House and Land packages for first home buyers
The allure of a new home remains as attractive today as it did for our parents and grandparents.
That’s because buying or building a brand new home means that you have access to the latest house designs as well as sparkly-new fixtures and fittings.
First home buyer’s house and land packages are always popular but it’s important to understand what to look for and what to stay away from.
So, let’s have a look at the pros and cons of house and land packages so you’re ahead of the curve from the very beginning.
What types of packages are on offer?
There are generally two types of house and land packages.
The first package is when you buy a vacant block of land – often in an estate or a master-planned community – and then organise for a builder of your choice to build a house on it.
With this type of package, you have two different types of loans – one for the land and one for the house (via a construction loan) once it is being built. You will have to make progress payments from the construction loan during the build.
The second type of first home buyers house and land package is when first-timers buy a property off-the-plan, which includes the land and the house. With this type of house and land package you pay a deposit, say 10 per cent, and then once the house is completed you pay the remainder via a home loan.
What discounts am I entitled to as a first home buyer?
Across Australia, there are a number of grants and concessions for first homebuyers – especially if they are building or buying a new property.
In Victoria, for example, the State Government has announced that from 1 July 2017, a 50 per cent reduction on stamp duty will be available to first homebuyers when they purchase a new or established property in Victoria that is valued up to $600,000.
There has been a $10,000 First Home Owners Grant (FHOG) available in Victoria since 1 July 2013 for first-timers who buy or build a new house or unit that is valued at $750,000 or less.
Also, from 1 July 2017, the Victoria Government has announced that it intends to increase the FHOG to $20,000 for new homes built in regional Victoria, which will apply to contracts signed from 1 July 2017 to 30 June 2020 once ratified.
Every state is different and you should do more investigation by going to your local state revenue office website or you can get more information from our story here (insert recent 1st home buyer story) or to find out more on understanding stamp duty then click here.
What are the advantages of choosing a house and land package?
One of the major pros is stamp duty savings – separate to any government discounts – because you generally only pay duty on the land and not on a property which hasn’t been built yet.
If you buy a vacant block of land, you can choose the design that best suits you and your needs as well as selecting a builder yourself.
While any first home owner grants are not available for investors, if you buy or a build a new property for investment purposes, they offer better depreciation benefits such as depreciating the construction cost of the building itself as well as fixtures and fittings.
New properties are also attractive to tenants given they offer the latest mod cons, which means investors can often rent them for a premium.
Another advantage is that new properties usually require little maintenance, which can save you money in the first few years of ownership when your repayments are usually your primary focus.
What are the risks of this a house and land package?
Like most things in life, there are cons to first home buyers house and land packages that need to be considered before you decide whether to proceed with this type of property purchase.
One of the risks is that 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.
Given the lack of supply of vacant land in our major cities, the location may be in outer-ring suburbs which may require significant commuting to your place of employment.
Another significant risk is that you won’t know the quality of the build until it is finished, plus, depending on how long the construction will take, you also don’t know whether the market will change during that period of time.
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 settle.
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.
Intuitive Finance – the smart choice
Many first-timers are attracted to first home buyers house and land packages, but it’s vitally important that they understand all of the pros and cons before they proceed.
What can also be tricky to navigate is the plethora of first home buyer loans out there as well as what you need to do to quality for one.
The world of banking and finance can be a pretty daunting one for both novice and sophisticated investors and since our establishment in 2002 we’ve focused on providing outstanding service and business standards.
This approach was vindicated when we were named Victoria’s favourite mortgage broker at the Investors Choice Awards.
So, if you’re considering buying or building a new home, why now contact Intuitive Finance today to ensure you have the right information and expert support on your side from the very beginning.
And not only can you book a complimentary consultation, you can also download our free guide “8 Things First Home Buyers Need to Understand About Finance”.
Disclaimer:
The information provided in this article is general in nature and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information with regard to your objectives, financial situation and needs.
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