Government Grants and Incentives
There are several government grants and schemes to help first home buyers get into the market both at a State and National level. You are not alone if you are getting confused as there are so many! Because there are differences between states and some are offered at a national level, it can be confusing.
Let me start by saying, this is what the team at Sphere Home Loans do every day. We work all over the country with first home buyers across every state. A quick email to our team and we can assist with working out what you can borrow and what you need for a deposit, using one or more of the government incentives. If you reach out to the team at hello@spherehomeloans.com.au with your question, we will come back to you.
Rather than list all the grants and incentives available state by state, I thought what may help is to give you a few scenarios of home buyers we have helped this year using a combination of these to buy their property.
Scenario 1:
A single applicant in outer Sydney wanting to buy for around $800,000 with $50,000 in savings.
She was not eligible for the First Home Buyer Assistance Scheme as it cut out at $700,000. Stamp duty would have been $33,340. If she was buying for $650,000, she would not have had to pay stamp duty.
There is a new scheme that came in this year called First Home Buyer Choice. We used this scheme, so she did not have to pay stamp duty of $33,340, which allowed her enough deposit to buy.
She did qualify for the First Home Loan Deposit Scheme which meant she could buy with only a 5% deposit plus costs (so no need to pay Lenders Mortgage Insurance).
$850,000 Purchase Price
$ 5,000 Costs (legals/bank fee/government charges)
$855,000 Total Cost
$ 47,500 Client Contribution (5% deposit plus $5K costs)
In this case the client managed to get into the market at $800,000 with $47,500 deposit.
The client used two different government assistance schemes. Each of these come with a restriction that we have outlined below:
1- Land Tax Option – as she did not pay stamp duty, she will pay an annual fee for land tax. This is currently $2050 per year. If she does sell the property in 10 years, she would still have saved a substantial amount in stamp duty. If she holds the property for 40 years this may end up costing more.
2- First Home Guarantee (FHG) meant she did not pay the $29,345 in Lenders Mortgage Insurance. She does have a guarantee from the government attached to her property. She cannot rent this property out before releasing the guarantee.
Scenario 2:
A couple was buying in regional Queensland with a very limited deposit of $30,000. Another factor that came into play is that only $15,000 was genuinely saved, they had been renting and were hoping to use rent as genuine savings. Their parents had gifted them $15,000 so they had $30,000 in total.
$500,000 Purchase Price
$ 5,000 Costs (legals/bank fee/govt. charges)
$505,000 Funds to Complete
$ 30,000 Client Contribution (5% deposit plus $5K costs)
In this case the client was able to enter the market at $500,000 with $30,000 deposit.
The client used two different government assistance schemes, outlined below:
1) QLD First Home Buyer Assistance Scheme – As a first home buyer no stamp duty is payable up to $500,000, then reduced stamp duty up to $550,000. In this case the scheme saved them $15,000 in Stamp Duty. Unlike Land Tax option there is no annual fee attached. They must live in this home for six months in the first 12 months.
2) Regional First Home Buyer Guarantee (RFHBG) - As they have lived in a Regional Area and earned under $200K combined they qualified. The restriction is that there is a guarantee from the government attached and it must be an owner-occupied home until the guarantee is released (when sufficient equity is held in the property)
We had to use a bank that allowed rent as genuine savings this these clients. Most banks who had access to the scheme require the full 5% to be genuinely saved.
Scenario 3
A single mother working full time with a 10-year-old child. Strong income at $115,000 pa however a very limited deposit of $22,000 saved.
$550,000 Purchase Price
$ 5,000 Costs (legals/bank fee/government charges)
$550,000 Funds Needed
$ 16,000 Client Contribution (2% deposit plus $5K Costs)
In this case the client used the Family Home Guarantee (FHG) which only requires a 2% deposit to be saved with the government guaranteeing the remaining portion. We also used the Stamp Duty Waiver that is a state-based scheme.
1) NSW First Home Buyer Assistance Scheme – As a first home buyer no stamp duty is payable up to $650,000 then reduced stamp duty up to $800,000. In this case the scheme saved them $19,000 in Stamp Duty. Unlike Land Tax option there is no annual fee attached. She must live in this home for six months in the first 12 months.
2) Family Home Guarantee (FHG) - As the client is a single parent, divorced, earning under $125,000 they qualify for the guarantee and only need to contribute 2%. The restriction is that there is a guarantee from the government attached and it must be an owner-occupied home until the guarantee is released (when sufficient equity is held in the property).
As you can see with these three different scenarios, State and Government Schemes can be layered and used in conjunction with each other. We have not had one this year with the First Home Buyer Grant for new homes, however a client could potentially get an additional grant if this property were newly built.
As certain banks have several spots each, and each bank has different lending policies, a good Mortgage Broker is essential when using any of these schemes. We would love to assist you and offer a cost-free service. Please reach out to the team by emailing hello@spherehomeloans.com.au and start your home buying journey.
If you would like to learn more about Government Grants and incentives, register for our free webinar on 16th May at 7pm AEST:
https://us06web.zoom.us/webinar/register/8016824868727/WN_XL-IkhDqSoqxVVUduC5GyQ#/registration
