As property prices continue to rise, purchasing in a centrally-located or sought-after area is out of reach for the average working millennial. Instead, many are opting to rent rather than buy as it means not having to compromise their inner city or beachside lifestyle. But for those who are still eager to enter the market, there is a way to get the best of both worlds.
Rental yield – essentially the rate of rental income returned against the costs of an investment property is a great indicator of a property’s investment potential. But you need to keep things in perspective when you factor it into your decision to purchase property.
Since its introduction in July 2000, the First Home Owner Grant (FHOG) has seen its fair share of adjustments, from a value increase, to the exclusion of individuals buying established homes. We take a state-by-state look at how eligibility is determined and how a broker’s assistance can streamline your application process.
As a first home buyer, on top of applying for a FHOG, you’re facing a whole new world of responsibilities, which is why it is worth seeking the services of an accredited broker like Darren from Streams Mortgage + Finance. It’s part of the service of a good broker to guide first home buyers. They’ll get a more holistic approach.”
For the most part, the eligibility criteria remains the same throughout all states and territories. The exceptions being things such as the value of the grant, its threshold, and the amount of time a buyer is expected to live in the property as a primary place of residence. The following are standard requirements.
As of October 2015, first home buyers purchasing established homes are no longer eligible for the grant.
Here is a breakdown of each state’s eligibility criteria.
New South Wales
The First Home Owner Grant (New Scheme) is valued up to $10,000 with a $750,000 property cap on transactions made on and after the 1 January 2016. Within twelve months of settlement, the purchaser must live in the home as a principal place of residence for a continuous six months.
Western Australia
The only difference first home buyers in the west will find from those in New South Wales is the property cap limit. Those wanting to purchase south of the 26th parallel (the town of Kalbarri) will have to stick to a $750,000 cap, whereas those north of the 26th parallel (the town of Denham) have a $1,000,000 cap to play with.
Tasmania
After the 1 January 2016, Tasmanians would have seen their FHOG decrease from $20,000 to $10,000, making it on par with New South Wales and Western Australia.
Victoria and the Australian Capital Territory
Just like New South Wales and Western Australia, those within Victoria and our nation’s capital are eligible for a $10,000 grant with a $750,000 cap. However, they need to reside in their property for twelve consecutive months, within twelve months of settlement.
Queensland and South Australia
First home buyers in both these states are required to live in the purchased property for six months, within twelve months of settlement. The grant in these states is valued at up to $15,000. Queenslanders, where it’s called the Great Start Grant, have a cap of $750,000 and those down south are limited to a $575,000 property value.
Northern Territory
Our northernmost first home buyers enjoy the FHOG of the highest value in the country, at $26,000. The property cap is set at $600,000 and they must reside in it for six continuous months.
Regardless of which state you reside in, the eligibility criteria must be met and no amount of work from a broker will change that. However, if you find that you do satisfy the requirements and are looking to apply, speak to an MFAA broker, who can help you secure the hugely helpful grant.
What to know more about the FHOG, Call Darren at Streams Mortgage + Finance, he is more than happy to assist you through the process and answer any queries you may have.
When you’re desperately trying to save up a deposit for a home and just see the prices of property climbing and climbing, it’s difficult to remain patient. But there is another way: a guarantor can help.
If you don’t have a substantial deposit for a home loan, there are still a number of ways to obtain finance. These are known as family pledges and there are two types available to borrowers: service guarantees and security guarantees.
Service guarantees are less common than security guarantees, and they involve a family member guaranteeing all of the repayments on a loan, as well as being named on the property title.
A drawback of this approach is that it usually means first home buyers are not entitled to any government grant.
A more popular option is a security guarantee. Borrowers who have a limited deposit often use this approach. In this situation, a relative or friend (usually a borrower’s parent or parents) is prepared to use the equity in his or her own home to guarantee the deposit and possibly costs of the purchase, of the borrower.
For example, for a total loan amount of $600,000, in a security guarantor situation the borrower/s would take on the debt of 80 per cent of the value of their loan secured against the property they have purchased, which would be $480,000, in their own name/s.
The loan for the balance, $120,000 + costs (If applicable), is then guaranteed by the guarantor against the guarantors security (home), limiting the guarantor’s liability to this amount, while providing security for the lender, meaning that lender’s mortgage insurance is not necessary, saving the borrowers thousands. The finance for the guaranteed amount, i.e. deposit + costs (If applicable) is in the name/s of the borrowers and payable by them.
Essentially, the borrower/s would have two loans, one secured against the property they purchased at 80% Loan to Value Ratio and one secured against the guarantors property for 20% Loan to Value Ratio, both loans payable by the borrower/s.
This is a very popular way of first home buyers entering the property market. It works well when borrowers don’t have a substantial deposit, but their parents own their own home or even have a small mortgage on their home. It’s a great option as long as the parents are comfortable with their child’s ability to pay back the loan.
Talk to Darren at Streams Mortgage + Finance for more detailed information on how a Guarantor can help you.