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Purchasing A Home

What is the first home owner grant?

What is the first home owner grant? 

Buying your own home has long been the Aussie dream, but it’s a dream that comes with a large price tag. Fortunately, the First Home Owner Grant (FHOG) exists to make the home ownership dream that much more attainable for eligible first home buyers by providing them with a one-time payment.

The FHOG has undergone many changes since its inception in 2000 and is now directed toward new or substantially renovated houses. The grant differs across the states and territories, with each region having its own eligibility criteria needing to be met by all applicants. 

Below is a summary of what’s available in each state and territory. For more information be sure to check out the links for the region relevant to you.

New South Wales

$10,00 is available when purchasing or constructing new homes. To be eligible, the newly constructed residence needs to be valued at less than $600,000; If building, the combined value of the house and land must be less than $750,000.

Stamp duty exemptions are available for houses valued at less than $650,000, or for vacant blocks valued less than $350,000. Concessions are available for homes valued between $650,000 and $800,000, or for vacant blocks valued between $350,000 and $450,000.

Read more at http://www.osr.nsw.gov.au/benefits/first_home/

Queensland

FHOG of $15,000 is available to purchase or build new homes valued at less than $750,000.

Stamp duty concessions can be accessed when buying a house worth less than $550,000, or a block less than $400,000.

For more information see https://www.qld.gov.au/housing/buying-owning-home/financial-help-concessions/qld-first-home-grant

Victoria

A grant of $10,000 is attainable when purchasing or building a new residence in metropolitan Melbourne, valued at less than $750,000. While $20,000 is available for homes of the same value in regional Victoria.

Homes valued at less than $600,000 are exempt from stamp duty, while homes valued above this amount up to $750,000 are eligible for a concession.

Details at http://www.sro.vic.gov.au/

Australian Capital Territory  

A new or substantially renovated home worth up to $750,000 will attract a $7,000 grant.

Stamp duty exemptions apply if the buyers live in the home continuously for 12 months, have not owned a property in the last two years, are over 18, and have a combined income less than the specified threshold (the threshold varies between $160,000 and $176,650 depending on how dependent children are present. 

More information at http://www.revenue.act.gov.au/home-buyer-assistance/first-home-owner-grant

South Australia

$15,000 is obtainable for new homes up to the value of $575,000 being purchased or built.

No stamp duty concessions apply specifically for first home owners in SA, but the stamp duty payable on a new or refurbished apartment will be capped at a $500,000 valued apartment.

Find more information at http://www.revenuesa.sa.gov.au/

Tasmania

$20,000 can be secured for buying or building a new home. From 1 July 2020, the grant will reduce to $10,000.

Properties valued at less than $400,000 attract a 50% stamp duty discount.

More details available at http://www.sro.tas.gov.au/

Western Australia

FHOG of $10,000 applies for purchasing or building a new home up to the value of either $750,000 or $1 million, depending on the location.

Stamp duty exemptions are available for homes valued at less than $430,000 and land worth less than $300,000. Concessions are available for values above these amounts up to $530,000 for homes and $400,000 for land.

See more at http://www.finance.wa.gov.au/cms/State_Revenue/FHOG/First_Home_Owner_Grant.aspx

Northern Territory 

$10,000 is available to buy or build a new home up to any value.

A stamp duty discount of up to $18,601 can be attained through the Territory Home Owner Discount (THOD).

More info at http://www.revenue.nt.gov.au/

What is Lenders Mortgage Insurance?

What is Lenders Mortgage Insurance?

Acquiring a home requires a rather large sum of money that most people are simply unable to accumulate. This is where mortgages come into play. You take out a mortgage against the house you’re purchasing and pay the lender back over some time — generally 20-30 years. But lenders aren’t simply going to lend you the money based on goodwill, they need some sort of guarantee that they can recover funds if you were to default on the loan — this is where a deposit enters the game. But what dollar figure is a good enough deposit? Banks typically require 20% of the property value to be covered in order to lend you money — and this is where lenders mortgage insurance (LMI) is added to the mix. 

What is Lenders Mortgage Insurance and how does it work? 

LMI is an insurance policy designed to protect the lender from financial loss in the case that the borrower is unable to meet their home loan repayments. The risk to lenders is that the borrower could default on their loan, resulting in the property needing to be sold to recover the value of the mortgage, and then the proceeds from the sale of the property not being sufficient to cover the unpaid value of the mortgage, leaving the lender out-of-pocket. LMI is a way for the lender to mitigate this risk. If this scenario was to occur, they’d simply claim the insurance policy to cover their losses.

LMI is expensive for borrowers, however, it means that lenders are able to lend larger amounts and approve more home loans due to the risk minimisation LMI provides them. It’s also helpful if you’re unable to save the required 20% deposit. 

How much does LMI cost? 

The exact cost of LMI varies greatly depending on your risk assessment which looks at circumstances such as the size of your deposit, the value of the property, and your employment status, to name a few. Generally speaking, the cost of LMI falls between $3,000 and $30,000. 

The cost of LMI can be paid upfront or added to the home loan to be paid off (the latter option attracts additional interest charges due to the capital increase of the loan). The policies are non-transferable meaning they can’t be moved to a different lender if you choose to refinance. 

When is LMI necessary? 

LMI is generally required when your loan-to-value ratio (LVR) is more than 80%. In other words, when the deposit is less than 20% of the value of the property. 

From January 1st 2020 the government is offering a First Home Loan Deposit Scheme to 10,000 eligible applicants. Under the scheme, approved applicants with a deposit of as little as 5% will be able to secure a loan without needing to pay for LMI. The government will guarantee the amount required to reach the 20% deposit.

To be eligible for the grant you must be a first home buyer with an annual taxable income of less than $125,000 as a single person, or $200,000 as a couple. To find out more about the scheme visit nhfic.gov.au
Whilst LMI is genuinely useful in the sense that it allows banks to take on more risk and lend more money to people with insufficient deposits, it comes at a price to the borrower. If you’re thinking about purchasing a house it might be a wise decision to weigh up whether paying for LMI is the best choice for you. 

Saving for Your First Home

Saving for Your First Home

Buying a home is one of life’s huge milestones, but it’s no easy feat to achieve. Houses are expensive, and while the mortgage covers the bulk of the price, you still need to save a rather large deposit to get your foot in the door.

How much do I need to save?

You need to figure out what price range you can afford. You can do that by using this mortgage calculator.  Firstly, you work out how much you can safely afford to pay towards your mortgage each month, then, you plug the figure into the calculator and it tells you how much you are able to borrow. For example, if you can afford to pay monthly repayments of $2,000 then you can afford to borrow roughly $380,000 (based on a 25-year mortgage at 4%).

The minimum deposit required is generally 5% of the value of the home. In the example above, a 5% deposit is $19,000. If you want to avoid lenders mortgage insurance, a 20% deposit is required, which amounts to $76,000 in the given example. 

That’s a lot of money to save! 

How do I save enough for a deposit?

Saving takes time, but we’ve got some tips that will get you there sooner.

Make a budget

We manage what we monitor. Monitor your spending to work out your essentials. To calculate your potential saving power, subtract your essential items (such as utilities, groceries and car expenses) from your weekly wage. This excess income is what you could be saving. Spending just $20 a day on miscellaneous items amounts to $7,300 a year! Cutting out your daily takeaway coffee or staying home to eat-in more often could see you well on the way to purchasing your first home. But remember not to leave yourself short, saving for a home doesn’t need to mean you go without all of the things you love to splurge on—everything in moderation.

Reduce your debt

Cutting down on debt is a great way to save on interest costs. This money could instead be used for saving for your deposit. If you have multiple credit cards or loans that you’re unable to live without, it could save you money to consolidate them into one loan. Making your credit card repayments promptly might save on interest costs if you pay it off during the interest-free period.

Find a high-interest savings account or term deposit

While trying to save, high interest rates are your best friend. Banks often offer savings accounts attracting high interest or bonus interest when you don’t make any withdrawals. These are great accounts for saving due to the high interest rate and the incentive to leave your hard-earned cash alone. 

Term deposits are a good option for when you’ve got a lump sum to lock away for a specified period at a high rate. 

Saving a deposit doesn’t happen overnight, but with set goals, hard work and dedication, you’ll be holding the key to your home before you know it. 

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