First home buyer grants all across the country provide young people with a great opportunity to jump on the property ladder quicker than they otherwise would have been able to. Undoubtedly, the hardest part about buying your first home is saving for the deposit as this requires a serious savings and earnings plan often when people are at their earning capacity infancy, whilst facing costs associated with rent, buying cars, household items and even raising children.
These days, the bigger your deposit, the better, as new lending restrictions mean banks are generally less willing to lend for high LVR (loan to value ratio) purchases. As a general rule, you should aim to have a deposit equal to 20% of the purchase price of the property you are wanting to buy. Whilst deposits of less than 20% are still workable, you will have to be prepared to pay a slightly higher interest rate and lenders mortgage insurance which is usually several thousand dollars and is charged upfront on settlement.
How is the grant changing?
In the Queensland Budget, 2018, Treasurer Jackie Trad announced that the grant would be permanently reduced in July 2018 to $15,000. The grant was actually boosted from $15,000 to $20,000 during the 2016 Budget and was initially a 12 months measure that was extended throughout 2017 because of its success in stimulating first home buyer purchases.
- Never have owned property before (including for investment) and your de facto partner/spouse must also never have owned property
- Be purchasing a newly constructed dwelling only; including apartments, townhouses, houses or house and land packages.
- The purchase price must be less than $750,000
- You must move into your new home as your principal place of residence within 1 year of the completed transaction and live there continuously for at least 6 months.
- You must be an Australian Citizen or permanent resident and be over the age of 18
You can apply to have the grant paid either on settlement of your purchase or within 1 year post settlement or upon completion of your new build. The application can either be done directly through the QLD Government Office of State Revenue, or through your bank or lending institution.
How does the First Home Owners Grant (FHOG) help first home buyers?
The FHOG can be used for a variety of purposes, from the housing deposit to covering expenses when you are setting up home such as buying furniture etc. The following scenario explains how the FHOG can be used for a housing deposit:
The above scenario shows how the FHOG can be used to make up for a slight shortfall in the buyer’s deposit. In this case, the buyer had only saved $75,000 but the bank would have required at least $80,000 to complete the purchase. In applying the FHOG, the buyer had plenty of funds to complete the purchase without the need to save the additional funds themselves.
So what will the proposed drop in July of the FHOG mean?
The drop in the FHOG from $20,000 to $15,000 in July 2018 may mean borrowers will need to save just that little bit longer to purchase their home. The $5,000 drop could add months of additional saving to make up the deposit shortfall. In the long run though, the reward of owning your own home and controlling your future will be worth it. If you’d like to know more about how to purchase your first home and borrow money for it, speak to Shoheel Khan, one of our residential finance specialist on [email protected] for assistance.