To access the HomeBuilder Scheme, you must meet the following eligibility criteria:
YOU MUST BE:
• a person (not a company or trust)
• aged 18 years or over
• an Australian citizen
• earning not more than $125,000 per annum for an individual (based on your 2018-19 taxable income or later) or $200,000 per annum for a couple (based on both 2018-19 taxable incomes or later)
YOUR PROPERTY MUST BE:
• your principal place of residence (not an investment property)
• under a value of $750,000 if you are building a new home, or if you are renovating, the home must be worth no more than $1.5 million (pre renovation)
YOUR CONTRACT MUST BE:
• to build or renovate
• valued at between $150,000 and $750,000
• entered between 4 June 2020 and executed by 31 December 2020
• commencing construction within three months of the contract date
NOT ELIGIBLE FOR HOMEBUILDER:
• investment properties
• renovations including additions such as swimming pools, tennis courts, outdoor spas and saunas, sheds or garages (unconnected to the property)
Case study 1 – new build
Shane and Justine have been living with Justine’s parents since they got engaged. They have since decided to purchase a block of land and build a new home to their preference.
They purchased a vacant block of land for $250,000 and the building contract to build their lifestyle home is for $400,000 (totalling $650,000). As first home buyers they are eligible for the First Home Buyer Scheme and accordingly the majority of acquisition costs are exempt (eg stamp duty).
Shane and Justine have a combined taxable income under $200,000 based on their 2018-19 tax returns. Whilst staying with Justine’s parents, they have managed to accumulate a decent sum of $75,000 in savings.
Shane and Justine used their savings as a deposit on the block of land and secured the balance with a traditional home loan with the land as security.
They will enter into the building contract on 16 September 2020 for construction to commence in November 2020 after their land is settled in July.
Their eligibility checks confirmed they are both Australian citizens, over the age of 18 and are therefore eligible for the HomeBuilder Scheme as the value of their home is less than $750,000.
During construction they will be diligent in making progress payments utilising drawdowns against the construction loan.
After completion of their new home and the government’s $25,000 grant, they will have a loan totalling $550,000 at which time they will apply to have the loan converted into a traditional home loan. (This is dependent on lenders as there are many who do not require a conversion of loan.)
Case study 2 – renovation
Pip and Janine purchased a family home four years ago. They paid $880,000 and the home is now valued at $1.2 million. They purchased their single storey home anticipating a major renovation at a later stage to cater for their growing family and ageing parents.
Pip earns $110,000 and Janine earns $65,000 in a permanent part-time role. They currently have a $680,000 mortgage secured against the property.
Their plan is to build an upper level to include a large master bedroom with an en suite, library and balcony. Their renovation will also include building a lower level with a laundry, bedroom and a bathroom. The entire renovation is expected to cost around $220,000.
While they have some cash available they would prefer to keep this for any unexpected events and accordingly are looking to borrow all the funds for the building works.
They will sign a building contract on 19 August 2020 with work to commence in October 2020.
Their eligibility checks confirmed they are both Australian citizens, over the age of 18 and are therefore eligible for the HomeBuilder Scheme as the cost of renovations is less than $750,00 but more than $150,000.
Pip and Janine will utilise an extension to their existing home loan to fund the renovations. After the renovations and the $25,000 grant, their home loan will increase to $875,000. As this amount is below 80% of the initial value of the home they will not require lenders’ mortgage insurance.