There may be some ways you could save money on some of the purchase costs and receive a government grant so there’s less money coming out of your pocket.
First Home Owner’s Grant
If you haven’t owned a home before, you may be eligible for the First Home Owner’s Grant. In South Australia the grant is $15,000, but only if you intend to construct the home. There is no longer a grant offered for first home owners purchasing an existing property.
The government grant is released at the first stage of the build, which is generally just after the foundations are poured. However some lenders will make the $15,000 available at settlement of the land. If you’ve established your mortgage correctly, you might be able to use the grant to help complete the purchase, so there’s less money coming out of your pocket to cover your costs.
Reduced stamp duty
When you buy an existing home, you’re charged stamp duty on the entire purchase price. By comparison, when you decide to construct your first home, you only pay stamp duty on the land value.
Keeping your stamp duty down can help reduce the amount of money you need in savings for your total deposit amount.
Fixed price contract
When it’s time to sign your building contracts, ask if it is a fixed price contract. If your builder fixes your contract price, it means there will be no added surprise costs to the build as it progresses. It’s common for some builders to add ‘variations’ to your original contract price after construction has begun, such as extra costs on footings.
One of the reasons so many first home buyers cringe at the thought of building their first home is that there’s so much to do to get the property finished after construction is complete.
Fortunately, some builders are happy to create ‘turnkey’ homes that are fully completed for you. Things like your driveway and paths, floor coverings, window treatments, landscaping, retaining walls, and even your light fittings are all included in the price. When the construction is complete, you simply move in and enjoy your new home.
First home loan
Not all home loans are created the same, so it’s important you take some time to ensure you’re getting the right one to suit your needs.
Most banks want to see that you have saved at least 5% of the purchase price as your deposit. The amount of money you have needs to be genuine savings shown over a period of at least 3 months in your bank account.
If you’ve been renting for at least 12 months through a property manager, you can use your rent payments as another way to strengthen your loan application. Ask your property manager for a letter or a copy of the rental ledger verifying that you’ve made all your rent payments on time.
Some lenders may use the evidence of your rental payments as a way to verify your genuine savings history. Of course, you’ll still need to have sufficient funds available to complete your purchase, but you can use gifted money from your parents or another family member. In some cases, you might also be able to use money received from a personal loan to cover your deposit amount, but only as long as the repayments on the debt are included on your home loan application.
If you are lucky enough to have your parents’ help you, they might offer to go guarantor for you and use the equity in their own home as security for your first home purchase. If you have the guarantee from a family member, you can potentially avoid paying lender’s mortgage insurance. You may also not need to show that you have genuine savings.
Buying your first home can be daunting, but we are here to make the whole process as smooth as possible for you. We’ll walk you through the entire application process, organise the First Home Owner’s Grant for you, and handle all the progress payments during the construction period.
If you’re not in a position to buy your first home right now, call Nieuvision and speak to us about your options. We’ll guide you through the necessary steps to get you where you need to be so you’ll be able to purchase your first home with confidence.
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Disclaimer: We recommend that you seek independent financial and taxation advice before acting on any information in our articles and newsletters. They contain general information only and have been prepared without taking into account your personal objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances. Your full financial situation will need to be reviewed prior to acceptance of any offer or product. Interest rates are subject to change without notice. Lenders terms, conditions, fees & charges apply.