Tips and details on the various benefits available for First Home Buyers in Victoria, Australia

1. First Home Buyers
What you need to know
Finance for busy people
Michael Royal, Finance Specialist

2. BIR Solutions
Finance for busy people
Property-backed secured loans
 Home owners
 Investment purposes
 Commercial & business
 Development & construction
 Asset-backed secured loans
 Cars & vehicles
 Plant & equipment
 Unsecured loans
 Personal loans
 Business loans

3. Terminology you need to know
• LVR – Loan to Value ratio – the ratio of the loan you will need
compared to the value of the property you are looking to buy.
• The ‘value’ of a property can vary from the seller/vendor to the real
estate agent to the bank’s valuer.
• LMI – Lenders Mortgage Insurance – a product for the benefit of the
lender (not you) in case you default. Typically is required by banks
when the required loan is greater than 80% of the bank’s valuation.

4. Disclaimer
BIR Pty Ltd ACN 117185654, trading as BIR Solutions, Credit Representative Licence 517662, is authorised under Australian Credit Licence 389328 held by Connective
Credit Services Pty Ltd ACN 143651496
This presentation provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend
that you consider whether it is appropriate for your circumstances. Your full financial situation will need to be reviewed prior to acceptance of any offer or product.
This page does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. Where
applicable, this page is subject to lenders terms and conditions, fees and charges and eligibility criteria apply.

5. Finance is the easy part
• Almost anyone can get access to money – but not always from their
local high street bank.
• Getting the right finance for you is a far more important than ‘getting
finance’.
• Features and options can vary.
• Timing of processing an loan application.
• LMI – kicks in at different levels of LVR depending upon who (& what)
you are.

6. Why you should not just ‘walk into your local
high street bank’
• A financier is like a single brand clothing store.
• Most financiers are not on your high street – 28 out of 34 have no or
little retail presence.
• High street banks won’t tell you what else is available.
• If a High street bank rejects you, you get a black mark on your credit
history.
• If a High Street bank offers their new customers a better deal, they
are not obliged to communicate this better offer to you.
• By the time you realise the bank may not be suitable for you,
you will have invested a lot of time and energy.

7. Why choose a reputable broker
• Not all brokers are the same – just like legal firms.
• Not all brokers have stringent controls, systems and processes.
• Not all brokers use knowledge and data as a resource – just like legal
precedents.
• Not all brokers value relationships.
• Some brokers only want transactions.
• Brokers who value relationships look to add value for their
clients for years to come.

8. What we do for our clients
• Use technology to make things efficient.
• Face to face time for the important bits.
• Understand ‘your why’ – the borrowed money is just the end game.
• Explain & create a process map for all the steps from beginning to end.
• Check in with you regularly during the process.
• Explain ‘the why’ for each document you need to prepare and/or review
and/or sign.
• Follow you up.
• And, make sure you remain on the best deal for you year after year.

9. Do’s
 Plan for your future – keep time on your side.
 Understand your dream – your why. Money is just the facilitator.
 Start planning for your dream – it is never too early and never too late.
 Savings are a habit. So start saving. Lenders love it too!
 Keep your credit history clean! Obtain your credit history today – Equifax.
 Investigate your options.
 Develop a team to assist you.
 Due diligence on the market.

10. Don’ts
 Walk into your savings bank expecting ‘the best deal for you’.
 Have higher limits on credit cards than you use.
 Use after-pay and other similar retail finance.
 Think ‘it doesn’t really matter what property I buy as the market will
go up’. It will, but the rate of change can vary significantly.

11. First Home Buyers
Overview of the Detail

12. First Home Buying is a 4 Step Process
1. Save for a deposit
a. 20% ideal
b. 5% required minimum
2. Calculate your borrowing capacity
a. Income
b. Expenses
c. Assets & Liabilities
d. Credit history
3. Get Pre-Approval
4. Start shopping for a home!

13. First Home Owners - Victoria
Available Assistance
 Government assistance
 First Home Owners Grant (FHOG) – cash: either $10K or $20K (Regional Vic).
 Stamp Duty Exemptions / Concessions – saving: up to $30K benefit.
 First Home Super Saver Scheme (FHSSS) – saving: up to $5K benefit.
 First Home Loan Deposit Scheme (FHLDS) – up to $90K guarantee (Melb & Geelong).
 Family assistance
 Family pledge – up to 100% of your loan.
 Gifts – up to 100% of your loan.
 Lenders Mortgage Insurance (LMI) – up to 18% of your home’s
value (at a cost)

14. Websites for more info
 FHOG: https://www.sro.vic.gov.au/fhogapply
 Stamp Duty: https://www.sro.vic.gov.au/fhbduty
 FHSSS: https://www.csc.gov.au/assets/fhsss-
calculator/index.html#/welcome
 FHLDS: https://www.nhfic.gov.au/what-we-do/fhlds/

15. We are here to help you
 Ring or SMS: 0411 190 474
 Email: Michael.royal@bir.net.au
 Research: www.bir.net.au

16. First Home Owners Grant
FHOG

17. FHOG Eligibility
 18 years of age.
 One applicant must be an Australian citizen or permanent resident at
the date of contractual possession or contractual occupation.
 At least one applicant must occupy the home as your Principal Place
of Residence for at least 12 months, commencing within 12 months of
settlement or completed construction (exemption for Aust Defence
Force).
 Must be a new home less than 5 years old.

18. FHOG Ineligibility
 If you or your spouse/partner have:
 Received the FHOG.
 Owned a home in Aust prior to 1 July 2000.
 Lived in a home which you have owned/part-owned after 1 July 2000 for a
continuous period of more than 6 months.
 This applies even if you spouse/partner is not an applicant.
 You are still eligible if you or your spouse/partner have not lived in
the property as your home (i.e. rented it out).

19. FHOG Other Matters
 All applicants must be the title holders of the property.
 Spouse/partner must be disclosed in the application.
 Application will probably be lodged by the lender but can be lodged by the
applicants
 Identity required for each applicant AND spouse/partner:
 If lodged by the lender you will require:
 If an Aust Citizen: Aust Birth Certificate or Aust Passport or Citizenship Certificate
 If a Citizen of another country: Passport AND evidence of Permanent Residency (eg PR Visa)
Except NZ – current Passport
 If lodged by you, more documentation is required across 4 different categories
Additional supporting documentation if applicable:
 Marriage Certificate / Divorce Certificate / Death Certificate (widow) / Stat dec (separated)

20. Stamp Duty
Exemptions & Concessions

21. Stamp Duty Reduction Eligibility – All Home
Buyers
 It is an extension of the Principal Place of Residence (PPR) assistance
scheme.
 The PPR Scheme offers reduced Duty Rates for all PPR up to $550K for all
home buyers
 To qualify you need to:
 Use the property as your PPR within 12 months of becoming entitled to possession
(usually 12 months from settlement).
 Live in the property for a continuous period of 12 months
 Land must include a building that is ‘designed and constructed for
residential purposes
 $550K is calculated based upon the Dutiable Value

22. Stamp Duty Reduction Eligibility – First Home
Buyers
 First Home Buyers get an additional benefit.
 FHB get a 100% Duty exemption up to $600K of the Dutiable Value.
 After $600K, there is a sliding scale concession up to $750K.
 Must be eligible for the FHOG.
 But, unlike the FHOG, it can be a new or established home.
 PPR requirements apply for at least 1 applicant (exemption for Aust
Defence Force).

23. Stamp Duty Calculations
 Calculated based upon Dutiable Value.
 Dutiable value is generally the purchase price or market value of the
property, whichever is greater.
 Off-the-plan purchases:
 Dutiable Value is the contract price minus the construction or refurbishment
costs incurred on or after the contract date.
 The Vendor advises your conveyancer of the Dutiable Value.
 Available for anyone who qualifies for Duty Reductions as a PPR or FHB

24. Stamp Duty Calculations

25. Stamp Duty payable in Victoria
Saving if
Eligible
$ % DV $ % DV $
400,000 16,370 4.1% 0 0.0% 16,370
500,000 21,970 4.4% 0 0.0% 21,970
600,000 30,070 5.0% 0 0.0% 30,070
625,000 32,570 5.2% 5,428 0.9% 27,142
650,000 34,070 5.2% 11,356 1.7% 22,714
700,000 37,070 5.3% 24,713 3.5% 12,357
725,000 38,570 5.3% 32,141 4.4% 6,429
750,000 40,070 5.3% 40,070 5.3% 0
800,000 43,070 5.4% 43,070 5.4% 0
900,000 49,070 5.5% 49,070 5.5% 0
1,000,000 55,000 5.5% 55,000 5.5% 0
Questions asked
Are you a foreign purchaser?
You are a foreign purchaser if you are not:
A citizen or permanent resident of Australia.
Is it your first home?
Is it your principal place of residence (PPR)? (For non-foreign
purchasers)
Dutiable
Value
Not eligible Eligible
Non foreign purchaser
Are you purchasing property in regional Victoria for commercial,
industrial or extractive industries use?
A New Zealand citizen with a Special Category Visa
(Subclass 444).

26. First Home Loan Deposit
Scheme
FHLDS

27. FHLDS – First Home Loan Deposit Scheme
 Applicable for 10,000 applicants
 Available from July 2020
 5,000 to the major banks – CBA and NAB – all have been ‘reserved’
 5,000 to 25 non-major lenders – some still available to be ‘reserved’

28. Lenders on the FHLDS panel

29. FHLDS Plusses
 Saves on LMI (Lenders Mortgage Insurance)
 Example: on a $600K purchase with a 5% saving ($30K), LMI is $23K NAB and
$27K CBA
 Assists with interest rates – many lenders may restrict borrowers or
charge higher rates for borrowers with over 80% LVR (Loan to Value
Ratio).
 Reduces the time to save for a deposit
 4+ years for an average income earner ($88Kpa) saving 20% of after tax
income for a 20% deposit on a $400K purchase.

30. FHLDS Minuses
 More spent on interest
 Example: $62K more interest on a $400K loan with a 20% deposit
 Only 10,000 application pa – equivalent to one month of current
applications by FHBs.

31. FHLDS Eligibility
 Over 18 years.
 Deposit saved: > 5% but < 20%.
 Move into the property within 6 mths of settlement or date of occupancy certificate.
 Live in the home so long as your home loan has the guarantee under the FHLDS.
 Borrowers must be the sole owners.
 Prices – Victoria
 Melbourne: $600K
 Geelong: $600K
 Other: $375K
 Singles and couples.
 Loans with more than one applicant where one applicant is not your spouse or de facto partner are not eligible.
 Income test:
 Single < $125K previous financial year (FY 2019).
 Couples: combined <$200K previous financial year (FY 2019).
 Assessed by the lender.
 Must be first home buyers – no previous interest in any Aust property.
 Aust Citizen (not just a PR).

32. FHLDS – difference between Citizen &
Permanent Resident
Permanent Resident
 Can remain in Aust indefinitely
 Work & study in Aust
 Enrol in Medicare
 Apply for bank loans
 Apply for Aust citizenship (if eligible)
Citizenship
 Aust passport
 Can vote
 Can join Aust Defence Force
 Can obtain ongoing work in the Aust Gov’t

33. FHLDS – other things
 First ranking mortgage security.
 No other registered owners other than the eligible borrowers.
 Loan: between 80% and 95% of the value of the property.
 Loan term: 30 years or less.
 P&I (Principal & Interest) repayments except when there is
construction of a new dwelling.
 No changes allowed to loan’s terms (eg increasing the limit).
 Can be made up of fixed & variable tranches.

34. First Home Super Saver
Scheme
FHSSS

35. FHSSS – First Home Super Saver Scheme
 Must be first home buyer
 You either live in or intend to live in the premises as soon as
practicable
 You intend to live in the property for at least 6 months with the first
12 months you own it, after it is practical to move in
 Max contributions in any one year: $15,000
 Max contributions under the FHSS: $30,000 across all years +
earnings that relate to those contributions

36. FHSS – Things to remember
 Contributions are voluntary – ‘salary sacrifice’
It reduces your take home pay (a $15K contribution on an $80K salary
reduces take home pay by $9.8K)
 Your savings earn more interest after tax ($5.3K for someone on
$80K salary who is contributing $15K pa)
 Married couples can both do this and get a benefit of $10.6K ($5.3K
x 2)

37. Family Pledge

38. Family Pledge – how it works
 Different rules for different lenders.
 First mortgage Vs 2nd mortgage.
 Family relationship – parents, siblings, grand parents.
 Maximum amount of any pledge – full loan amount down to 20%.
 Release date for the guarantor
 A family member has to have equity and/or no loan owing on their
property which is going to be used as security for your loan.
 Allows the borrower to use their family’s property as security for
their borrowings.

39. Family Pledge Benefits
 Borrow without needing to incur LMI (Lenders Mortgage Insurance)
 Example: LMI on a $570K 95% lend is about $25K.
 Guarantor does not have to pay anything IF you do not default.
 Guarantor can be released when:
 You have made sufficient repayments to bring the loan balance down to sub-
LMI LVR (often 80%).
and/or
 Your property value has risen so the LVR of the loan balance is sub-LMI.
 Interest rates are often at sub-LMI rates.

40. Family Pledge Costs
 The guarantor will need independent legal advice.
 Your relationships with your guarantors need to be strong –
particularly if something goes awry.
 There might be complications if the guarantors pass away / divorce
etc and they want to sell their property
 The guarantor will be unable to use their property for additional
borrowings etc without the consent of your lender – which may not
be given.

41. Gifts

42. Gifts
 Great for increasing the cash available for a deposit.
 Often given by a family member.
 If it is required to be disclosed to the lender, the gift must be from
your parents unless an exception is provided by the lender.
 Need to be non-refundable and not subject to repayment under any
circumstances.
 Should be done as soon as possible so it shows in your bank
statements for (preferably) over 12 months.
 May need to be subject to formal legal documentation to avoid
classification as a loan to you.

43. Lenders Mortgage Insurance
LMI

44. LMI Explained
 Lenders will normally lend up to 80% of a property’s value (as
assessed by their valuer).
 The balance of funds has to be provided by the borrower.
 The exception: if the borrower wants more than the amount a lender
will provide, they can borrow a further amount from the lender IF the
borrower takes out an insurance policy – LMI – in favour of the
lender.
 LMI is a once off premium which only provides a benefit for the
lender. It does not provide any protection for the borrower with
respect to the loan.

45. LMI explained
 It can be paid or capitalised and repaid as part of your loan.
 As the LVR increases above 80% the LMI increases exponentially.

46. We are here to help you
 Ring or SMS: 0411 190 474
 Email: Michael.royal@bir.net.au
 Research: www.bir.net.au