The phone has been ringing off the hook with questions about the Homebuilder grant.
Here I’m focusing on those who want to buy land and build (rather than renovators – that’s a whole separate topic on its own). First, some basics about the grant:
To qualify for the $25k HomeBuilder grant you must:
- Be Australian citizen
- Earn below $ 125k for singles or $ 200k for couples
- Sign a building contract between 4 June and 31 December (and start the build within 3 months of contract date)
- Be building a home where the value of the completed house and land must be $750k or less
- Own the home in individual names and occupy it as your home. (no investment properties)
The easiest way to explain some of the complexities is to jump straight into some of the common questions people are asking.
1 – Can I get both the HomeBuilder Grant and the state based First Homeowners Grant?
As long as you meet the eligibility for each grant independently, you can receive both if you are building your first home.
2 – Does this mean that I can get into the market with no deposit?
There are two elements to answering this question. Firstly, meeting the requirements for genuine savings and secondly the timing of when the grant will be paid.
Let’s take a step back and look at how much you typically need to buy a home.
If you are a first homebuyer in Queensland and you qualify for the stamp duty concession, to buy an existing home without the FHOG you would need a deposit of 9% or around $40 000. Of this amount you will need to demonstrate that 5% has been genuinely saved. Neither the FHOG, nor the Homebuilder grant count as genuine savings.
If you have owned a home before, you would need a deposit of around 10.5 % or around $ 46 300. Again, of this amount you will need to demonstrate that 5% has been genuinely saved.
While the grants may help you reduce the amount you end up borrowing, if you are hoping to get into the market with a new home build with a lower deposit, there are some tricky aspects of how and when the grants are paid that you’ll need to be across and plan for..
Essentially, as with the FHOG, the HomeBuilder will not be able to be used as part of your initial deposit.
The tables below sets out what the overall contribution is with a maximum loan of 95% including mortgage insurance, as well as how much is needed at land settlement for both first homebuyers and others.
While the actual contribution needed is low, the timing of payments of the grants, and the need to demonstrate genuine savings, means you will actually need a lot more.
3 – How do I work out whether I’m under the income cap?
The income cap is the same as the First Home Loan Deposit Scheme, so your income as an individual must be under $125,000 per year and as a couple your combined income needs to be under $200,000. This is your gross income before tax (excluding Super). You will be able to find this on your 2019 Notice of Assessment issued by the ATO.
4 – If I was under the income cap last year but may go over this year, am I still eligible?
The wording of the grant is that the income cap will be based on your individual ‘2018-19 tax return or later’ so if you earned less last year, but will earn more this year they will use the most recent year to confirm your income.
There is a requirement to report any change in your circumstances to the state revenue office, so the intention appears to be that if you will exceed the income cap before you are paid the grant that you would no longer be eligible.
This grant may be audited, and if for example you earned $190,000 as a couple in 2018-19 tax year and then earned $220,000 in 2019-20 tax year, you could be required to pay back the grant.
5 – What if I am a citizen but my partner is not?
There are some things we don’t know yet here, as the application form for the HomeBuilder Scheme hasn’t yet been issued, so we don’t know the specific questions that will be asked.
However, if it’s going to be similar to the First Home Owner’s Grant than the eligibility is based on the applicants – which is based on the property ownership.
If this is the case and the property is just in the Australian citizens name you may qualify.
Given the uncertainty around what the formal criteria on application will be, I would recommend waiting to see what these are in your state before signing a contract if you need the grant to complete the build. As an industry, we are seeking clarity around Treasury’s intentions here.
You would also need to seek advice here around whether you may meet the criteria to have two people on the loan where only one is on the title (and consider whether this structure is right for you)
I’ll be posting updates as we get more clarity around the ambiguous areas, but in the meantime, if you’d like to understand what this grant might mean for you, reach out at tanya@affinitasfinance.com.au or give me a call on 0430 383 996.