Take advantage of FHOG or straight IP loan?

[start-up]

Hi all – I have been sitting on my 1st property deposit for a frustrating 2+ years because of a poor paying job hindering my borrowing power and ability to service a loan. I’ve now scored a higher paying job and I’d like to move forward.

I see two pathways in front of me, I’d like to run them past you to see what the consensus is and check I haven't missed anything.

My position:

• $95,000 Cash in the bank (to cover deposit and fees associated with the purchase.)

• $80-85k gross annual income

• Eligible for First Home Owners Grant & stamp duty savings (buying in Victoria) as well as Defence Home Ownership Assistance Scheme (basics explained below.)

• Hoping to buy something in the 425-450k price range.

Option 1:

Purchase as a Primary Place of Residence, accrue:

• $7,000 FHOG

• some stamp duty savings

• $11,000 tax free dollars as part of the Defence Home Owners Assistance Scheme

• receive approx. $200 a month towards the mortgage for the first 24ish months of the loan from Defence.

• The interest rate payable would be the NAB’s standard variable rate less a .7% discount for Defence loans.

I’d live in the house for the minimum period required to meet FHOG requirements and then convert it to an IP. I may have to refinance the loan as a result of the change in circumstances when the property becomes an IP.

Option 2:

Purchase IP, go through a broker and get the best loan available (possibly a significantly better deal than NAB?) Forego grants..

Are there any reasons why Option 2 makes sense? (..besides avoiding the stuff-around of moving into the place for six months and having to stay active in the Army Reserves for the time being.)

Any thoughts appreciated

 

[Peter_Tersteeg]

Victoria may well follow the other states in the not-to-distant-future and make changes to the FHOG, which means you may not be eligible unless you're purchasing a brand new property. There's been a definite trend in this direction in the last few years. If you don't take advantage of it, you may find that you miss out completely in the future.

Add the substantial defence force assistance & benefits, you'll probably find that ownership of your PPOR under this scheme costs the same or even less than the cost of and IP. The net cost to you is probably less when you consider that you no longer have to rent yourself (mind that I have no idea if there's any assistance with rentals for the ADF).

I'd be buying now, but it would be worth doing your research on what the NAB is offering to the general public and make sure you get the same deal, plus the ADF benefits.

 

[Aaron_C]

NAB's discount of 0.7% means a rate of 5.88% which is OK given the benefits you get from it.

 

[start-up]

Thanks gents, very helpful as always.

 

[chuds]

Hi all – I have been sitting on my 1st property deposit for a frustrating 2+ years because of a poor paying job hindering my borrowing power and ability to service a loan. I’ve now scored a higher paying job and I’d like to move forward.

I see two pathways in front of me, I’d like to run them past you to see what the consensus is and check I haven't missed anything.

My position:

• $95,000 Cash in the bank (to cover deposit and fees associated with the purchase.)

• $80-85k gross annual income

• Eligible for First Home Owners Grant & stamp duty savings (buying in Victoria) as well as Defence Home Ownership Assistance Scheme (basics explained below.)

• Hoping to buy something in the 425-450k price range.

Option 1:

Purchase as a Primary Place of Residence, accrue:

• $7,000 FHOG

• some stamp duty savings

• $11,000 tax free dollars as part of the Defence Home Owners Assistance Scheme

• receive approx. $200 a month towards the mortgage for the first 24ish months of the loan from Defence.

• The interest rate payable would be the NAB’s standard variable rate less a .7% discount for Defence loans.

I’d live in the house for the minimum period required to meet FHOG requirements and then convert it to an IP. I may have to refinance the loan as a result of the change in circumstances when the property becomes an IP.

Option 2:

Purchase IP, go through a broker and get the best loan available (possibly a significantly better deal than NAB?) Forego grants..

Are there any reasons why Option 2 makes sense? (..besides avoiding the stuff-around of moving into the place for six months and having to stay active in the Army Reserves for the time being.)

Any thoughts appreciated

You seemed to have confused DHOAS with HPAS, and DHOAS is higher than $200 a month.

HPAS is also significantly higher than $11,000 but it is taxed.

In my opinion, defence members are crazy not to own a PPOR

 

[start-up]

You seemed to have confused DHOAS with HPAS, and DHOAS is higher than $200 a month.

HPAS is also significantly higher than $11,000 but it is taxed.

In my opinion, defence members are crazy not to own a PPOR

Hi Chuds, I'm ineligible for HPAS as I'm now a Reservist. Re. $11,000 for DHOAS you have the option of taking up to 48 months of accrued payments up front in a lump sum, this is approx. 11k depending on where interest rates sit. As I qualify for the lowest subsidy tier, tier 1, my monthly subsidy is $234.