

$500

$485

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