How the First Home Owners Grant Could Help You

Everything You Need to Know About Claiming and Using the First Home Owners Grant

When you ask yourself “how much can I afford to spend on a property?”, one of the first things you must consider is how much money you have to cover the upfront fees. You’ll need to pay a deposit, mortgage fees, and several other costs before you can buy a home.

First-time buyers find this particularly difficult. They have no equity in a previous home to help them out, which means they must save the thousands of dollars they need on their own. They must figure out what the additional costs involved in buying property are, while ensuring their deposits are big enough to secure a suitable mortgage.

It seems like a lot to ask, right?

That’s why the Australian government has decided to give first-time buyers a helping hand. The First Home Owners Grant (FHOG) could help you get your hands on a few thousand dollars. However, you need to know what it is, and how you can access it.

What is the FHOG?

The FHOG offers a one-time grant you can use to help pay your deposit, or some of the extra fees that come with buying a property. The government introduced it to help first-time buyers deal with the impact of the Goods and Services Tax (GST)

You can use the FHOG to help with funding the construction of a new home, or to buy a new home. Furthermore, you could use the grant to purchase an established property that was built before 30th June, 2014.

The grant itself ranges from $5,000 to $15,000, depending on the type of property you buy. While this isn’t usually enough to cover an entire deposit, you can see how it would give you a boost. Having an extra $15,000 in savings could boost your answer to the question of “how much can I afford to spend on property”?

What are the FHOG Eligibility Criteria?

There are several criteria you must meet to qualify for the FHOG. They include the following:

  • You must be 18 years of age or older to lodge an application. This requirement may be waived, but only under very special circumstances.
  • Though multiple people may apply for the same grant, at least one must be either a permanent resident or citizen of Australia. If you come from New Zealand, you must hold a Special Category Visa to apply.
  • Neither you nor your partner may have owned a property before 1st July, 2000. You also cannot have had an interest in a property you lived in for over six months after that date.
  • Trusts and companies may not apply for the FHOG.
  • You must make the home you buy your main place of residence for a minimum of six months. Furthermore, this six months must be continuous and fall within your first year of ownership of the property.

In addition to this, you have a few other things to consider if you’re building your own home. You may only apply for the FHOG once you’ve laid the foundations of your property. The same criteria applies for occupying the house for a continuous six months within a year of its construction.

As a general rule, you can’t apply for the FHOG if you owned a property before 1st July, 2000.

Can I Buy Any Type of Property?

Most property types fall under the FHOG. You can use the grant to buy any of the following:

  • A single home
  • An apartment
  • A duplex or townhouse.

Unfortunately, you can’t use the FHOG to help you when you buy vacant land. Instead, you’ll have to wait until you’ve laid the foundations of the home you’re building before you can apply. Furthermore, you can’t apply for the FHOG to fund renovations on a property you own. You’ll have to use your own money, or your property’s equity, to pay for that.

How Do I Apply?

You have two options for lodging an application:

  • Applying directly through RevenueSA, which is Australia’s treasury department
  • Use an Approved Agent to make the application

As part of the application, you’ll be asked to submit various documents. Most of these have to do with your identity. These may include copies of your citizenship certificate, passport, and driver’s licence, in addition to any other documents you’re asked for.

The application form makes things fairly simple. You just have to ensure you meet the eligibility criteria and can supply the correct documents.

When Can I Apply?

You can apply for the FHOG both before and after the settlement of your property transaction. Let’s look at applying after the settlement first.

When buying an existing property, you must apply within one year of moving into the home. Take your date of settlement as a good marker point. Get the application submitted as soon as you move in, and you should have very few problems. You will need to send along a copy of your purchase contract, though.

If you’re building your own home, you have to wait until you’ve laid the foundation of the property. You’ll need to send along a copy of your building contract if you’ve hired somebody to build the property. An owner builder must provide a statutory declaration that shows that construction has ended and the property is now liveable.

All of this is great, but what if you want to use the FHOG as part of your deposit? That’s where your lender can help. Most lenders are Approved Agents, which means they can submit an FHOG application on your behalf. As a result, your lender can help you apply for the FHOG before you buy the property, which allows you to use it as part of a deposit.

What If I Want to Buy an Investment Property?

There are many reasons why property is a great investment. Unfortunately, none of these matters when you’re applying for the FHOG. You may not apply for the grant to buy a property that you intend to use only for investment.

That doesn’t mean you can’t use the home as an investment property later on. However, you must first live in the property for at least six months continuously within the first year of home ownership.

Do I Have to Worry About Any Caps?

There is a cap that you have to keep in mind. The maximum value of the property you buy cannot exceed $575,000.

This is pretty simple if you’re buying an existing property. However, those who build their own properties have to think about things a little more. The combined value of your building costs and the value of your land are used to determine the home’s market value. As a result, you’ll need to manage your costs well if you want to take advantage of the FHOG.

There’s another issue to keep in mind. The grant scales downwards alongside the property you buy. Let’s look at an example.

If you buy a new property worth $575,000, you should be able to claim $15,000 through the FHOG.

However, let’s say the property is worth $400,000. This will mean that you don’t receive the full grant. Instead, you receive a sum that is relevant to the value of the property.

How much you receive varies and depends on several factors.

Can Multiple People Claim FHOG?

Yes and no. We know that’s a confusing answer, so let us explain.

Multiple people can lodge an FHOG application if they’re going to be living together. In fact, it’s required. The FHOG form has special sections that deal with partners and spouses. Your partner will have to fill out part of the form, even if he or she won’t take a controlling interest in the property.

However, the FHOG does not apply to the applicant. It’s for the property that you purchase. This means your partner can’t claim FHOG for a different property after you’ve applied with them for your current property.

But this changes in the case of divorce. Assuming you didn’t own an interest in your ex partner’s property, you could claim the FHOG for the home you buy after your divorce. Again, this needs to be the first property you’ve had an ownership stake in. The only exception to this is if you bought the property you owned previously before 1st September, 2000.

What If I’m Not Eligible?

If you don’t meet the eligibility criteria, you can’t apply for the FHOG. Unfortunately, some people try to play the system. They’ll lie about their situation to claim eligibility, when they really shouldn’t receive the grant.

There are consequences to these actions. If you’re caught lying about your eligibility, and have received the FHOG because of your deception, you may have to do the following:

  • Pay back every cent that you received as part of the FHOG.
  • Potentially have to repay an amount of up to 100% of the grant you received, in addition to repaying the grant money.
  • Serve a maximum of two years in prison, or pay a fine of $20,000.

Simply put, it’s not worth fudging your application. You just have to accept the situation if you aren’t eligible. There are very severe penalties for lying, and they may affect everything from your career to your future home ownership.

What Can I Use the FHOG For?

Now for some really good news. There are no set guidelines on how you use the FHOG once you receive it, as long as you live in the property that was part of the application.

This means you can use the FHOG to cover part of your deposit, or use it to pay some of the other costs of property ownership. You could even use it to help with your mortgage repayments.

As long as you meet the above criteria, you can use the FHOG however you wish.

Conclusion

The FHOG may be your route towards homeownership if you’re a first-time buyer. The thousands of dollars you receive could put a serious dent into the fees you have to pay when buying a home.

Your financial circumstances don’t play into your eligibility. This means you can claim FHOG, even if you have the money to afford the home. You just need to meet the criteria we’ve spoken about above.

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