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- Everything you need to know when you buy your first home ...
Buying your First Home! ...
Overview
First home owners grant
Stamp duty concessions
Your deposit
Maximum loan amount / property price
Overview
Buying your first home should be an exciting and satisfying experience and with a little knowledge and preparation there is no reason why it shouldn't be. There are a number of things to be aware of ranging from the various government benefits for first home buyers to understanding the requirements the various lenders place on you before they will give you a loan. Don’t be worried about the number of things to consider … that's where we come in ...
Our service at Home Loan Advice Centre costs you nothing and we provide top quality professional assistance the whole way through the entire buying process.
We'll explain to you how government grants and stamp duty exemptions can save you up to $26,000.00 off the cost of your new property in some states. So clearly these benefits are worthwhile if you're eligible!
As a first home buyer, items you should consider include:
- The First Home Owners Grant – $7000 (+ an extra $3000 in Victoria) grant provided by the federal government. Note - from mid oct 2008 until 30 jun 2009 the federal government has increased the grant from $7,000 to $14,000 for the purchase of existing properties; and a further $7,000 if the property is a new (previously unlived in) property.
- Stamp Duty Exemption schemes – various schemes provided by the state governments
- Deposits required – the amount of deposit you need to provide
- Loan capacity – your capacity to borrow money from the various lenders as determined mainly by your income
- Your repayments – what your loan repayments will be at various loan amounts.
Remember, our service is provided completely free to you so if you are looking to buy a home or investment property in the near future, we recommend the following.. Firstly, you can click on the following link to go to our online enquiry form. It only takes 5 minutes to complete and with this information we can assess your loan options. This is not a loan application and it's no obligation..... it just allows us to work out your loan capacity and inform you of what position you are in. Also, when we send you your assessment email, we'll also include parts 1 and 2 of our free Home Loan Advice Centre e-Course. The e-Course is a 35 page indepth guide that gives you all the information you need about buying property in Australia. It goes through the common methods of purchasing property and gives an indepth description of each stage in the entire home buying process. It's especially usefull to first home buyers. Click here to see a sample of what the e-Course contains (pdf opens in new window) |
First home owners grant
To be eligible for the federal government’s First Home Owners Grant scheme you must be an Australian citizen or permanent resident and you (and your spouse / partner) must have not previously owned a home in Australia. If there are 2 applicants, at least one applicant needs to be an Australian citizen or permanent resident to qualify.
The grant amount varies from state to state. In NSW, QLD, and the ACT it is currently $14,000 ($21,000 for new unlived in properties). In VIC, first home buyers receive and extra $3,000 and in some cases with a new property purchase even a higher amount is claimable. In VIC however stamp duty exemptions are not as favourable as some other states.
The government gives you the First Home Owners Grant in the form of cash to add to your deposit and this is usually paid at the time of property settlement. The property you buy must be an owner occupied property and legislation introduced back 2004 requires you live in the property for a period of at least 6 consecutive months commencing within the first 12 months after purchase. Therefore, there is some flexibility in complying with this legislation and you still may qualify if you
- decide not to live in the property straight away or alternatively
- live in it for six or more months and then rent it out following that.
The First Home Owners Grant application can be submitted up to 12 months after the property purchase has settled however Home Loan Advice Centre usually recommends you request that your chosen lender arrange this up front for ease and simplicity. This is done at the lender’s discretion.
A current First Home Owners Grant application form needs to be completed to apply.
Stamp duty concessions
In NSW first home buyers are eligible for the First Home Plus stamp duty exemption scheme which gives first home buyers discounts on stamp duty payable dependant on the cost price of the purchased property. Similar to the First Home Owners Grant, eligible applicants must be an Australian citizen or permanent resident and you (and your spouse / partner) must have not previously owned a home in Australia. There are equivalent schemes in other states however the exemptions receivable vary greatly. More information is available in our First Home Buyer e-Course (see above in blue) or by clicking our stamp duty page.
The First Home Plus scheme in NSW gives a 100% stamp duty exemption for property purchases up to a cost price of $500,000 ($300,000 if vacant land).
A $500,000 first home purchase in NSW,QLD & WA for example will have no stamp duty payable (on the transfer of title nor on the mortgage) saving up to $19,000 in stamp duties normally payable. Above a $500,000 cost price, purchasers are on a sliding scale of increasing stamp duty up to a purchase price of $600,000 where 100% stamp duty is again payable. Please call Home Loan Advice Centre on 1300-729-177 or 02-9210-1000 for more information on exact stamp duty amounts payable against different home purchase prices.
Your deposit
If you're a first home buyer, you will need to provide some amount of deposit towards the purchase of your first home. The amount of deposit you require is dependant on a number of factors including
- the cost price of the property
and the corresponding loan amount you arrange against your property
- the cost of stamp duties and other purchase costs (eg loan application fee, mortgage registration fees, legal costs, mortgage insurance premium)
- whether any other security property can be pledged by family towards your purchase.
The loan amount depends on the policy of the various lenders however in general the maximum loan against your new purchase is either 95% or 100% of the value of the property.
There are a number of lenders who now will allow 100% home loans at the same interest rate as the “standard” 95% lenders. You can read more about these on our no deposit home loan page. Whether a "no deposit home loan" or a "standard 95% home loan" is best for you is dependent on your individual situation. "No deposit home loans" tend to have slightly higher mortgage insurance premiums but the decreased requirement for deposit is attractive to some people.
As you can see, there are a number of factors that will determine how much deposit you will need for your property purchase. As a guide in NSW however,
- 95% loan - the deposit amount you would need ranges from ~$0 for a $200,000 property to ~$8,000 for a $500,000 property
- 100% loan - the deposit amount you would need ranges from ~$0 for a $220,000 property to ~$3,000 for a $500,000 property . See our no deposit home loan page for more information.
- click here for a sample loan report indicating deposit required and various purchase costs you may expect on a $300,000 new purchase - note the items marked in yellow.
Maximum loan amount / property price
The amount that you can borrow and hence the maximum property you can purchase is usually based on two factors,
- your deposit amount and
- the amount of income you earn
These factors determine your lending ceiling and usually the amount you can borrow is dependant on which ceiling you hit first. Due to the proliferation of lenders allowing 100% home loans in recent years, most first home buyers are now finding themselves in a position of their income being the "ceiling" they hit first. Although it varies state by state, in NSW it means that a first home buyer can purchase a property up to $500,000 with as little as around $3,000 deposit if their income is sufficient.
For more information on this topic or any other topics please call Home Loan Advice Centre on 1300-729-177 or 02-9210-1000. Or see the following links:
Remember.... If you'd like us to help you work out your loan options - it's just 5 minutes away by filling out our short online enquiry form .... and you'll start receiving our our free e-Course at the same time!.
