By Joel Davis, Image Property
The Federal Government’s HomeBuilder scheme was rightly celebrated when it was announced in June.
The $25,000 payment that can potentially be put towards building a home or significantly renovating one is a policy that will help to underpin the construction sector during our economic recovery.
More details has now been released about the scheme with the program being managed by the relevant State Government, a bit like first home owner grants.
However, like so many of these types of policies the devil is in the detail.
Now, I’m not saying there are any big surprises in the finer details of the policy.
Rather, it pays to be aware of the various eligibility criteria for each part of the program as well as when the funds are actually paid.
One of the biggest misconceptions about the scheme from the outset has been that it is like a first home owner grant.
What I mean by that is that buyers can use the funds as a part of their deposit for the construction or purchase of a new home in their borrowing application.
Unfortunately, this is not the case.
Whereas first home owner grants are generally paid at settlement and can generally be counted as part of a genuine deposit, the HomeBuilder funds are paid quite differently.
Let’s consider these timeframes of when the grant is paid, according to the Queensland Government.
Buying a home
The grant is paid into your nominated bank account once all the supporting evidence is submitted, including the registration confirmation statement listing you as the owner on title.
This registration is generally after settlement.
Building a home
The grant is paid into your nominated bank account after all the supporting evidence is submitted, including evidence that the foundations have been laid and paid for under a progress payment.
Buyers generally need to have been approved for a property loan for these progress payments to happen.
If you have borrowed from a financial institution, however, you can nominate the payment to go directly to your mortgage account.
Renovating a home
The grant is paid into your nominated bank account once construction has commenced and at least $150,000 of the contract price for renovations has been paid to the builder.
Again, these funds will need to have come from personal savings or a loan.
The HomeBuilder scheme has a number of differing requirements, depending on whether you a buying or building a new home or substantially renovating one.
That’s why it’s vital to understand all the requirements on the relevant State Government website.
One of the most important eligibility criteria is when it comes to the timing of each contract as well as the start and the value of the specific project.
That is, the contract must be signed between 4 June 2020 and 31 December 2020 to:
- buy an off-the plan or new home valued at $750,000 or less and construction had not started before 4 June 2020 or
- build a new home valued at $750,000 or less (house and land) or
- substantially renovate an existing home, where
- renovations cost between $150,000 and $750,000 and
- value of property (house and land before renovation) is less than $1.5 million
On top of that, there are additional eligibility requirements depending on whether you are buying or building a new home or significantly renovating one.
Buying a new home
- The licensed builder must have held a Queensland licence before 4 June 2020.
- Excavation and site preparation for your new home must have commenced on or after 4 June 2020.
- If excavation and site preparation had not commenced when the contract was entered into, it must commence within three months of signing the contract. In limited circumstances, a three-month extension may be granted.
Building a new home
- Your comprehensive building contract is with a licensed builder, whose Queensland licence began before 4 June 2020.
- Excavation and site preparation for your new home must have commenced within three months of signing the contract. In limited circumstances, a three-month extension may be granted.
- The foundations must have been laid and the first progress payment made to your builder.
Renovating a home
- Your contract is with a licensed builder, whose Queensland licence began before 4 June 2020.
- The contract to renovate—or demolish and build—your home is signed between 4 June 2020 and 31 December 2020.
- You are the owner of the property when you enter into the contract.
- The value of property before renovation (house and land) is less than $1.5 million.
- Building work under the contract must have commenced within three months of signing the contract. In limited circumstances, a three-month extension may be granted.
- You must not be performing any of the construction work yourself under the contract.
- You must have been invoiced for and paid at least $150,000 in construction costs under your contract by 31 October 2022.