Buying a Property: Interest rates and grants.
Tax is never an easy thing to read about, even accountant’s struggle to read and write about tax! After all, this is a property page, so let’s talk a bit more about property in this article.
Buying your first property, or an investment property, is a dream to many people across Australia. There are a few basic things you should know before jumping in the deep end.
First, being able to afford the property comes first! Not that we want to keep talking about accounting, but that should be the first meeting you make. Your loan servicing ability (and therefore the loan you can receive) directly correlates to the taxable income shown on your most recent tax return/s. If you are looking at buying a property, before talking to a mortgage broker or bank, you should review your recent tax returns.
The role of the accountant is to minimise tax by reducing your taxable income, but the bank/broker will want to see your taxable income higher so they know you can afford the loan. Because of these competing interests, it is best to advise your accountant if you are considering buying a property in the next 1-2 years.
Have a sufficient taxable income? Banks and brokers lining up to fund your purchase? Great, now look at the rates! There is nothing wrong with having banks or brokers competing to give you the better rate. Ideally, you are looking for a pre-approval, that way this step is completed well before you find that property you love. Minor changes in an interest rate on a 20+ year property mortgage can save thousands. Doing this work up front rather than changing banks in the future will usually save thousands on discharge and refinancing fees as well.
Now onto grants. The homeowner grants change very regularly, and many differ between states, so up to date advice based on your individual circumstance is needed. One grant to talk about however is the First Home Loan Deposit Scheme (FHLDS). This is not strictly a grant, but a government backed guarantee. It allows a first home buyer in the low-middle income bracket to purchase a home with a deposit of as little as 5% without having to pay Lenders Mortgage Insurance or a Low Deposit Premium.
Eligibility is limited to those citizens over the age of 18 whose taxable income is individually under $125,000 (or $200,000 combined if a couple). The purchase price of the property is limited based on its location, so make sure to check https://www.nhfic.gov.au/what-we-do/fhlds/property-price-caps/ for more. Higher purchase price caps are generally allowed for new homes (off-the-plan, house and land packages, new builds etc.).
In Queensland, there is a first homeowner grant that provides a payment of $15,000 towards buying or building your new house. The amount is paid per house, and you must not have previously owned a property (nor has your spouse). Applicants must be a citizen over the age of 18 and be purchasing a new house or building, and the property must not be valued at more than $750,000. A new house is considered a brand-new dwelling that has not previously been occupied as a place of residence.
Established homes that have undergone substantial renovations can also qualify so long as the renovation is completed before you purchase it, and it has not been lived in since the renovation. It must also involve all or most of the structural or non-structural components of the building being removed or replaced.
The grant and subsidies change very regularly, so make sure you do your own research! This article is just to point you in the right direction.
Note, the above is not intended as advice and is purely general in nature, every circumstance is different and specific advice should be sought in all individual situations, see our Disclaimer page for more.