The First Home Owner’s Grant

Thursday the 11th of June, 2009 16 Comments »

Posted by Iden Money .

Buying or building your first home is a very exciting but sometimes nerve-wracking experience. To ensure it is a completely satisfying experience, a lot of planning and checking should go into this very important milestone in your life.

To help with this big task we have set out below some important points to consider to successfully own your own home. These points can be:

How Much Do I Need?

Well it depends on where you want to live and the type of accommodation you are looking for. Most people prefer to save a deposit, which is used as their contribution towards the purchase, and to cover the associated transaction costs. They may then borrow up to 100% of the purchase price, but borrowing above 80% of the purchase price will cause quite a bit of additional set up cost. The more you can save the better.

How Much Can I Borrow?

The amount that you can borrow is determined by the lender by testing your repayment ability based on your income, some other personal information, such as credit card limits, and assumed details, such as living expenses. Usually, loan terms are for 25 or 30 years, the longer the loan term the smaller the monthly repayment.

Where Will I Live?

Where would you like to live? Are you looking for a house or a unit? Are the available homes in your preferred area within your price range? Are you looking for a home for the next few years, or to live in for an extended period? If you have a young family, does the area you have chosen suit the needs of children? Does the area have good access to amenities and to major centres? Does the council have plans for any further developments in the area? What is the capital appreciation history of this location?

Selecting Your Home

Be absolutely sure that the home you have selected has no hidden surprises. Obtain a building report to ensure you are not buying someone else’s problems. Check that the local council has approved all alterations and renovations to the house. Check the area at different times such as weekends and weekdays to confirm it is as you think it is and that there aren’t any noise, traffic and parking issues that would be a nuisance to you. Obtain other opinions as to the value of the house. Ensure that the council rates (if a house) or the Body Corporate levies (if a unit) are within your budget.

Obtaining a Home Loan

Calculate the cost of purchase and all of the additional costs that will be incurred such as:

• Stamp Duty on the purchase contract
• Loan set up costs
• Lender’s Mortgage Insurance (Usually applicable if you have less than a 20% deposit)
• Legal Fees
• Other moving and relocation costs

Contact Iden Money, who will arrange for a consultant to call on you to complete a loan application form. Ensure that you obtain a conditional loan approval before you commit to purchasing a property and ensure that you understand the conditions that must be met before an unconditional approval will be given.

Exchanging Contracts

Once you have located the home you wish to buy and made an offer that has been accepted by the vendor, the next step is to exchange contracts. Employ a solicitor to review the contract of sale on your behalf – they will be able to advise if there are any non-standard conditions. Fully understand the “cooling off period” terms and conditions. Be certain that your finance is approved and will cover the amount required to settle, before you execute the contract. When you sign you will be required to hand over a small deposit, usually 0.25% of the purchase price, so on a $400,000 purchase approximately $1,000. A 5 day business day ‘cooling off period’ usually follows, which allows you to withdraw from the contract should you discover something unsatisfactory (This benefit is not available at auction). It is during this period that the lender will value the property, pest and building inspections would be completed and you would satisfy any outstanding conditions on the conditional loan approval. The deposit (usually 10% of the purchase price) is paid on expiry of the cooling off period; however it is common for a lesser amount than 10% to be negotiated.

Arranging Settlement

Once the approval is finalised and the deposit has been paid loan documents will be prepared and forwarded to you for execution. Your solicitor should check these documents and assist you to sign them. You will need to arrange insurance over the new home and provide a copy of the certificate of currency to your solicitor. The lender’s name must be noted on the policy as an interested party.

Your solicitor will now make further enquiries into the status of the property to ensure that you receive a full and clean title and that no existing monies owing or charges against the property will remain after settlement. The solicitor will calculate the exact amount of monies to be paid out at settlement, with any additional contributions from you to be given to your solicitor for use at settlement.

Settlement will occur on a date to be agreed between the purchaser and vendor, often 6 weeks from exchange of contracts. In exchange for full payment to the vendor the property title deed will be handed to your lender. A mortgage will then be registered and the lender will keep the title in safe custody.

Post Settlement

The property is yours. The agent will provide you with the keys to the property and you may move in. The lender and your solicitor will provide you with a summary of the entire transaction detailing how the funds were disbursed. Good lenders provide details of your loan, dates that payments will be deducted and lots of product and Internet/Telephone Banking details.

First Home Owners Grant

The Australian Government, under certain terms and conditions, may provide a grant to help you with the purchase of your first home. You can find details about this and other assistance provided by state governments by going to one of these websites:

NSW www.osr.nsw.gov.au
VIC www.sro.vic.gov.au
QLD www.osr.qld.gov.au
TAS www.treasury.tas.gov.au
SA www.revenuesa.sa.gov.au
WA www.osr.wa.gov.au
ACT www.revenue.act.gov.au
NT www.nt.gov.au

Briefly, until 30th September, 2009 the First Home Owners Grant of $14,000 is available to people buying their first home. If you buy a new building or buy land and have your home constructed, the grant is $21,000. The size of the grant will be reviewed after this date. You must meet the following eligibility criteria:

1. Each applicant is a natural person and not a company or trust.
2. At least one applicant is a permanent resident of Australia
3. Each applicant must be at least 18 years of age.
4. All applicants and/or their spouse/de facto have not owned a residential property, jointly, separately or with some other person, in any State or Territory of Australia before July 2000.
5. All applicants/and/or their spouse/de facto have not previously owned a residential property jointly, separately or with some other person in any State or Territory of Australia, and occupied that property for a continuous period of at least six months.
6. Each applicant has entered into a contract for the purchase of a home or signed a contract to build a home on or after 1 July 2000. In the case of an owner-builder, laying of the foundations commenced on of after 1 July 2000.
7. This is the first time an applicant and/or their spouse/de facto will receive a grant under the First Home Owner Grant Act 2000 in any State or Territory (unless subsequently repaid.)
8. At least one applicant will occupy the home as their principal place of residence for a continuous period of six months, commencing within 12 months of settlement or construction of the home.

Also, each state provides other benefits, ranging from stamp duty concessions to additional cash payments. You should check the above website for the available benefit in your state.

Handy Hints:
1. Supporting documents for the First Home Owners Grant must be “certified” copies. Read this condition carefully.
2. From the first of October the grant will be reduced to $10,500 for existing property purchases and $14,000 to buy new or build. The position after 31st December, 2009 has not been determined.

Summary:
Your first home purchase may seem daunting. By understanding and following the above information you will make the process much easier. Iden Money provides a full report for first home owners entitled “Unlock Your Dreams” by clicking here.