The federal government’s announcement of its HomeBuilder stimulus package was met with enthusiasm and excitement by many home owners and prospective home buyers. However, a lack of information – and several months delay before state governments opened their online application portals – has fuelled some confusion around the finer details of how the HomeBuilder grant will work.
Here, we will clarify some of the common misconceptions around how to apply for the grant, how it can be used and when the money will become available.
What is HomeBuilder?
HomeBuilder is a $25,000 grant from the federal government that can be put towards the cost of building a new home or a substantial renovation to an existing home. The $680 million initiative is expected to encourage homeowners to spend money on construction and help support the building industry through the coronavirus pandemic.
Am I eligible for the HomeBuilder grant?
You must meet the following criteria to be eligible for the grant.
- If more than one person is listed on the property title as a proprietor, you must jointly apply for HomeBuilder as a couple (if you meet the definition of a couple). All applicants must be over 18 years old and be Australian citizens.
- Applicants cannot earn more than $125,000 per year (for singles) or $200,000 per year (for couples). This is based on your taxable income as determined by either your 2018–2019 or 2019–2020 tax return.
- The property must be owner–occupied.
- New builds must not cost more than $750,000 (house and land combined).
- Renovations must be part of the main property and must cost between $150,000 and $750,000. The property must be valued at less than $1.5 million prior to the renovation.
- Construction must be completed by an eligible builder. The builder must have been licensed or registered prior to the government’s announcement on 4 June, 2020.
- The building contract must be signed between 4 June and 31 December 2020 and construction must start within three months of the contract date. Properties in Victoria have been granted an extension and can now start construction up to six months after the contract date.
For off-the-plan or new home purchases, the sales contract must be signed between 4 June and 31 December, 2020. Construction must start after 4 June 2020 and within three months after the contract is signed. Applicants must also be registered on the title before 31 October, 2022.
How do I apply for HomeBuilder?
HomeBuilder grants are managed by the state or territory revenue office (or equivalent authority) where the property is located. You can lodge an initial application online through the relevant authority’s website once you have signed an eligible building contract (or a sales contract for off the plan or new home purchases).
You will usually need to lodge additional documentation via the online portal after commencement of your building works and once payment requirements have been met.
When will I receive the HomeBuilder grant?
Generally, the grant will not be paid until after building commences. For renovations, the grant will be paid after construction has commenced and at least $150,000 has been paid to the builder. Similarly, for new builds, the grant will be paid after the foundations have been laid and the first progress payment has been made to your builder.
For off-the-plan or new home purchases, the grant will be paid after the applicant’s name is registered on the title.
How can I use the HomeBuilder grant?
Since the HomeBuilder grant is not paid until after building starts, you will generally not be able to include the grant in your loan application. That is, you cannot use it as part of your deposit, nor to increase your equity for your loan application. You will need to show your lender that you have genuine savings to access a loan for your construction project, (usually at least 5% of the loan amount), as well as being able to demonstrate that you can service the loan without the HomeBuilder grant.
Where do I start if I want to use the HomeBuilder grant?
If you plan on borrowing money to fund your renovation or new build, we strongly suggest you start by speaking with your Smartline Mortgage Adviser. As with any other purchase, it is essential you know how much you can afford to borrow before you are committed, so speak to your adviser before you sign your building contract. In addition, there are other government grants and schemes including the WA Building Bonus Scheme and various state First Home Owner Grants which you may be eligible for and your Adviser can discuss with you. Regardless of whether you are successful in receiving the HomeBuilder grant or not, your mortgage adviser will assess your finances and your suitability for a loan without taking the extra $25,000 into account.
Once you have certainty around your loan, you will need to sign a building or sales contract and then you can apply for the grant.
What if I miss a deadline due to a delay?
The short time frames for HomeBuilder eligibility, combined with the potential for delays with your loan application, the build contract or the start of construction, means that there is always a risk you could miss one of the deadlines required to receive the grant. This is particularly relevant to off-the-plan or new home purchases because you have no control over when construction starts.
A maximum extension of three months to start construction may occasionally be granted in the case of a delay. However, this will be determined on a case-by-case basis by the relevant authority in your state or territory, and will only be considered in unforeseen circumstances.
While the HomeBuilder is a fantastic bonus for people who have been considering building, renovating or buying a new home, it may not necessarily be wise to dive in purely because of the availability of the grant. Buying a property or undergoing a huge renovation typically involves a long-term commitment and a debt that will take years to pay off, so home owners should consider what they want from their home over the long term before rushing in.
For further information about the HomeBuilder scheme, please contact the Office of Revenue for your state or territory. Website links and further information are available at https://treasury.gov.au/coronavirus/homebuilder