HOW TO FINANCE BUILDING A HOME
Building a property can be an attractive proposition in that it allows the purchaser to obtain the home they want whilst adhering to the budget they have available. It’s important to note that home building budgets need to be carefully planned to include any required land acquisition costs as well as the building process itself.
In New South Wales there are certain grants available both for first home owners and for new home construction. Construction loans are tailored to those purchasers who are building a home and can help meet any remaining purchase cost. Financing needs to be in place before the purchaser enlists the services of any construction professional such as a home builder in Maitland.
What is a first home owner grant?
Available for the purchase of brand new homes only, including the building of a new home, these grants are available to adult permanent residents or Australian citizens who have not had a relevant interest or investment in a residential property prior to 1 July 2000. Purchasers who have had a relevant investment in a property since 1 July 2000 may qualify, if they have not resided in the property for a continuous period of six months.
Availability of the grants is to individuals only, not companies or trusts, and is subject to a strict list of criteria. Purchasers can obtain details of these grants from their financial institution. They can also apply by approaching the New South Wales Office of State Revenue, but only after the home construction is complete and the title is signed over.
Currently the amount of the first home owner grant is $15,000, but the amount is scheduled to reduce to $10,000 on 1 January 2016.
What is a new home construction grant?
Instigated on 1 July 2012, the new home construction grant is available for purchasers of a newly constructed home, an off the plan home or a plot of land with the intention of building a home. If the purchase is of a plot of land then building of the residence must commence within 26 weeks after purchase of the land purchase.
The new home construction grant is for residential property only. Unlike the first home owner grant it is available to trusts, companies and investors as well as individual prospective home owners. Applicants for the grant must be an Australian citizen or resident, or an Australian owned body and any award is subject to the applicant satisfying a list of conditions. A full list of these conditions is available from the New South Wales Office of State Revenue, to whom applications should also be made.
The amount awarded as a new home construction grant is $5,000 which is allocated to the payment of any duty due on the purchase.
What are the benefits of a construction loan?
Whether or not there is any entitlement to a grant, a purchaser needs to secure funding for any remaining costs. This finance needs to be in place before land is purchased and any professionals, such as builders in Maitland, start work.
A construction loan is specifically formulated for use by those people starting from scratch with the building of a home. It allows for the drawing down of finance at specific stages during the building process. This means that the purchaser only pays interest on the amount of the loan that has actually been used. It’s a good solution to the financing of building a new property. On completion of the build the purchaser is then given the option of which home loan product the construction loan is converted to.