The Coach: Get a grip on home grant

On June 4, the federal government announced the commencement of a new program called HomeBuilder. Picture: Rohan Kelly

We are looking to undertake renovations on our house in the next few months. Could you please explain how the recently announced HomeBuilder grant program will operate and the eligibility criteria?

On June 4, the federal government announced the commencement of a new program called HomeBuilder that will provide eligible owner-occupiers (including first-home buyers) with a grant of $25,000 to build a new home or substantially renovate an existing home where the contract is signed between June 4 and December 31, 2020. Construction must begin within three months of contract date.

To be eligible, you must meet the following criteria: You must be an Australian citizen aged 18 or older; your income must be below $125,000 for an individual applicant or $200,000 for a couple based on your latest tax return (either 2018-19 or 2019-20); the home must be used as your principal place of residence; and the new or renovated dwelling cannot be intended for use as an investment property.

The program is only for individuals, not companies or trusts or self-managed super funds. The construction or renovation contract must be signed with a licensed builder and owner-builders are ineligible to apply.

If you are looking to build a new home, the completed value of the new build including land and building cannot exceed $750,000.

If you are renovating an existing property, the works must be substantial renovations with a commercial contract price between $150,000 and $750,000. Renovations include where a property is already owned and a knockdown rebuild is completed where the new build cost is no more than $750,000. The pre-renovation value of the property must not exceed $1.5m. Renovations must improve accessibility, safety or liveability for the occupants but cannot include additions such as swimming pools, spas, sheds or stand-alone garages.

Information on when and how you will be able to access HomeBuilder will become available through your relevant state or territory revenue office. States and territories will backdate acceptance of HomeBuilder applications to June 4, 2020, once the National Partnership Agreement is signed with the federal government.

Could you please explain how the First Home Loan Deposit scheme operates?

The scheme offers an additional loan facility to first-home buyers to fund the gap between their current deposit savings and the 20 per cent deposit requirement of most mortgage lenders.

While lenders may offer loans to some first-home owners with a deposit of less than 20 per cent, the scheme will mean first-home owners who cannot save a 20 per cent deposit may avoid the additional financial expense of Lenders Mortgage Insurance (LMI). LMI protects banks in case borrowers’ default on their mortgages.

To qualify, first-home buyers may earn up to $125,000 a year and couples a combined annual income of up to $200,000. To be eligible, new homebuyers must have saved at least a 5 per cent deposit and never previously owned property in Australia.

The government limits assistance to 10,000 first-home buyers each financial year. All available scheme places for the 2019-20 tax year have been allocated. A new release of 10,000 scheme places will become available via the 27 appointed lenders from July 1, 2020. The government will underwrite the home loans and will serve as the guarantor.

Visit www.nhfic.gov.au for details of appointed lenders and further information.

Andrew Heaven is an AMP financial planner at WealthPartners Financial Solutions.

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