First home buyers will be aware of the Queensland Government’s First Home Owner’s Grant. Builders are advertising it, and lots of lenders are promoting it too.
It certainly sounds like a great way to build a brand-new home and, available until 31st December, it is a generous offer from the government.
The biggest hurdle for First Home Buyers is definitely saving the deposit. A 5% deposit on the average home of $400,000 in Cairns is $20,000. So a $20,000 grant from the government sounds just right. Unfortunately, it’s not that simple.
Building
When you’re building your new home, lenders do not take the $20,000 grant into account when determining what deposit you will need. You still need to have the 5% deposit from your own savings to begin with.
This is because of the timing of the grant payment.
The grant becomes available when the slab is completed. So, you have to pay the 5% deposit on the purchase of the land and also the 5% builder’s deposit before the grant is paid. You can then spend the grant money on paying down your loan (depending on the type), furniture, landscaping or a new car for example once it’s paid to you.
Buying
If you’re buying a brand-new house or unit that has already been built & is ready to move in then it works a bit differently!
Because you’re not waiting for the ‘slab stage’ as it’s already been completed, many lenders will allow you to use the grant as your deposit.
This is because of the timing – the grant is available on the day you settle which means it is possible to buy a brand-new home for $400k using the $20k grant as your deposit. The settlement on the land and the completed property happens all at once and the ‘slab stage’ was at the very start of the build.
So, if you’re keen to choose your own block and design your own home, you’ll need to make sure you have that deposit saved. But, if you’re willing to limit yourself to the very small amount of properties available from builders that fully have constructed new homes, then you may be able to use the grant as a deposit.
So, for the majority of people, the grant doesn’t help you get into your new home sooner, but gives you a great helping hand once you have moved in.
Key Points
- Don’t rely on the grant for your deposit – get saving!
- There are not many new homes that builders have funded to full construction, so don’t expect to find the home you want in these
- Talk to LendFirst Home Loans and we can make sure you get the best advice on the full new home buying or building process
- Move quickly – the grant is due to end on 31st December 2017 and you don’t want to miss out!
