Walking into your newly built home and seeing light shine through the windows, filling the rooms and bouncing off the sparkly-new fittings… is just a wonderful feeling.
House and land packages are always a popular choice for first home buyers but it’s important to understand what to look out for in the beginning to save yourself heartache along the way.
What types of packages are available?
There are generally two ways to go about getting your house and land.
The first, is when you buy a vacant block of land and then organise for a builder of your choice to build a house on it. Going this way, you have two different types of loans – a mortgage for the land and one for the house (a construction loan) once building starts. With a construction loan, payments are made to the builder in various stages as the build progresses.
The second way is buying a property off-the-plan, which includes the land and the house. With off-the-plan purchases, you pay say a 10% deposit, and then once the house is completed you pay the remainder via a home loan.
What government assistance is available?
The First Home Owners Grant (FHOG) is a government initiative assisting first home buyers. If you are buying a newly built home in Victoria, a grant of $20,000 is available for first home buyers buying in regional Victoria, and $10,000 for newly built homes in and around Melbourne. The maximum purchase price of eligible new homes is $750,000.
First home buyers may also be eligible for stamp duty exemptions or concessions when buying their principle place of residence. In Victoria, a one-off duty exemption is available for homes valued up to $600,000, and a concession is available for homes with valued from $600,001 to $750,000.
Every state is different, and you should do more investigation by going to your local state revenue office website or visit http://www.firsthome.gov.au/.
What are the advantages of choosing a house and land package?
- Stamp duty savings. Aside from government discounts, you generally only pay stamp duty on the land and not on a property which hasn’t been built yet.
- Once you buy a vacant block of land, you can then select a home design the best suits you and a reputable builder of your choice.
- New properties usually require little maintenance, which can save you money in the first few years of ownership and allow you to focus on your home loan repayments.
What are the risks of choosing a house and land package?
- There may be delays in receiving your FHOG, which can mean you will have to pay the full deposit and costs before being credited your FHOG funds.
- House and land packages have the developer’s profit built into the purchase price, so you generally are paying a higher price than you would for other similar established properties in the same location.
- You may have to travel further to get to work. Given the lack of supply of vacant land in our major cities, these locations may be in outer-ring suburbs.
- You won’t know the quality of the build until it is finished so always choose a reputable builder and don’t be afraid to question them.
- The property market may change during the period of construction. For example, an oversupply of similar properties can mean that the bank valuation may not stack up to what you agreed to pay on the contract of sale. That will mean you may have to find additional funds to complete settlement.
- Weather delays are also common, which can be frustrating and costly, especially if you are renting elsewhere while you wait for your new home to be finished.
A brand-new home is enticing, but it’s important for home buyers to do their research and get the right advice.
For further guidance with your first home purchase contact Your Future First on 03 9362 1458 or email andy@yourfuturefirst.com.au