Borrowing using First Home Owners grant

[WebBoard]

From: Michael Mudman


I have a friend considering using the FHOG to purchase her first property. She doesn't plan on living there for any more than six months but has been told the loan must be a principal and interest loan to take advantage of the Grant???

However, she wants interest only because she plans on leaving the loan fully drawn for when she moves out and it becomes a rental property.

Has anyone been in or seen this situation before?

 

[WebBoard]

Reply: 1
From: S W


I would doubt that it needs to be a P&I loan. I think the biggest problem is that 6 months wouldn't be enough owner occupied time. If SRO found out the property was rented, they would ask for the FHOG to be returned.

 

[Rolf Latham]

Reply: 2
From: Rolf Latham


Hi MM

Get a new lender ). What this comes down to is that many lenders will not do PPOR loans on an interest only basis.

ANZ, Homeside and CBA will do I/O PPOR to name a few.

By assoaition with the lender being used then the FHOG means you need a PPOR loan, so no I/O coz its an FHOG loan.

Seek the services of an independent broker.

Ta

Rolf

 

[Property Invest]

Reply: 3
From: Property Investor


Hi Michael,

Think of this option,
FHOG requires you to occupy the residence within 12 months.

Regards,
Mannie.

 

[Richard Hunt]

Reply: 3.1
From: Richard Hunt


Hi Michael,

There are no constraints in the FHOG legislation as to how a FHOG applicant should structure their finance. There are numerous lenders that will provide interest-only finance to a FHOG applicant.

Generally, FHOG eligibility criteria stipulates that the property must become the PPOR of the FHOG applicant within 12 months of settlement. As long as your friend makes the property their PPOR within 12 months, they would satisfy the PPOR criteria and the FHOG would not be refundable.

Whether the property remains your friend's bona-fide PPOR for 1 day, 6 months or a longer period, will not effect FHOG eligibility, although it could be expected that the shorter the period, the greater the degree of scepticism likely to be exercised by the OSR should they choose to review the situation.

Hope this helps.

Regards
Richard

 

[Jerry Maguire]

Reply: 3.1.1
From: Jerry Maguire


hi michael,
no offence the broker that says FHOG loans needs to be P&I please just put a bullet through his head...
and find another broker that knows their stuff like rolf
FHOG all u need is just to stay there for a minimum of 30 days tops just to cover yourself.
6 mths is not enough for some lets make it 9 mths so that u can have a baby as well as the FHOG so u kill 2 birds with 1 stone...pls HELLO
if you need to stay there any longer HELLO!!!
just think like what the PROS are thinking...

Jerry

 

[WebBoard]

Reply: 3.1.1.1
From: Michael Mudman


Thanks everyone.

Rolf, what happens in the case of a lender who doesn't do interest only loans on PPOR but you take out an interest only loan for an investment property, rent the house out for 6 months and then move into it later.

Would you have to refinance or could you get away with keeping the interest only loan?

 

[Rolf Latham]

Reply: 3.1.1.1.1
From: Rolf Latham


Hi MM

I suppose you would need to take the view that to stay in tune with your contract your lender would need to be notified. In most cases where this has happened my clients have been advised by lending staff to not worry about it.


Ta

Rolf