The First Home Owners Grant in WA. What Am I Eligible For?

As there have been recent changes announced in relation to the First Home Owners Grant (FHOG) it is a timely opportunity to restate the basic requirements of the scheme.

The applicant's for a FHOG must be a natural persons over the age of 18 years, with one of them an Australian citizen or permanent resident. Neither the applicant nor their spouse can have received a FHOG previously or owned a residential property anywhere in Australia.

The current boost to the FHOG has been extended to the 30th September 2009. The FHOG of $14,000 for an established residence and $21,000 for a new residence will continue to that date. Thereafter the respective grants will be reduced to $10,500 for an established residence and $14,000 for new homes until the 31st December 2009. Thereafter the FHOG will revert to $7,000 only for an established or new home.

Several months ago the State Treasurer announced that the Government was considering the imposition of a cap on the value of properties eligible for FHOG, which was stated to be $750,000. The proposed cap has not been implemented but may be reviewed next year.


With respect to Transfer Duty a person eligible for a FHOG will also receive a transfer duty rebate on the purchase. For an established residence there is no duty up to $500,000 and thereafter calculated at the rate of $22.51 per $100 or part thereof so that on a $600,000 purchase it becomes the same duty as any other person pays on a $600,000 property. For vacant land there is no transfer duty payable up to $300,000 and thereafter it is phased in to achieve parity with the standard rate of duty at $400,000. Please note that these limits only relate to transfer duty; a buyer will be eligible for a FHOG for properties in excess of those stamp duty limits.

Disclaimer
The advices in this post are general in nature and further advice should be sought from IRDI Legal in relation to any specific situations you may have.

For further information please contact IRDI Legal on (08) 9443 2544 or visit our website at www.irdi.com.au

0403 144 822
(08) 9300 0686
michael.cormack@aussie.com.au
Mike Cormack
Aussie Joondalup

What is 'Genuine Savings'? Do I Need It?

Turn the clock back 24 months. The economy was booming, jobs were secure and house prices were growing faster than ever. Banks were lending up to 90%, 100%, even as much as 120% of the property value. The deposit was commonly the First Home Owners Grant or a gift from the parents or even a seperate loan. Then boom-time finished.

Banks started releasing statements like "Due to the increasingly volatile economic climate and rising unemployment levels the Bank is taking further steps to ensure it continues lending responsibly to customers. In particular, we are ensuring customers who are entering into more highly geared borrowings have a demonstrated savings pattern over time."

Instead of lending up to 120%, banks will generally now lend only 90% of the property value. Instead of allowing the deposit to be from almost any source, the lenders need evidence it is 'Genuine Savings'. But what is genuine savings? How do you prove you have it? And when will it be needed?

As a very general rule, when you borrow over 80% of your property's value you will need to have Genuine Savings - and proof of it. The Genuine Savings must normally be at least 5% of the property value. So how do the lenders ensure you have Genuine Savings and haven't just hocked your X-Box at Cash Converters? They generally require 3 months statements as evidence of one or more of the following:

• A demonstrated saving pattern established over a 3-month period
• Gift – must be held in an account for a minimum of 3 months
• Term deposit – must have been held for a minimum of 3 months
• Cash – acceptable only if placed in an account for a minimum of 3 months
• Shares – must have been held for a minimum of 3 months
• Equity in existing property
  However, be aware they probably will not accept the following as Genuine Savings:
• First Home Owners Grant (FHOG)
• Additional borrowed funds i.e. personal loan
• Proposed sale of an asset (other than property) i.e. sale of car

To wrap up, in most cases now when you borrow more than 80% of your property value, you need to show evidence of 5% Genuine Savings. Please bear in mind these are the most common guidelines, however every lender is different and they may be a way for you to buy sooner. Speak to your broker or mortgage professional for information specific to you circumstances.

0403 144 822
(08) 9300 0686
michael.cormack@aussie.com.au
Mike Cormack
Aussie Joondalup