HomeBuilder grant program has been released
The Federal Government released its HomeBuilder package as a third wave of stimulus to the economy specifically supporting the construction industry. It is a time limited grant program that will be demand driven with no existing funding cap. There are 2 parts to the grant program; for the building of new homes and renovation of existing owner-occupied homes.
The grant is $25,000 and will be applied through and processed by each State and Territory’s existing mechanisms. The implementation of the grant program will be done via a National Partnership Agreement to be signed by the Commonwealth and State and Territory Governments. There will be further information to come at a later date regarding the partnership agreement and application processes. As the National Partnership Agreement may not be finalised until September 2020, applications will be back dated by States and Territories to 4 June 2020.
Eligibility criteria:
· You are a natural person (not a company or trust);
· You are an Australian Citizen;
· You are aged 18 years or older;
· You enter into a building contract between 4 June 2020 and 31 December 2020 to either:
o Build a new home as a principal place of residence and the property value including land does not exceed $750,000; or
o Renovate your existing home as a principal place or residence, the renovation contract is between $150,000 and $750,000 and the value of your property does not exceed $1.5 million
· Construction must commence within 3 months of the signed contract date;
· Your annual taxable income is below one of the following caps:
o $125,000 per annum for an individual application based on 2018/19 or later tax return; or
o $200,000 per annum for a couple based on both 2018/19 or later tax returns;
· Renovation or building works must be undertaken by a registered or licensed builder as per their state or territory regulations and be the named builder on the building license or permit;
· Renovation works are to improve accessibility, safety and livability of the dwelling and not for additions to the property such as sheds, swimming pools, tennis courts;
· An arms-length/commercial relationship must exist between the builder and individuals;
All dwelling types are eligible under the grant program such as houses, apartments, house and land packages, off the plan builds etc.
The total program is estimated to cost the National Budget $680 million, but this may vary given this is a demand driven grant with no funding caps in place.
The grant monies will be non-taxable income. The grant program will work in partnership with existing State and Territory stamp duty exemptions and grants for first home buyers.
For an individual in NSW buying a $400,000 house and land package as their first home, the following exemptions and grants may apply:
Federal Government HomeBuilder Grant - $25,000
NSW First Homebuyers new home grant - $10,000
NSW Stamp Duty exemption - $13,432
This equates to a total saving of $48,432 on the house purchase, on the lifetime of a mortgage the savings extend further. Based on the above purchase scenario, an average interest rate of 2.91%, 25-year term and $10,000 initial deposit the below table demonstrates the differences.
Without grants & SD exemptions
Amount borrowed - $403,432
Total interest charged - $164,855
Monthly repayments - $1,894
With grants & SD exemption
Amount borrowed - $355,000
Total interest charged - $145,064
Monthly repayments - $1,667
There is a total interest saving of $19,791 over the lifetime of the loan. To go a step further, based on the same monthly repayment of $1,894; there is a further saving of 4 years and 1 month on the term of the loan and interest saving of $26,105. These calculations are from Moneysmart’s Mortgage calculator.
In conclusion, the HomeBuilder in conjunction with the existing NSW First Home Buyer Stamp Duty exemption and Grant (for new homes) would result in an estimated net benefit of $68,223 in the scenario above.
If you wish to discuss how this grant program may assist you in your homeownership/renovation dreams, please contact our office to discuss with our mortgage broker Charles Agnew on 02 6883 2200.