First Home Owners Grant Explained
As a first home buyer, one of the most important parts of your journey is working out how much you need to save and what you can afford. Thankfully, there are plenty of government incentives to give you a helping hand along the way, as well as mortgage brokers who can assist you with the applications.
One of the incentives is the First Home Owner’s Grant (FHOG) – a one-off cash payment designed to help people buy their first home.
The grant amount and eligibility conditions vary according to the State or Territory you live in, ranging between $10,000 to $25,000. In most cases, the grant only applies when you buy or build a ‘new’ home – one that hasn’t previously been lived in or sold as a home. In some cases, a home may be considered as ‘new’ if it has been substantially renovated. For this to count, most of the rooms or the entire building will need to be renovated or replaced.
The ACT is the only exception as it no longer offers the FHOG to homes purchased after 1st July 2019.
To be eligible to apply, you will need to satisfy these standard, minimum requirements:
- Must be an Australian citizen or permanent resident
- Must be over 18 years old
- Must be planning to live in the property for at least 6 months
- You and the person you’re buying the property with, must both be first homeowners
FHOG for Victorians
If you’re planning on buying or building in Victoria, your eligibility conditions and grant amount will depend on if you choose a home in a metropolitan or regional area. The grant is $10,000 for homes in metro areas valued up to $600,000, while in regional areas it is $20,000 for homes valued up to $750,000.
Your new home must also be less than five years old and be the first sale of the property as a residential home. Be sure to check the other eligibility requirements on the State Revenue Office Victoria website.
Applying for the FHOG
Your mortgage broker can help you prepare the required documentation for the FHOG. In most cases, your lender (bank or credit union) will lodge the FHOG application form on your behalf to the relevant organisation. In Victoria, you can also choose to apply directly to the State Revenue Office (SRO).
The timing of when to apply and when you receive the grant depends on whether you apply through the bank or the SRO, as well as if you’re buying or building a home.
- Buying a new or off the plan home – if applying through the bank, you can do this before settlement to receive the payment at settlement. If applying through the SRO, you can apply after settlement and receive the payment within 14 days of lodging your application.
- Owner builder – if applying through the bank, you will receive the payment when the bank receives the Certificate of Occupancy. If you are applying through the SRO, you must wait until you receive the Certificate of Occupancy. You will receive the payments within 14 days of lodging your application.
Traditionally, deposits less than 20% of the house price are charged with a Lender’s Mortgage Insurance (LMI), which can potentially set you back tens of thousands of dollars.
The good news for first home buyers is that they may be able to access the First Home Loan Deposit Scheme (FHLDS). This scheme helps eligible participants buy their first home more readily by reducing the deposit to as little as 5%, without needing to pay the LMI. There are a few conditions you will need to meet, such as not exceeding the income limits and the price cap of the value of the home.
You can apply for this scheme via participating lenders or speak with your mortgage broker. There are only 10,000 FHLDS spots each financial year, offered on a first come first served basis.
Lenders want to see evidence of you saving up money to put towards your deposit over time. Genuine savings is a term describing savings that you have accumulated yourself, i.e. not monetary gifts from other people. You will generally need hold a 5% deposit as genuine savings in order for your home loan to be accepted.
Some forms of genuine savings include:
- Savings held in your account for at least three months
- Term deposits held for at least three months
- Shares or managed funds held for at least three months
- Equity in residential properties previously bought
- Cash gift held for at least three months
- Inheritance funds held for at least three months
- Contributions from the First Home Super Saver Scheme
Gift from parents
Parents, relatives and friends can give you money to put towards your deposit as long as they are gifts, not loans. You will need to provide a letter signed by the person gifting the money to your lender. In the letter, it must clear that this gift is non-refundable and will not be repaid.
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