The Federal Government continues to look for ways to stimulate the economy in the current pandemic. One such scheme has already been introduced in early June, consisting of a cash grant worth $25,000 for new houses and renovations. Called the HomeBuilder scheme, it may be the financial support that you need if you plan to build a new home or do a renovation.
Before you get excited and submit your application, there are a number of things that you should know. This blog post will help you understand what the scheme is about and if you qualify for it. This way, you can either be confident about your application or look for a more suitable Government program.
An Overview of the HomeBuilder Scheme
The Homebuilder scheme is worth $688 million, which commenced from 4 June and will run until 31 December. The program is a part of the Government’s efforts to strengthen the construction industry. With the effect of the COVID-19 pandemic, the industry has been hard hit, with more than a hundred thousand jobs directly hit.
The aim of the HomeBuilder scheme is to support about 140,000 jobs in the construction industry and one million more that are related to it.
This program is not to be confused with another existing initiative, such as the First Home Buyers scheme. Although they are quite similar, this mentioned program is mainly targeted towards first home buyers, as its name suggests. With the HomeBuilder scheme, you can take advantage of it even if you have already bought a house before.
Are You Qualified?
Accessing the HomeBuilder scheme is quite simple.
However, it is essential that you meet the following requirements:
- You are an Australian citizen.
- You are at least 18 years old.
- You apply as an individual and not as a company or trust.
- Your income is $125,000 or less.
- If you are a couple, your income should be less than $200,000.
- If you use the grant to build a new house, the property should be less than $750,000 in value, including the cost of the land.
- Meanwhile, if you plan to use the grant for a renovation project, your house should first be worth less than $1.5 million. You should also spend anywhere from $150,000 to $750,000.
Renovations are quite tricky. Even though you meet the renovation requirement above, the project should also fall into the following criteria:
- The modification should improve your property in three ways: accessibility, safety, and livability.
- The project should start within three months of the contract date.
- Renovations should not include additions that are not connected to the home.
- Therefore, you cannot use the grant if you wish to build a swimming pool, an outdoor spa, or a garage.
If you do meet all the mentioned criteria above, you can apply for the grant. You have until 31 December to submit the application. From there, it should state in your contract that the building or renovation work will start within three months of the date in the agreement.
Some Points to Remember
You may be a little hesitant about the grant due to the requirements. For instance, building a home means that it should be your principal place of residence. Therefore, even if the value of the property, including land, is $750,000, it should become your home address.
The conditions involving renovations are also quite substantial. Aside from the house being your main place of residence, the project should prompt you to spend at least $150,000 but not more than $750,000. Your home should not be worth more than $1.5 million before the renovation takes place.
These numbers all mean that the cheapest renovation that you should afford is $150,000. While you get a $25,000 discount through the grant, you will still have to spend $125,000 (at least) from your own pocket. It does show that the grant is more accessible to those with enough savings. However, if you are truly willing to borrow and you need the extra cash, the HomeBuilder scheme will benefit you.
Apart from the mentioned exceptions above, you can renovate just about anything. It can be your kitchen or your bathroom – or even a combination of both. However, it is vital that all these projects are overseen or supervised by a licenced builder.
The Housing Industry Association claims that there are about 14,000 renovations every year that cost more than $150,000. But not everyone agrees. According to Labour leader, Anthony Albanese, the program may not spark people’s interest to take out the loan. Homeowners may not be willing to spend cash right now, especially with the pandemic still gripping parts of the nation. Spending cash on major renovations is not ideal.
Albanese said his bathroom makeover was less than $150,000. Unless you want to use pearl taps and other luxurious items in your bathroom or kitchen, the grant may not interest you.
Also, because homeowners are only allowed to work with a licenced or registered builder, many people will miss out on the opportunity. Among them are DIY renovators and owner-builders who may want to use their skills instead of paying other people to build or renovate for them.
When hiring a builder, it is required that the professional you choose was licenced or registered before the announcement of the HomeBuilder scheme. Be sure to ask the builder before commencing with the agreement. You cannot be a relative of the builder, as well; otherwise, your application will not be approved.
How to Access More Funds
The HomeBuilder scheme does provide a $25,000 cash grant for eligible Australian citizens. But you can supplement the grant and gain more money from other Government programs.
Here are some of your options:
1. First Home Loan Deposit Scheme
FHLDS applies to you if you are a first home buyer. Instead of providing a 20 per cent deposit, you only have to provide five per cent so that you can purchase the house you want sooner. There is also no need to pay Lenders Mortgage Insurance (LMI) fees. Currently, you can go to any of the 27 participating lenders. If approved, the lender will send your application directly to the National Housing Finance and Investment Corporation (NHFIC). Note that you cannot apply directly even if you qualify.
2. First Home Super Saver Scheme
If you qualify for FHLDS, you may also be eligible for the First Home Super Saver Scheme. You can use it alongside the HomeBuilder scheme, as well. This mentioned scheme lets you, as the home buyer, withdraw your superannuation contributions to your super fund. Then, the money can be used to increase your available deposit on a property.
For instance, if you have made super contributions, you can withdraw it and use it for FHLDS. This way, you can pay the five per cent deposit offer. You can, however, withdraw up to $30,000. For couples, the limit is $60,000.
3. Personal Loans
This type of loan is the most flexible of all. You can use the money you borrowed for almost anything, including a home deposit or a renovation. If you want to take advantage of the HomeBuilder scheme, you need to meet the spending requirements. You can take out a personal loan to reach the $150,000 renovation cost or purchase an eligible property.
A personal loan can either be secured or unsecured. Both can be beneficial for you, but always check the terms and conditions before applying. A secured loan has lower rates and may provide fast and easy approval, but it requires collateral, such as a house or vehicle.
Some loans have an early repayment fee or other costs that can make the loan more expensive than you can afford.
4. Refinance Existing Loans
Refinancing may be another option for you if you already have an existing loan with a lender. Let’s face it: renovations or building a new house is not exactly the most affordable task you can accomplish. You need to have enough money to carry out and finish the project.
If you already borrowed funds, you can take another mortgage loan to pay for the previous loan. At the same time, the HomeBuilder scheme can help you with your current building or remodelling project. Refinancing is one of the best ways to save you from going into more debt than you can manage.
For instance, your existing loan is approaching its deadline. You can take out a new loan to avoid any penalties and extra costs.
Refinancing is great when used with other initiatives from the Government, including FHLDS, since it is targeted towards buying properties, including land.
5. Construction Loans
This type of loan can help you to become the owner of your dream house. Instead of buying a pre-made home, why not build your own? Be sure that you avoid doing any DIY construction, unless with the help of a licenced builder. This way, you can use construction financing along with the HomeBuilder scheme.
Be aware though that a construction loan often has a higher interest rate. Nevertheless, with the right lender and product, it will be much easier to cover the cost of the renovation or building of the house. You also get the $25,000 grant through the HomeBuilder scheme, which means more savings for you.
Another thing to remember is that the lender will provide the loan to the contractor or builder – not you as the borrower.
6. State-Based Programs
For those in Western Australia, there is a new housing stimulus in place. It can cover up to $70,000 for first home buyers. The initiative is applicable for both buyers and builders, as long as it is your first time to purchase a property.
This program is a part of the $444 million housing stimulus package. Both the HomeBuilder scheme and the WA Building Bonus offer to help support jobs. According to Premier Mark McGowan, the Building Bonus and the rest of the stimulus package can aid about 4,300 workers in the state.
The HomeBuilder also complements stamp duty concessions in Western Australia.
Why Renovate or Build Now?
The First Home Owners Grant was introduced back in 2009 during the global financial crisis. It did increase demand significantly, and this scenario is expected with the introduction of the HomeBuilder scheme. Because of the high demand, supply can become constrained, which means it can be challenging to find and buy the house of your dreams if you keep waiting.
Additionally, with high demand and low supply, the prices can increase, which will mute the efficiency of the grant.
Renovating and building now can help the economy. When you invest in your dream home and take advantage of the HomeBuilder grant, it is not only for you. You also facilitate in helping and creating jobs. The more people who use the grant, the better. It can lead to more support for more than one million workers, including builders, plumbers, electricians, and painters across Australia.
According to Prime Minister Scott Morrison, the average cost of building a new house is around $350,000. Therefore, there is an excellent chance that you will be eligible for the grant.
The grant is a part of the stimulus package, which includes renovation funds for homes. You can take this opportunity to prepare for natural disasters. If you have been planning to renovate your home for a while, now may be the best time.
The stimulus package also includes funding for specific programs in the commercial industry, such as cladding and asbestos removal.
The arguments about the HomeBuilder scheme and other Government initiatives may not come to an end. But ultimately, the decision is yours. If you meet the requirements mentioned in this post, there is no reason why you should not get the cash grant. It gives you $25,000 less to worry about from your own pocket. Plus, you get the incentive you need to push through your plan to land the home of your dreams.