The new first home loan deposit scheme (FHLDS) aims to give first home buyers a leg up in the property market by reducing the deposit amount required to purchase a property.
First homebuyers were previously slugged with lenders mortgage insurance (LMI) if they did not come up with at least 20% deposit.
The First home loan deposit scheme works by providing a guarantee to first home buyers to purchase a property with as little as 5% deposit opposed to the onerous 20% required by most lenders. On a $500,000.00 property, that’s a whopping $75,000.00 difference!
Places are limited! The Australian Government has reported nearly 3,000 potential first homebuyers have registered with the banks since the 1st of January for the scheme. The remaining 7,000 places will open from the 1st February 2020. It is important that you have your finances in order, have spoken to a financier (i.e bank) and have started looking at potential properties.
Can you apply?
If you are a first time homebuyer then you are most likely eligible for the scheme. The Australian Government website has a handy eligibility tool to see if buyers qualify for the scheme. In a nutshell, you will need to be a first home buyer and:
· Pass the income test;
· A prior property ownership test;
· A deposit requirement; and
· Pass the owner occupier requirement.
Before you sign a contract of make an offer on a property, make sure you get legal advice to protect your interests. At McLaughlin & Associates Lawyers we have a team dedicated to residential conveyancing. We can assist you with pre-purchase contract conditions and also make sure the contract you sign protects your interests. See our page on Conveyancing for more info and guides for buyers and sellers.
Written by Dominic Doan, Commercial and Property Solicitor
For further information or to book in a consultation please contact us at firstname.lastname@example.org or phone us on 07 3808 7777.
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Read some of our other residential conveyancing articles:
- Streamlining home sale contracts and statement – currently PAMDA prescribes a complex process which must be followed when presenting and delivering residential real estate contracts. These processes require several approved forms to be presented and delivered to a buyer in a specified way and order. In addition, failure to comply with these provisions constitutes grounds for terminating the Contract. The existing Warning Statements (information sheets) will be replaced with a simpler requirement for a prescribed statement to be included in the contract, once, and in a conspicuous way, directly above where the buyer executes the Contract.
- The maximum commission constraints which an agent can charge will be removed meaning an agent can charge whatever commission they wish, provided of course, the Seller agrees to it.
- The prohibition on agents receiving a commission for beneficial interest sales will be removed provided the seller acknowledges and agrees to the agent acquiring the beneficial interest in the Sellers property.
- The Lawyers Certificate requirements will be removed.
- The limit on lengths of appointments for a sole or exclusive agency will be extended from 60 to 90 days.
- The requirement for agents to disclose to a buyer the commission the agent is receiving from the seller will be removed.
- Agents will be allowed to disclose the fact that a reserve price has been set for a property going to auction (but not the reserve price itself).
At some stage in your life you may be approached to go Guarantor either for one of your children or for a relative or friend. I tell my client’s that there are three groups of people for whom you should never go Guarantor.
2. Friends; and
I repeat never go Guarantor for family, friends or strangers. If you rule out those three groups you will be safe (because there are not too many others left). The reason I advise this is that unfortunately we see case after case where client’s, who did not wish to offend, or did not understand what they were really getting into, find themselves in a plethora of trouble.
I appreciate that sometimes it is hard to say “no” to a child or a sibling or best friend who comes to you with a request to go Guarantor because at the time there doesn’t seem to be too much harm done by simply signing a piece of paper. But it is what happens down the track when things go wrong which can have devastating effects.
If you think about it for a second the reason why a bank wants somebody else to guarantee the loan is because they, after careful consideration and analysis of the borrower’s financial position, ability to repay etc have not go the confidence to lend the money to that person without someone else guaranteeing repayment of the loan. If the banks, with all their billions of dollars, aren’t prepared to take the risk, why should you?
Another factor that a lot of people don’t understand is that if you go Guarantor for say a $300,000.00 loan then as far as your bank is concerned that is a debt on your balance sheet. Therefore, if you then later decide that you wish to borrow money, the amount of your guarantee will be taken into consideration along with your other existing debts in determining how much you can borrow.
I appreciate that sometimes parents want to give their child “a helping hand” in buying their first property and will agree to go Guarantor. If you must, then there are some steps you can take to try and protect yourself.
- Always go for the minimum amount the bank will accept. The bank may only need you to go guarantor for $80,000.00 on a $350,000.00 loan. In which case you must make sure that is all you guarantee.
- Always ensure that the Guarantee is limited to a maximum amount. That way, in a worst case scenario where your guarantee is called upon you know exactly how much you are up for.
- Make sure that you only guarantee the specific loan for which you have been asked to Guarantee. The fine print of some guarantees actually provides that the Guarantor is responsible for all loans of the Borrower both existing and future.
- Request that you be provided with bank statements of the loan so that you can ensure that it is being kept up to date and has not fallen into arrears.
- Terminate the Guarantee as soon as you can, don’t let it continue in perpetuity.
I can recount dozen’s of cases where I have seen parents who have had to sell their home or lose their nest egg because they had gone Guarantor for a child in a failed business venture. Invariably, the first notice that the Guarantor has of there being a problem is when they are notified by the bank. Most borrower’s are too embarrassed (or thoughtless) to approach the Guarantor to let them know that there may be a problem.
So remember my advice DO NOT go Guarantor for family, friends or strangers.
Do You Require Window Coverings?
Landlords who supply corded window furnishings in rental properties, and Property Managers who offer services in relation to those properties, must now comply with national Mandatory Product Standards designed to reduce the risk of strangulation of infants and young children.
The legislation is part of The Australian Consumer Law which came into effect on 1 January 2011 and incorporates The Trade Practices Act. It prescribes standards for child safety devices, mandatory warning labels and safety installation instructions.
Any corded window covering supplied by the Landlord such as Vertical Blinds, Venetian Blinds, Holland Blinds, Roman Blinds and Curtains must comply, even if they are second hand or already installed.
As a breach of the Mandatory Standards carries a potential fine of up to $220,000 for individuals and $1.1 Million for companies, Landlords and Property Managers need to take their obligations seriously.
I recommend to you the services of Safer Property Solutions Pty Ltd, “SPS” who offer a specialist compliance inspection and retrofit installation service tailor made for Property Managers. SPS provides free advice on how to identify non-compliance and template letters that you can use to inform your landlords of their obligations.
PPR advice from the leading solicitor in Springwood
When buying a home to live in you are entitled to claim a Principal Place of Residence concession whereby you pay stamp duty at a lesser rate. In order to qualify for this concession you must sign a declaration and in that declaration are one or two points which are often overlooked by buyers (this happens frequently when buyers don’t ask the advice of a solicitor in Springwood).
Firstly, you cannot “dispose” of the land or the residence, lease or otherwise grant exclusive possession of part or all of the property to another person if you are claiming the First Home or Principal Place of Residence concession. This also may include renting out a room within the home. There have been cases where a buyer, in order to help meet the mortgage payments has rented out a bedroom to a friend and that has been held to be “disposing” of part of the residence.
Secondly, to qualify for the stamp duty concession you must occupy the home within twelve (12) months of the settlement date. This time limit is strict, there is no way around it. The seller can continue to occupy the property after settlement provided they vacate the premises within six (6) months. If the property is tenanted at the time of purchase then the existing tenants can continue to occupy the property after the settlement date provided they vacate at the end of the term of their lease or within six (6) months of the settlement date, whichever is first to occur. It is important to note that the lease arrangement had to be in place prior to the settlement date and that it cannot be renewed or extended.
We had a case recently where a client failed to qualify because she didn’t take occupation within the time period and had to pay an additional $15,000 in stamp duty.
Be very careful when signing the Form 2.1 Declaration. Read it carefully and make sure you understand what you are signing and that you are going to be able to meet the criteria. Your best step is to speak to your solicitor in Springwood who can guide you through the process.
The new Act came into effect late last year (2011) and it introduces new responsibilities and rights in relation to trees. The Act introduces the new expression of “tree keeper”. The tree keeper is the person who is responsible to maintain the tree and ensuring that it does not become a nuisance.
A person affected by an overhanging tree can still exercise the common law right of abatement (eg: by lopping branches and roots to the boundary). Now a neighbour can decide whether or not to return the lopped branches or roots or to dispose of the cuttings themselves. When exercising the right of abatement, neighbours must take care to comply with any applicable tree or vegetation protection orders.
If a neighbour wants the tree keeper to take responsibility for lopping the branches of their tree hanging over the boundary, then the neighbour can serve a notice for overhanging branches upon the tree keeper. This notice can be used for branches which are more than half a meter over the boundary and less than 2.5 metres above the ground. If the tree keeper does not respond to the notice, the neighbour can proceed to have the lopping done and recover from the tree keeper a max sum of $300.00 per annum. Importantly, responsibility is placed on the tree keeper to ensure their neighbour’s land is not affected by a tree growing on the tree keeper’s land. For the purpose of the Act, land is affected by the tree if a neighbour can demonstrate that the tree caused serious injury to a person, serious damage to land or property or interferes with their enjoyment of the land.
“QCAT” (Queensland Civil Administrative Tribunal) has jurisdiction to hear and decide any matter in relation to a tree in which it is alleged that the land is affected by the tree.
As of the 1st July, 2000 first home buyers may qualify to receive a one off $7,000.00 grant from the Federal Government. Maybe you, your children or someone you know can take advantage of the grant!
There appears to be a lot of confusion and misinformation about who is eligible for the grant. For example, I had a client who was informed by her Bank Manager that she was not eligible for the grant because she was not buying a “new” home. Wrong!
Lets have a look at some of the requirements for eligibility.
- For a person to be eligible for the grant they must:-
- Be buying or building their first home.
- Enter into a Contract to buy an existing home or build a new home on or after 1 July, 2000.
- Be an Australian Citizen or permanent resident.
- Intend to reside in the home as their principle place of residence.
- Start living in the home within a reasonable time.
Other points to know are:-
- The payment is not means tested.
- Trusts and Company’s are not eligible for the grant.
- The payment will be made regardless of where the person buys or the value of the home they are buying/building.
- It applies to both new and established homes.
- It does not apply to holiday houses or investment properties.
There are some catches to eligibility so it is vitally important you speak with a person who knows what they are talking about.
I think everyone by now has heard of the horse meat furore unfolding in the UK and Europe; the widespread contamination of processed beef products with up to 100% horse meat. How is this relevant to legal services pricing? Simple really, it doesn’t matter whether you are talking processed meat or dubious legal services at the end of the day you get what you pay for.
We find this across all spectrums of legal services but particularly in the area of conveyancing.
People who shop around for the lowest price conveyancing are simply kidding themselves if they think they are going to get the same quality of service and professionalism as they would from a firm like ours and it never ceases to amaze that there are people dealing with the biggest investment of their lives, literally hundreds of thousands of dollars, which is going to be a home to their family for years to come, ringing around amongst the horse meat traders of the profession and then react in shock and horror when the standard of service doesn’t live up
For most people buying or selling a home is a very, very stressful time for them and their partner. If issues arise people want them resolved immediately, if they have questions they want them answered, if things start to go wrong they want good sound legal advice. All of a sudden that tender sirloin steak that was priced too good to be true turns out to be horse meat.
The trouble with cut price conveyancing firms is that because they are doing it so cheap they have to cut costs and cut corners. What else can they do? If they don’t they will go broke (and many of them do).
The trouble nowadays with the internet is that people think they have done their research in selecting a conveyancing firm simply by Googling “conveyancing” and then filling in an online quote. That’s not research. Speaking to family and friends, asking them who they used, were they happy with the service, were phone calls returned promptly, was the firm competent in the advice they gave. That’s research.
Fortunately our clients are a bit more discerning and for that matter so are we in selecting clients to act for. If someone is after “the cheapest quote” for conveyancing we are happy to send them elsewhere. We’re by no means expensive but you can’t deliver good, competent professional advice at horse meat prices.
We recently had a case where a client bought a unit in the inner city some seven years ago. She claimed First Home Owner status thus receiving the First Home Owners grant (as it was back then) as well as a concession on Stamp Duty. The Contract was subject to a Tenancy which expired 3 months after settlement date.
At the end of the Tenancy the Tenant negotiated another 3 month lease. The Tenant subsequently moved out and our client moved in and thought everything was fine. The client later sold the unit in 2010. In 2011 the client received notice from the Office of State Revenue demanding that they pay additional Stamp Duty, penalties, and interest of some $12,000.00 because she did not comply with the requirements for either the First Home Owners Grant or Stamp Duty concession.
The matter is still ongoing in 2013.
On occasions, through an innocent oversight, clients may breach the requirements to qualify for a concession and that mistake can be costly. Other times clients think they will just “take the risk” because “what are the chances of being caught?” Well the chances are quite high actually. In this day and age the Office of State Revenue has so many aids available to them to be able to cross reference information e.g. Electoral role, taxation records, Rental Bond Authority etc that there is a high risk that you will be caught and unfortunately even innocent mistakes do not always meet with the sympathy of the Commissioner. So be warned.
Prefer a video format? Our Principal, John McLaughlin, provides an informative Law Talk episode on Tenancy