Find and fund your first home with these useful resources

Technology is a wonderful thing that can make the process of finding and buying your first home significantly easier.

We help you take the guesswork out of the home buying process with a list of useful resources to assist you with finding and funding your first home.

Budgeting

ASIC – MoneySmart Budget Planner

Getting your finances in order is an effective way to see where you can lower your expenses and increase your savings. Laying out your finances clearly like in ASIC’s MoneySmart Budget Planner will help mortgage brokers or banks determine how much the bank will loan you.

https://www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/budget-planner

Australian Government – First Home Owner Grants

Find out if you’re eligible to receive the First Home Owner Grant (FHOG), depending on what state or territory in which you intend to purchase your home.

http://www.firsthome.gov.au/

Couple reviewing finances, calculating budget for first home

Calculators

ASIC – MoneySmart Savings Goal Calculator

Find out in just 5 minutes how long it will take to reach your savings goals and what steps to take to put your plan into action using ASIC’s Savings Goals Calculator.

https://www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/budget-planner

Aussie – Borrowing Power Calculator

Enter some basic information about yourself and Aussie’s borrowing power calculator will give you an estimate of how much you can borrow, as well as what your monthly repayments may look like.

https://www.aussie.com.au/home-loan-calculator/borrowing-power.html

Macquarie Bank – ‘Where Can I Afford To Buy?’ Calculator

Once you’ve been pre-approved for an amount of money by a bank, the fun begins! Macquarie Bank has a great tool to assist with finding the right location to purchase your new home within your budget.

https://www.macquarie.com/au/personal/home-loans/calculators/where-to-buy

Realestate.com.au – Stamp Duty Calculator

The rate of stamp duty charged for your property depends on a variety of factors. Use realestate.com.au’s handy stamp duty calculator to find out exactly how much you’ll need to pay.

https://www.realestate.com.au/calculators/stamp-duty-calculator/

Genworth – Lender’s Mortgage Insurance (LMI) Premium Estimator

A quick and simple tool by Genworth used to calculate Lender’s Mortgage Insurance (LMI), if you’re expecting to have less than a 20% deposit on your property.

https://www.genworth.com.au/lender/lmi-tools/lmi-premium-estimator/

Financial advisors discussing finances with home buyer

The resources provided in this article are designed to be used for reference only, as actual figures can vary depending on a range of aspects. For an accurate analysis of your individual financial situation, we recommend speaking with a financial expert.

Buying a new home vs buying an established home

Buying a new home vs buying an established home? This is a question we constantly get asked, the truth is, there are advantages and disadvantages for both!

We’ve pulled together a list of what we love – and less than love – about purchasing an established home and purchasing a brand new home.

An Established Home

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Established homes tend to have an architectural beauty, charm and individuality about them – characteristics that are certainly difficult to find in brand new homes. They also bear a mature garden, which means there’s no need for costly landscaping, fence fitting or time spent nurturing a young, dependent garden.

Older homes are located in older suburbs, where the streets are lined with large, fully grown trees and established nature strips – a site that, in a new home, could take decades to come to fruition. Older homes also have larger blocks, meaning a bigger backyard and more space between your neighbours.

When purchasing a pre-loved home, buyers also tend to have more flexibility in their negotiating power on the price of the home. There’s also a good opportunity for savings/investment. However, if you’re lucky enough to save a bit on money buying an older home, it does beg the question – what do you need to spend money on to update or revote the house? Fixing up older homes can often be very costly. Renovations could range from simply replacing a toilet suite to needing an entire new kitchen. Then there is always the unknown, because you never really know what will need fixing (and the costs associated with it) until you move in.

Plus, there are a range of inspection and residential reports that you should get when buying an established home. These include building inspection reports, pest inspections etc, and range in cost.

A Brand New Home

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There’s nothing like the luxury of moving into a brand new home. No maintenance or renovations are required because everything is brand spanking new; the paint is fresh; the floor is unscathed; and the kitchen and bathrooms are modern are functioning properly. There’s also the comfort of knowing that the products and components of your new home are still under manufacturer’s or builder’s warranty, so if something breaks you can get it fixed quickly and easily. And did we mention that new homes are guaranteed asbestos free?

The orientation of a new home is also likely to be much better compared with an older home. These days, houses are built to maximise sunlight in the right rooms at the right times of day. Not only does this boost the amount of natural light in your home, it also helps to ensure that you use your air conditioner less in summer and your heater less in winter, saving you money in the long run! New homes are also much more energy efficient than old homes. They use current, energy-saving materials, technology and appliances to reduce the impact on both the earth and your pocket.

While new suburbs tend to be in a more remote location, they are also better planned with nearby schools, shops, parks and other community and recreational facilities. Although, as mentioned above, it can take years for these suburbs to develop the natural beauty of an older suburb.

When purchasing a new home, buyers do not usually have much negotiating power on price and have less opportunity to for savings/investment. In saying this, if you’re an investment buyer, a new home can be quite appealing due to the depreciation benefits that can be transferred to tax benefits.

New homes also aren’t entirely complete just because the build has finished. There’s usually landscaping to be done, proper fences to be built and sometimes a driveway to be paved. Due to space restrictions, new homes are also built on smaller blocks, meaning they compensate the backyard to ensure a reasonably sized home. On the plus side, if you shop around, you should be able to find affordable, value-for-money house and land packages in a suburb to suit your needs!

First Home Owner Grant: What You Need to Know

Are you a first-time home buyer that’s finding the First Home Owner Grant all very confusing? You’re not alone. We’ve answered the most important questions you’re probably asking yourself about the grant, to help make life a little easier while you search for your new home:

The First Home Owner Grant was introduced in 2000 as a way to offset the effects of GST on home ownership for people who are purchasing their first home. It is a national scheme which is funded by the individual states and territories and administered under their own legislation.

Are you eligible for the First Home Owner Grant?

To qualify for a First Home Owner Grant in the ACT or NSW you must meet the following criteria:

  • Each applicant is a natural person and not a company or trust.
  • At least one applicant is a permanent resident or Australian citizen.
  • Each applicant must be at least 18 years of age.
  • All applicants and/or their spouse/de facto have not owned a residential property, jointly, separately or with another person, in any State or Territory of Australia before July 2000.
  • All applicants and/or their spouse/de facto have not previously owned a residential property jointly, separately or with another person in any State or Territory of Australia, and occupied that property for a continuous period of at least six months.
  • This is the first time an applicant and/or their spouse/de facto will receive a grant under the First Home Owner Grant Act 2000 in any State or Territory (unless subsequently repaid).

What makes a property eligible?

The First Home Owner Grant applies to new or substantially renovated properties with a value of less than $750,000. A new or substantially renovated property is:

  • a home that has not been previously occupied or sold as a place of residence; or
  • a substantially renovated home that, as renovated, has not been previously occupied or sold as a place of residence; or
  • a property which is subject to an “off the plan” purchase agreement.

The home must not have been previously occupied or sold as a place of residence. For a renovation to be considered as ‘substantial’, they must have affected most of the rooms in the building.

Further requirements to be met:

New home: The home must be complete and ready for occupation at the time of the application for the grant.

Off the plan purchase: The land must be intended for the site of a new home and must be built before completion of the agreement.

Vacant land purchase: Foundations of the property must be layed within 26 weeks of completion of the purchase, however there is no limit on the time of construction. Agreement or transfer of vacant land must be for the whole of the land. If the land is a parcel of land where two or more homes are to be built, the agreement or transfer must be for that part of the land which has exclusive occupancy.

Once all these criteria are met, the owner must live in the new home for at least 6 months. If you move out before 6 months the grant must be repaid.

How much is the grant?

ACT: As announced in the 2015-16 budget, the FHOG was reduced to $7,000 tax free for grants on or after January 1st 2017.

NSW: The FHOG in NSW offers a $10,000 tax free grant for homes that meet all criteria.

Are stamp duty concessions available?

Yes, in the ACT for properties under $468,000 you can expect to only pay $20, and for properties up to $590,000 you’ll be paying $14.70 for each $100 over $468,000.

For amounts in NSW, click here.

Does your income affect your eligibility for the grant?

No, the grant is not affected by your income, however it does affect your concessional duty amounts.

Tips For Buying Off-The-Plan

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When buying a new home there are a tonne of options to consider. One option that should be at the forefront of your decision making is buying off-the-plan.

Off-the-plan refers to purchasing a property before it is constructed. Most of the time this means you will be buying a property while it is just a hole in the ground, and while it may seem crazy to buy something that has not been built yet, there are many benefits to purchasing an off-the-plan property:

The Benefits

  • One of the biggest benefits of buying off-the-plan is having the ability to customise the finishes and fittings in the home to suit your personal needs.
  • Since stamp duty is calculated based on the value of the land and the building, you will essentially only have to pay based on the value of the land, because there is no building yet!
  • In terms of an investment property, the depreciation tax savings are greater for an off-the-plan property, as the newer the building is, the greater the savings are.
  • You have the ability to lock in the price that you will pay, which is financially beneficial as there is a good chance the property will increase significantly in value by the time of completion.
  • The extra time you have while you wait for your new house to be built will allow you ample time to sell your existing home.
  • If you are a first home buyer, you will be able to benefit from the First Home Owners Grant, as well as stamp duty exemptions.
  • Newly built properties in Australia come with a 7 year builder’s guarantee, which means any faults must be repaired by the builder.

The Risks

  • There is always a risk that you will not get what you have already paid for. That is why it is important to have a comprehensive contract detailing all features, fixtures, fittings and time frames to ensure you have a leg to stand on when expectations are not met.
  • Since there is no way to see your apartment before purchasing it, there is a chance that you simply might not like it. Once completed it may look different to your expectations and it will be too late to change anything.
  • If your circumstances change during the build and you are no longer able to buy, it is important to act quickly and ensure you find another buyer to purchase from you at settlement.
  • A risk of having a locked in price is the uncertainty of the property market. Your property may suddenly lose value but you will still be paying the agreed price for it.

Things To Do

  • Make sure that it is definitely the property you want. This includes the size, suburb, orientation, and whether it is on a level you want to be on.
  • Visit the property site regularly and check if there are any other constructions occurring that may obstruct your view.
  • Carefully inspect the display home, including fixtures, fittings and finishes.
  • Research the market conditions and get advice from professionals on the right time to buy.
  • Research the developer. Do not be afraid to ask detailed questions and inspect other projects completed by them in the past. You may even want to talk with a past client to gauge satisfaction.
  • Have a legal professional look over all contracts and translate key points to you in laymen’s terms.
  • Make sure you have a lender that has agreed to financing. A lot of lenders are reluctant to finance off-the-plan properties given their high risk and the chance that the lendee will sell the property for a high price straight away, meaning the lender will lose interest.
  • Check that your deposit is going into a trust account, and do not let that money be released to a personal name to help build the project. This is a sure fire way to lose a lot of money very quickly.

Essentially, when buying off-the-plan, make sure you do the appropriate research to make sure it is the right option for you!

References

Emily Blatchford, Huffington Post, Buying A House Off The Plan: The Things You Need To Know, http://www.huffingtonpost.com.au/2016/02/18/buying-off-the-plan-australia_n_9269506.html, Accessed April 7th, 2017.

Oz Property Law, Buying Property Off-the-plan, http://ozpropertylaw.com/buying-property-off-the-plan/?gclid=CKqb2qX4kNMCFUcKKgodLqkF-g , Accessed April 7th, 2017.

Real Estate View, Things to Consider when Buying Off-the-plan, https://advice.realestateview.com.au/buying/things-to-consider-when-buying-off-the-plan/, Accessed April 7th, 2017.

Tim McIntyre, Your Investment Property, The Trick to Buying off the Plan, http://www.yourinvestmentpropertymag.com.au/buying-property/the-trick-to-buying-off-the-plan-148257.aspx, Accessed April 7th, 2017.

A Beginner’s Guide to Positive and Negative Gearing

If you’ve considered investing in the property market, there is a chance that you may have been baffled by the complexities of “positive” and “negative” gearing schemes.

However, determining whether your property will be positively geared or negatively geared is an important step in the investment process. For a better understanding of the benefits and potential drawbacks of these schemes, we have compared the two strategies below:

Positive Gearing

Opting for a positive gearing strategy is generally considered the safer and more conservative option. Positive gearing occurs when the rental income on your investment property exceeds the cost of maintaining it. This includes the cost of mortgage repayments, interest rates and maintenance fees. Positive gearing schemes are sometimes more favourable, as the extra cash-flow results in an immediate short-term profit.

Benefits

  • Immediate short-term profit – Investors will immediately gain an additional stream of income.
  • Low risk – If circumstances change and the investor loses their income, they will not be under pressure to pay the costs associated with multiple mortgages.

Drawbacks

  • The additional funds are taxable – As with your regular income, any funds obtained on a positively geared property are subject to income tax.
  • Less long-term gains – While you are immediately rewarded with additional income, it lacks the long-term payoff of a negatively geared property.
  • It is circumstantial – Due to a range of circumstances, a positively geared property can quickly become negatively geared. For example, if you are forced to reduce the rental income, you may have to cover the extra costs personally.

Negative Gearing

Negative gearing occurs when the rental income is less than the costs of maintaining the home. As the property is running at a loss, investors need to use their own funds to make up the difference. The benefit of a negatively geared investment is that the value of the home is likely to grow in time. It is expected that the increased profit from selling the property will outweigh the initial financial losses. Further, thanks to the available tax deductions, negative gearing can be a helpful strategy for offsetting the costs of acquiring an investment property. Negatively geared homes are likely to be in more populated areas like capital cities, where there are fewer factors that can affect their value.

Benefits

  • Greater long-term profit – Over time, the value of the property can be increased to the point where it exceeds the cost of maintaining it.
  • Tax deductible – A negatively geared home allows you to claim tax deductions related to any expenses you incur, so you can reduce the shortfall in rent and ultimately reduce your taxable income.

Drawbacks

  • Higher risk – If your circumstances change, or an investor loses their source of income, they are still required to cover the additional rent.
  • Housing markets – Investors will need to be careful that the property does not lose value over time. They will also need to ensure that the property is sold at a time where the housing market is strong.
  • You will need to budget – The ongoing costs associated with a long-term investment will add up. You may also need to consider you will be taxed on capital gains accrued when the property is sold.