A lot of clients have had their new home dreams given an extra lease of life lately with the Federal Government's $25,000 HomeBuilder subsidy, but there's still some confusion out there. I hope I can provide some light as to how things may unfold.
Key points:
Enquiry is up across the board with news of the Federal Government HomeBuilder plan
There is confusion over whether the $25,000 grants be used for your deposit
Mortgage brokers don't yet have the answers, will they soon?
In speaking with brokers and banks no one seems to yet be sure, but will the information be released soon?
Some of the major questions have been:
How can I use the grants?
Can they use it in terms of deposit?
When will it be paid?
What is the hold up?
Federal Housing Minister and Assistant Treasurer Michael Sukkar said the Commonwealth was working through the implementation of the scheme with state and territory governments and it would be delivered through yet-to-be signed national partnership agreements. (this is what banks are waiting for to make their decision)
"The agreements will be designed to complement existing state and territory first home owner grant programs, stamp duty concessions and other grant schemes," he said.
"It is the Government's intention that the delivery of grants will be similar to each state's own property grant programs."
What do the banks say and what looks likely?
According to the ABC the big four banks for comment, have provided varying levels of detail.
“The ABC understands NAB customers will be able to put HomeBuilder grants towards a deposit, but the total deposit required will not change.
A spokeswoman said the bank's standard lending policies would continue to apply.
[This is] to ensure our customers are able to appropriately manage their home loan commitments both today and in the future," she said.
The HomeBuilder grants will contribute to the customer's savings in the same way as the first home owner grant does today."
“An ANZ spokesman said the $25,000 could be used as part of the equity a customer contributed to building costs, as long as a loan was not subject to lenders mortgage insurance (LMI).
LMI is insurance borrowers have to take out if they have not saved a 20 per cent deposit for their home.
It protects banks in the event a borrower defaults on their loan and the proceeds from the sale of the property cannot cover what the bank is owed.
The ANZ spokesman said for loans subject to LMI, the $25,000 could be used as equity, but "applicants must meet the genuine savings policy of 5 per cent of the purchase price over a three-month period".
“The Commonwealth Bank said it was still working through the details of the scheme, but a spokesman indicated normal construction loan lending conditions would apply.
Westpac's acting chief executive for its consumer division, Richard Burton, responded to the ABC's questions with a statement, but did not address questions about lending criteria.
Helping Australians into their next home is a core part of our business strategy and we look forward to supporting our customers with accessing the Government's new HomeBuilder grants,"
In Victoria other incentives:
$10,000 First Home Buyers Grant for Australian Citizens or Permanent Residents who:
Purchase an established property under $600,000 or
Purchase a block of land under $600,000 and build a home under $750,000 (contract value)
$20,000 for First Home Buyers in Regional Victorian Towns
$0 Stamp Duty for First Home Buyers who’s established property purchase is under $600,000 or purchase a block of land under $600,000
As of Tuesday night (16th June 2020), more than 208,000 people had visited the Federal Government's HomeBuilder webpage and more than 15,600 Australians had registered an interest.