Investment Loan for FHOG

[bdc]

I was wondering are you able to get an investment loan from a bank for a home that is being built for owner occupying and still get the FHOG.

Such as,
- Apply for Investment Loan with bank.
- Get approved.
- Change mind and get FHOG paperwork and diy/with lawyers when settlement happens.
- Move into house.

Will the gov reject your appliction for FHOG if it has an investment loan written down?
Is there anything stopping someone from doing something like this?

 

[Kristine..]

G'day bdc

People's circumstances, and their minds, change frequently.

You can certainly apply to a lender for an investment loan, but there are a couple of things in your scenario which may need thinking through:

Why an Investment Loan? Is this because you will be relying on 'rent income' to be able to service the loan?

Would you be relying on the FHOG / reduction in Stamp Duties, in order to be able to settle on the purchase?

How are you going to reconcile the two situations to the lender's satisfaction?

It is not uncommon for people to buy an investment property and then move in, and apply for the FHOG when they take up residence

It is not uncommon for people to buy a property to live in and then get transferred to Bandywallop and have to refund the FHOG / pay the increased Stamp Duty because they do not take up residence for the required six months within the twelve months from settlement.

Life is flexible and so are the circumstances of the Grant, however the lender will want to see demonstration of your Funds to Complete (and Genuine Savings!) before they provide unconditional approval of the loan. Lenders do not like being left at the altar when borrowers cannot settle. If part of your Funds to Complete is the FHOG then you will not be able to take 'rent income' into account for calculation of serviceability.

So the answer is yes .... depends!

Cheers
Kristine

 

[bdc]

The reason I was looking at doing this is certain banks (such as st george) offer better offset facilities on investment loans but not on OO loans.

I would have enough genuine savings to put around 10% down and pay for other fee's etc.

Though I hadn't thought of stamp duty costs being added into the mix, thanks for that, on that note, the reduced stamp duty in nsw for new homes, if the contract was signed in Jan/Feb of this year would you still be eligible for that or is it only from contracts signed from the date they announced it?

Also, I assume once you have unconditional approval that you can change your mind, inform your lawyer and get all the relevant paperwork filled out to avoid stamp duty costs and submit the fhog as soon as settlement happens?

Anyway, knowing that is possible has given me something to think about, thanks. : D

 

[Rolf Latham]

Hiya

Use a decent lender.........................that has a decent IO offset product, not ST George or HBS as examples. Just about everyone else will do what you need.

As has been pointed out, there may be reasons as to why youd change your mind, product selection is probably not one of those in my mind,

ta
rolf

 

[bdc]

Hi Rolf,
I thought that St George investment IO offset worked the same as NAB/ANZ/etc IO offset? (Reducing re-payments not principle?)

I was curious as to whether it was an option, I have run the numbers and going with the St George option would save me about $1000 over NAB for the first year and with rates as they are atm after the first year I would go backwards a little over $100 a year, combined with no access to a FF credit card with St George the NAB package does beat the St George one after a few years anyway.

 

[Rolf Latham]

Hiya

The INVESTMENT loan secured on an investment property does if you select repayment offset.

PPOR loan, nah

ta
rolf

 

[bdc]

Yeah, that was why I was wanting to know if it could be done, have it all set up with the bank as if it were an investment even though its a PPOR.

Am I correct in assuming that is how NAB/ANZ work, reduce the repayment amount not principle?

 

[tobe]

Ive had a couple of clients who, due to their circumstances changing, choose to move into their investment property shortly after settlement. They have then applies to the SRO directly to receive the FHOG. It doesnt help if you are short with settlement money, but it is possible.

 

[Fuzzboy]

bdc,

It is possible because i just did what you are proposing. I basically got approval via an investment loan then once settlement occured i applied for the first homebuyers grant directly from the OSR. I'm currently living in the property for 6 months, but the bank would n't have any idea as long as i am fulfilling the repayments. The government (OSR) will not reject your application, because they don't check any details of your finance (They don't care!). Theres a few things you should weary of:

- As its an investment loan, the bank will assume you are not a FHB, therefore, will assume you need funds for the payment of stap duty and deposit. So you need to show evidence you have funds for the deposit and stamp duty. Unless you have this they may reject your application.

- At settlement you will need to either pay for stamp duty then get a refund back from the OSR or you can get your solicitor to fill out a stamp duty exemption form. I did the later. The banks generally wont know your solicitor filled it out, but some banks might be more diligent.

- You will need to apply directly to the OSR for your grant, it a no fuss process, i got my money with 14 days of settlement. Just need to supply your certificate of title showing your name on it.

If your looking for an investment property and want to take advantage of the FHB grant i would recommend it. It worked out well for me, i borrowed 95% with LMI capitalised and then recieved the FHB grant. So effectively when i purchased a $485k investment property, i only injected about $12k of my own cash.

Even, if you plan to live in the property for longer than 6 months its a good idea, especially if you need to maximise your borrowing capacity. Just make sure you can afford the repayments, as you wont be getting rent.

Fuzzboy

 

[Dragon]

- As its an investment loan, the bank will assume you are not a FHB, therefore, will assume you need funds for the payment of stap duty and deposit. So you need to show evidence you have funds for the deposit and stamp duty. Unless you have this they may reject your application.

Nope - the criteria is that you occupy the property for at least 6 months for the first 12 months.

- At settlement you will need to either pay for stamp duty then get a refund back from the OSR or you can get your solicitor to fill out a stamp duty exemption form. I did the later. The banks generally wont know your solicitor filled it out, but some banks might be more diligent.

Nope - as above, if you are eligible for the grant, we can apply on your behalf and make funds available at settlement.

Essentially the lender acts as an agent for the FHOG, so if you meet the criteria, then we process the grant. The only issue that remains unanswered is that if you o/o the property, then rental will cease. However, the rental the clients are paying will also cease if they are renting now.

So the summary is, it is possible. Get a good lender or good mortgage broker to help you.

 

[tobe]

There are two ways to get FHOG, apply with the bank at purchase, or apply to the SRO or equivalent, after purchase. If you apply thru the bank, they cannot approve the loan as an investment loan, only O/O. SO, if you wanted to apply for an investment loan, you cannot rely on the FHOG funds for settlement costs, you can only apply for it directly, after settlement.

 

[bdc]

Thanks for all the replies guys/gals ; D

 

[Fuzzboy]

Nope - the criteria is that you occupy the property for at least 6 months for the first 12 months.

Dragon,

So you are saying you can apply for an investment home loan and get the lender to act as an agent for FHBG, even though during their assessment of your borrowing capacity you qoute a rental that can be achieved from the property to reduce the repayments to increase servicability, therefore, increase your borrow capacity. The whole reason i took the steps i did was to increase the borrowing capacity and reduce the amount of equity i was putting into my property purchase. Please let me know if you can apply for the FHBG through the lender under an investment loan? Because i have a few friends that would also like to take advantage of this scenario.

Fuzz boy