Buying a first home is a major financial milestone and often one of the most exciting (yet overwhelming) events in a person’s life.
First home buyers can be caught by surprise at the upfront costs of buying a home. While most are aware of the need to save a deposit, some may be less familiar with the additional outlays like funding building and pest inspections, conveyancing fees, additional searches and enquiries, and transfer duty. These additional fees can be significant, especially transfer duty, which on an average-price home in New South Wales is around $40,000.
Fortunately, there are grants and concessions available to help buyers get into their first homes in New South Wales.
As a buyer, it is up to you to identify these benefits and apply, so it is important to understand what is available to you at the time of your proposed purchase.
First Home Buyer Assistance Scheme (FHBAS)
First home buyers in New South Wales can apply for an exemption or reduction of duty charges under the First Home Buyer Assistance Scheme (FHBAS). Importantly, the FHBAS applies to existing homes, as well as new homes and vacant land on which to build a home.
Under the FHBAS, buyers purchasing their first home in New South Wales for less than $800,000 can receive a partial or full exemption on duty. Whether a full or partial exemption applies is based on the purchase price and whether the property is an existing or new home.
For first home buyers who still have some duty to pay, there is a new scheme that will allow them to elect to either pay the stamp duty upfront in one lump sum, or choose to pay the duty in an annual property tax (see below). This scheme is not applicable to properties with a purchase price over $1.5 million (or $800,000 for vacant land).
Eligibility for FHBAS
The FHBAS scheme is only for buyers who have never previously owned a property. In addition, a buyer’s spouse must also be a first home buyer.
Buyers must be Australian citizens (or permanent residents), over eighteen, and must be individuals (that is, not a company or other legal entity). Buyers must also move into the property within a year, and live in the home for at least six months.
To apply for the scheme, buyers must have already exchanged contracts to purchase their first home or vacant land. The application form and supporting documents is lodged with the buyer’s conveyancer.
First Home Owner’s Grant for New Homes
First home buyers who choose to buy a brand new home, or who will be building their own home, may be eligible for an additional benefit. Revenue NSW manages a scheme that allocates grants of $10,000 under the First Home Owner’s Grant for New Homes.
Most buyers apply for the First Home Owner Grant at the same time as they apply for their home loan. Banks and financial institutions often take the grant into consideration when calculating required deposits.
However, if you do not wish to apply through your Lender, we can apply for the First Home Owners Grant on your behalf. The only difference with us doing it is that we can only apply for it after settlement takes place and the $10,000.00 will be deposited into your nominated account once approved, but your Lender can apply for it prior to settlement taking place and you will receive the $10,000.00 on settlement.
Other New South Wales Schemes for Home Buyers
Recently, the New South Wales Government has introduced other schemes such as First Home Buyers Choice and the New South Wales Government Shared Equity Scheme.
First Home Buyers Choice NSW is designed to make home ownership more obtainable for first home buyers by giving them a choice between paying upfront transfer duty or an annual property tax. It is important to understand that, unlike other incentives to help first home buyers, this scheme may not be a straight-forward win for all first home buyers who should carefully consider the pros and cons.
If you opt for the Land Tax option you will be liable for Land Tax for the entire time you own the property and if you purchase it as an owner occupied property and then use it as an Investment property in years to come, the percentage of Land Tax that you pay will increase.
If you would like to know more about this scheme and how it works please feel free to give us a call.
The New South Wales Government Shared Equity Scheme is designed to help address what for many has become an almost insurmountable goal of home ownership.
Under the scheme, eligible home buyers are only required to provide a deposit equal to 2% of the purchase price of the home and demonstrate a savings history. The Government will contribute up to 40% of the purchase price of a new-build home, and up to 30% of the purchase price of an existing home. No interest is charged on these funds. There are also no mandatory repayments as long as the homeowner remains eligible for the scheme. The Government’s stake in the property can be gradually reduced by voluntary repayments and must be repaid in full if the property is sold. Again, the pros and cons of such a scheme must be carefully considered by potential home buyers.