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HomeBuilder: Loan confusion and obligations on home owners

09 September 2020

#Property & Real Estate, #COVID-19

Published by:

Nicola Howell

HomeBuilder: Loan confusion and obligations on home owners

The HomeBuilder grant has gained further traction as all Australian states and territories have now established application forms and procedures for distributing the grant. Further to our guidance here, we provide some indication of when payments will be made and a reminder of your obligations as a recipient of the grant.

When will payment be made?

New builds

For approved applicants of new builds, grants will be paid after the foundations have been laid and the first progress payment has been made to your builder.

The Department of Housing and Public Works – Form 16 Inspection Certificate must be completed to evidence the laying of foundations, although payment of the grant will only be made after a receipt is provided to the Commissioner of State Revenue as evidence of the first progress payment.

Off-the-plan

For approved applicants of off-the-plan or new home purchases, applicants can apply for the grant prior to owning the property, provided they have an eligible transaction. However, grants will only be paid after the applicants’ name is registered on title.

Loan treatment of the HomeBuilder grant

Most buyers usually require 10 per cent or 20 per cent deposit in order to obtain finance from a lender. The First Home Owner Grant is usually treated by lenders as part of that 10 per cent or 20 per cent deposit as the financial institutions are “approved agents” for the purposes of the grant and as such are able to access those funds on the settlement date.

In contrast, financial institutions are not approved agents for the purposes of the HomeBuilder grant and as such, this grant will most likely not be treated by financial institutions as part of a buyer’s 10 or 20 per cent deposit as the lender cannot access the funds at settlement and can only do so afterwards.   

 To circumvent this issue, applicants may obtain funds from family members to complete their deposit, although borrowing funds in such a manner may impact applicants’ ability to access other concessions like the First Home Owner Grant. Funds from family members may be classed as “financial assistance” by a third party which rules a buyer ineligible for the First Home Owner Grant.  

Your obligations

As a recipient of the HomeBuilder grant, you must move into your new home as your principal place of residence and live there continuously for six months.

During the six month occupancy, you can rent out rooms in your home, provided this arrangement does not affect your use of the home.

This differs with the conditions of the first home concession, which requires recipients to live in the property for one year and does not permit owners to rent out rooms.

If you are claiming multiple grants and concessions, ensure you are familiar with the requirements of each as these do differ and you may find yourself having to repay the grant or concession should you be non-compliant.

Authors: Ranjit Singh & Nicola Howell

Disclaimer
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this newsletter is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:

Nicola Howell

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