Did you know that first home buyers are eligible for five generous State and Commonwealth government schemes, each of which is aimed at helping them take their first steps onto the property ladder?
If you’re a first home buyer looking to get into the market for the first time on Sydney’s Upper North Shore, here’s how you could use those grants to your advantage.
Five grants and schemes for First Home Buyers
Of the five grants or schemes available to First Home Buyers, three are run by the Commonwealth Government and available to first home buyers across the country:
- The First Home Super Saver Scheme
- The First Home Loan Deposit Scheme
- The Homebuilder Scheme
While two are run by the NSW State Government:
- NSW Stamp Duty Concessions
- The NSW First Home Owner Grant
The First Home Super Saver Scheme
Saving a 20% deposit to buy your first home is hard work. The First Home Super Saver Scheme (FHSSS) is a Commonwealth Government scheme that allows first home buyers to increase their savings by making additional contributions to their superannuation.
First home buyers can save a home deposit of up to $15,000 per year, to a total of $30,000, by making super contributions. This can give your savings a boost because voluntary contributions are taxed at the superannuation tax rate of 15% rather than at your marginal income tax rate. The additional, voluntary contributions can then be used as savings towards your home deposit (the rest of your compulsory super cannot).
For example: You could use up to $30,000 of voluntary super contributions towards a deposit for any property. This modern two-bedroom unit in Gordon is on the market for $950,000 and to put down a 20% deposit you’d need to save up to $190,000. Meanwhile, this two-bedroom unit in Turramurra is on the market for $810,000, which means you’d ideally need a deposit of $162,000.
The First Home Loan Deposit Scheme
Finding it hard to save the full 20% deposit? The First Home Loan Deposit Scheme is another Commonwealth Government initiative that guarantees up to 15% of your home loan. This means first home buyers could buy with as little as 5% of the purchase price without having to take out lender’s mortgage insurance (LMI), helping you get into the property market sooner.
Applicants need to be Australian Citizens aged 18 or over and need to live in the property as an owner-occupier. Your 5% deposit must be “genuine savings” and income caps apply, of $125,000 for singles and $200,000 for couples.
In Sydney, you’re also subject to a price cap of $700,000 for the property you buy. And you are restricted to borrowing through one of the Scheme’s 27 participating lenders.
For example: Coming in around the $700,000 cap are some excellent units on the Upper North Shore like this sunny two-bedroom apartment in Hornsby.
The Homebuilder Scheme
Planning on building, buying off-the-plan, or buying a renovator’s delight? First home buyers are eligible to apply for the Commonwealth Government’s $25,000 HomeBuilder scheme if they’re buying a brand new house or apartment, or undertaking a major renovation. This scheme started as a stimulus response to COVID-19 and runs until the end of 2020. It has several requirements applicants need to meet including:
- Being an Australian Citizen over the age of 18
- Being an owner-occupier (investors are not eligible)
- Earning under the income caps of $125,000 a year for an individual or $200,000 a year for couples
- Entering into a building contract between 4 June 2020 and 31 December 2020
- Starting construction within three months of signing the building contract.
The grant itself can be used for two types of residential construction:
- Building a brand new home up to the value of $750,000, including house and land packages or off-the-plan apartments.
- Completing a substantial renovation of an existing home and this includes knock-down rebuilds. The existing property must be valued at less than $1.5 million before the renovation and the renovation contract cost must be valued at between $150,000 and $750,000
For example: It’s unlikely you would be able to build a new home on land on the Upper North Shore for a combined value of $750,000. However, if you buy a property for under $1.5 million and undertake a significant renovation costing between $150,000 and $750,000 you may be eligible. Something like 12 Carina Road, Turramurra. Off-the-plan apartments under $750,000 are also eligible.
NSW Stamp Duty Concessions
Stamp duty – or transfer duty – is one of the biggest upfront costs when you’re buying a home. Calculated as a percentage of the purchase price, it can run to tens of thousands of dollars and cannot be borrowed as part of your mortgage.
For several years the NSW Government has offered stamp duty concessions and exemptions for first home buyers buying new or established properties and from 1 August 2020, it increased the thresholds for 12 months. This means that more new and off-the-plan properties will be eligible for stamp duty exemptions or concessions.
For brand new properties under $800,000 no stamp duty is payable. For new properties between $800,000 and $1 million a concessional rate applies. And for new properties over $1 million, the full rate of stamp duty kicks in.
For an established property that costs up to $650,000, no stamp duty is payable. From $650,000 to $800,000 a concessional rate applies. And over $800,000 the full rate of stamp duty applies.
For example: Older style one-bedroom units on the Upper North Shore like 4/721 Pacific Highway, Gordon, may come in just under the $650,000 stamp duty threshold. You could claim the concessional stamp duty rate for this modern two bedroom, two bathroom apartment in the coveted ‘Rosedale’ complex, which is located in the catchment for St Ives North Primary School and is on the market for just under $800,000.
The First Home Owner Grant
Another opportunity for new builds or buying off the plan. The NSW First Home Owner Grant is the longest-running and best-known scheme for First Home Buyers. It provides a one-off grant payment of $10,000 to buy a new property if it is:
- a newly constructed home or a substantially renovated home you’re buying that is valued at less than $600,000, or
- a new home you’re building and the dwelling and land have a combined value less than $750,000.
For example: It’s pretty unlikely that you’d be able to spend the first home owners grant on a house and land package on the Upper North Shore. But off-the-plan units certainly qualify.
If you’re interested in buying your first home on Sydney’s Upper North Shore, contact our team today.