Buying a House in Australia - Money and Finance
First Home Owner Grant - A Gift from the GovernmentAnyone buying a house in Australia for the first time (including migrants with permanent residence) has been eligible for the First Home Owner Grant, a lump sum worth $7,000.
On October 14, 2008, the government announced a doubling of the grant to $14,000 for buyers of homes that were not newly constructed.
The higher grant was originally pencilled in to be available until June 30, 2009, as part of an economic stimulus package. More recently, availability of the the higher grant has been extended. Buyers who sign contracts by the end of September 2009 will still be eligible for the full $14,000 grant.
The enhanced payments will then be phased out in two stages. On October 1 the grant will be reduced to $10,500. It will revert to $7,000 on January 1 2010.
First home buyers who buy a newly-constructed house are currently receiving an even higher first home owner grant, worth $21,000. This will also be reduced in stages, falling to $14,000 on October 1 and finally to $7,000 on January 1 2010.
The First Home Owner Grant is paid directly to the buyer of a house. The grant is not payable for land purchases.
Welcome as it is, the grant will not buy you a house in Australia. Unless you have substantial savings, you will need to get a mortgage from an Australian Bank.
How Much Can You Borrow?
The amount of money you can borrow for a mortgage depends on the lender. Lenders typically use your salary to decide the maximum amount they will lend you. On average, lenders allow couples to borrow 5 times their joint pre-tax income. Some will lend more, some less. If you need a mortgage, many lenders prefer you to be settled into a job for a few months before offering you a mortgage.
Stamp Duty on the Purchase - A Major Cost for Many Buyers
When you buy a house, you will have to pay tax on the purchase price. This is called Stamp Duty. First time buyers, especially of lower priced properties, may get a discount on stamp duty. Discounts are highest in New South Wales, Queensland and Western Australia where, provided the property sells for less than $500,000, no stamp duty is paid by first time buyers. The rate of stamp duty you pay depends on the house price. The more expensive the house, the higher the rate of tax. Each Australian state levies stamp duty at different rates.
For example, a buyer in 2008-2009 would pay stamp duty on properties as follows:
Stamp Duty on a $700,000 House
| Location | Normal Stamp Duty | Stamp Duty Paid by First Time Buyers | |||
| Sydney (New South Wales) | $26,990 | $26,990 | |||
| Melbourne (Victoria) | $37,070 | $34,070 (First Home Bonus) | |||
| Perth (Western Australia) | $27,265 | $27,265 | |||
| Brisbane (Queensland) | $17,350 | $17,350 | |||
| Adelaide (South Australia) | $32,330 | $32,330 | |||
| Hobart (Tasmania) | $25,550 | $25,550 | |||
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Stamp Duty on a $500,000 House
| Location | Normal Stamp Duty | Stamp Duty Paid by First Time Buyers |
| Sydney (New South Wales) | $17,990 | $0 |
| Melbourne (Victoria) | $21,970 | $18,970 (First Home Bonus) |
| Perth (Western Australia) | $17,765 | $0 |
| Brisbane (Queensland) | $8,750 | $0 |
| Adelaide (South Australia) | $21,330 | $21,330 |
| Hobart (Tasmania) | $17,550 | $17,550 |
Stamp Duty on a $400,000 House
| Location | Normal Stamp Duty | Stamp Duty Paid by First Time Buyers |
| Sydney (New South Wales) | $13,490 | $0 |
| Melbourne (Victoria) | $16,370 | $13,370 (First Home Bonus) |
| Perth (Western Australia) | $15,700 | $0 |
| Brisbane (Queensland) | $5,250 | $0 |
| Adelaide (South Australia) | $16,330 | $12,330 (First Home Bonus) |
| Hobart (Tasmania) | $13,550 | $13,550 |
Stamp Duty on a $250,000 House
| Location | Normal Stamp Duty | Stamp Duty Paid by First Time Buyers |
| Sydney (New South Wales) | $7,240 | $0 |
| Melbourne (Victoria) | $8,870 | $5,870 (First Home Bonus) |
| Perth (Western Australia) | $8,200 | $0 |
| Brisbane (Queensland) | $2,500 | $0 |
| Adelaide (South Australia) | $8,955 | $4,955 |
| Hobart (Tasmania) | $7,550 | $3,550 |
Stamp Duty on your Mortgage
All Australian states have now abolished mortgage stamp duty.