Buying land and building your first home presents some great benefits to first home buyers, which makes starting out with something from scratch, a very attractive prospect for first time entrants to the housing market. Aside from a owning a brand new home that would be modern and shiny, there are two potentially substantial financial benefits to buying land & building your first home.

Posted in: Insights

13/08/2019

Stamp Duty Savings

Buying land & building presents an opportunity to save significantly on stamp duty payable. Stamp duty is based on the value on the land alone, as opposed to buying an established home where stamp duty is based on the combined purchase price of the land and building. This could result in thousands saved!

See our example for yourself on how much that could potentially be:

Established Home

Purchase Price = $400,000.00

Land Transfer Registration = $3,167.50

Land Transfer Stamp Duty = $16,330.00

Mortgage Registration Fee = $170.00

Total State Fees & Charges = $19,667.50

 

Land & Construction

Purchase Price = $400,000.00

Land Value = $200,000.00

Land Transfer Registration = $1,517.50

Land Transfer Stamp Duty = $6,830.00

Mortgage Registration Fee = $170.00

Total State Fees & Charges = $8,517.50

 

This is a saving of thousands of dollars that could enable you to get more value for money out of your deposit.

Feel free to use our stamp duty calculator for your scenario.

First Home Owners Grant

How does an extra $15,000 on top of the stamp duty savings above sound? Pretty good right! For eligible first home buyers in SA, the First Home Owners Grant of $15,000 can also assist with building your first home. The First Home Owners Grant is a great way to get your foot in the door, and to further maximise the use of your deposit.

Does income or assets affect the Grant?

No, the Grant is not means or asset tested.

What can the money be used for?

You can use the money for any legal purpose. There are no regulations on how the money can be used provided you are eligible to receive it.

When will the Grant be paid?

If you are building, typically it will be paid on the first construction progress payment. Owner builders will receive the Grant on production of a Certificate of Occupancy/Completion. The grant will also be available at settlement for the purchase of a brand new home (that hasn’t been lived in before).

Who is eligible to receive the Grant?

A first home buyer who fits the criteria below:

  • At least one of the applicants must be an Australian citizen or have permanent residency in Australia. New Zealand citizens permanently residing in Australia who hold Special Category Visas may also apply.
  • In general, no applicant or their spouse/domestic partner can have previously owned a residential property anywhere in Australia. However there are some exceptions to this rule. For further details please contact a Mortgage Broker or Revenue SA.
  • Except in cases of legal disability, applicants must be natural persons; that is, not a company.
  • On completion of the transaction everyone who will be an owner of the home is considered an applicant.
  • Applicant(s) must be at least 18 years of age at the time of making an application for the Grant.

What kind of property can I purchase?

You could opt for any fixed dwelling that is suitable as a residence such as a new single dwelling, duplex, flat, apartment, townhouse etc. The Grant is not available for renovations to an existing building or for the purchase of vacant land.

How do I apply?

A Bernie Lewis Home Loans Mortgage Broker can assist you to complete and lodge an application form with a suitable lender, or RevenueSA.

A Combined Benefit

Now in this scenario alone, the first home buyer looking at a property worth $400,000 would have an extra $26,150 at their disposal, which could enable a greater equity position from the start, or upgraded fixtures and furnishings, or retaining an all-important rainy day fund.

But beware buying land & building will also come with a few potential negatives as well (keep an eye on our next blog). For now we suggest speaking to a Bernie Lewis Home Loans Mortgage Broker on 8300 8300 to discuss the pros and cons of each purchase option, and what might be suitable for you.

 

The information provided in this article is general in nature and does not take into account your personal circumstances. Since everyone's personal situation is different, this article should not be taken as advice. The figures used in this article are to be used as a guide only. Depending on your personal circumstances, these numbers may vary. We recommend you seek individual advice with a mortgage broker.