Can You Use the First Home Owners Grant as a Deposit?

Owner Grant, which helps Australians to get the funds they need to buy or build their first home. It can be hard to save up enough money to do this on your own, so the government offers a one-off payment to help you achieve your dream.

We’ve compiled all the information you might need about the First Home Owner Grant, from what it is, to the eligibility criteria, what the differences are in each state, how much you could receive, when the scheme started and when the grant gets paid.

What Is the First Home Owner Grant?

The First Home Owner Grant (FHOG) was introduced back in July 2000 for first-time homeowners. It’s a nationwide scheme but is funded by the individual states and territories, with each state or territory having its legislation for the scheme. The First Home Owner Grant is a lump sum of cash available to first homeowners to help with the cost of buying a first home or vacant land to build a home on. The Grant doesn’t have to be repaid, and it’s not taxable, but there are strings attached. 

While the FHOG is a national scheme, it’s funded by the states and territories and individually administered by each of them. So each state or territory tweaks its own FHOG rules pretty much every year.

We’ll look at some general principles of FHOG, the intention behind it and then look at the eligibility rules. We’ll then briefly summarise how the FHOG works in each state and territory.

The purpose of the FHOG is to encourage people to save up and buy their first home. It is worth finding out if you are eligible to apply if you are a first-time buyer. 

What sort of properties is eligible?

The FHOG only applies to a home that you will live in and doesn’t apply to investment properties or holiday homes.

In some states or territories, you can only get the FHOG if you’re buying a new home or one that’s been substantially renovated. This could include:

  • buying an off the plan property
  • building a home on vacant land
  • buying an established home where all or most of the building has been renovated, fixed or replaced.

Usually, there’s also a limit on the property’s value – but the exact limit depends on the location. 

How much is the First Home Owner Grant (FHOG) in 2021?

We all like free money, and that’s exactly what the First Home Owner Grant (FHOG) is – a lump sum of cash to help with the purchase of your first home.

State governments fund the First Home Owner Grant, so different amounts are available in each state and territory. Exactly how much you will receive depends on where you are buying. In regional Victoria, for instance, the FHOG is worth $20,000.

  • ACT – $0
  • NSW – $10,000
  • NT – $10,000
  • QLD – $15,000
  • SA – $15,000
  • TAS – $20,000
  • VIC – $10,000 or $20,000 for homes built in regional Victoria
  • WA – $10,000

Am I eligible for the First Home Owner Grant?

Home

The rules for the First Home Owner Grant differ slightly around Australia, but some basic conditions apply:

  • You must be a permanent resident or an Australian citizen. If you’re co-buying with someone
  • else, at least one of you must be a permanent resident or Australian citizen
  • You must not previously have owned or co-owned a home in Australia or have received an
  • Australian First Home Owner Grant in the past.
  • You must be buying a home to live in – not as an investment property
  • You need to live in the home for at least six months after purchase,
  • You must be a natural person (not a company or a trust), and
  • You need to be aged over 18.

Other conditions may apply depending on your state/territory. In many states, the First Home Owner Grant is only available if you buy or build a new home. In some states, you may not be eligible for the FHOG if you pay over a certain value for your first home.

As each state has its own set of rules for the First Home Owner Grant, it is important to understand the guidelines that apply to your area.

The national scheme is administered separately by the states and territories. Consequently, the terms and conditions will vary across different locations.

Eligibility is subject to several factors, including the value of your home and whether you intend to live in your home after construction.

Generally, to receive the grant:

  • you must be an individual, not a company or trust
  • you must be over 18
  • you, or at least one person you’re buying with, must be an Australian citizen or permanent resident
  • you must be buying the property as an individual and not a company or trust
  • You plan on living in residence for the minimum amount of time set by your state or territory
  • You must apply for the grant within 12 months of settlement
  • The market value of the home must not exceed the limit of your state or territory

Generally, you won’t be eligible for the grant if you or your spouse:

  • have previously owned or co-owned property in Australia or
  • have received an Australian first home owners grant

Understanding the Contract of Sale when purchasing a property

Not all of us have a law background, so to save you the stress and confusion, here’s everything you need to know *before* signing your Contract of Sale.

New South Wales (NSW)

A grant of $10,000 will be given to first homeowners buying a new home up to the value of $600,000 or building a new property worth up to $750,000.

If your new or established property is valued at less than $650,000, your stamp duty will be waived. If your new or established property is between $650,000 to $800,000, you are eligible for a discount. Buyers must live in the home for at least six months in the first year of construction.

Queensland (QLD)

A grant of $15,000 will be given when you buy or build a new home valued up to $750,000.

Discounts on transfer duty (previously stamp duty) are also available for both new and established homes. Buyers must live in the home for at least six months in the first year of construction.

Victoria (VIC)

A grant of $10,000 will be given when you buy or build a new home worth up to $750,000. Grants for property in regional Victoria rise up to $20,000 for homes worth up to $750,000. New homes must be less than five years old. Buyers must live in the home for at least six months in the first year of construction.

Tasmania (TAS)

A grant of $10,000 will be given to first time owners who buy or build a new home. Buyers must live in the home for at least six months in the first year of the home being built.

Northern Territory (NT)

First home buyers are eligible for a $10,000 grant if they buy a new home. Stamp duty discounts of up to $23,928 may apply to eligible first home buyers of an established home, along with a $10,000 home renovation grant. 

Australian Capital Territory (ACT)

First home buyers who built or purchased a new or substantially renovated home between 1 January 2017 and on or before 30 June 2019 are eligible for a $7,000 FHOG, provided they meet other criteria.

First Home Buyers entering into a transaction with a commencement date on or after 1 July 2019 are not entitled to the FHOG payment. In the ACT, the FHOG has been replaced by the new Home Buyer Concession Scheme.

South Australia (SA)

A grant of $15,000 will be given to homeowners who buy or build a new home in South Australia up to the value of $575,000.

Western Australia (WA)

Grants of $10,000 are available for the purchase or construction of a new home. Depending on where you live, the cap is either $750,000 or $1 million.

If you are south of the 26th parallel of south latitude, your property must be valued less than $750,000, while properties north are limited to $1 million. Buyers must live in the home for at least six months in the first year of the home being built.

How do I apply?

You can apply directly to the government revenue office in your state or territory. But many people choose to lodge their FHOG application through their lender. 

The process will be slightly different depending on which state or territory you live in, so check the application details carefully. You’ll need to lodge:

  • documents that confirm your identity and your eligibility; and 
  • a copy of the contract of sale (or contract to build if you’re constructing a new home).

A word of advice: tell the truth on your application. If you don’t, you could end up getting prosecuted, and there are heavy penalties if you’re convicted. It isn’t worth it.

When will the grant be paid?

Once again, each state and territory has its own rules. But generally, the grant’s paid out under these conditions:

  • established home: payment will be made on settlement
  • contract to build: grant paid to the builder with the first progress payment
  • owner builder: payment on receipt of the Certificate of Occupancy
  • new home: payment at settlement
  • purchase off the plan: payment at settlement

Can I get the First Home Owner Grant (FHOG)?

Home

The following criteria are generally the same across all Australian states and territories:

The applicant must be buying or building a new home, which includes off-the-plan homes or substantially renovated homes.

The application for the FHOG, including the form and supporting documents, must be submitted within 1 year of completing an eligible transaction.

  • Everyone with relevant interest (i.e. legal entitlement) in the home must be an applicant.
  • Every applicant must be at least 18 years old.
  • Applicants cannot be a company or trust.
  • At least 1 applicant must be an Australian citizen or permanent resident.
  • Applicants must not have previously received an FHOG in any Australian state or territory. However, if this grant has been repaid, applicants may be eligible.
  • Applicants must not have held a relevant interest in a residential property in Australia before 1st July 2000.

Can I use the First Home Owner Grant (FHOG) as part of my deposit?

Yes, you can use the First Home Owner Grant (FHOG) as part of your deposit, but you will usually need to have existing savings as the FHOG alone is rarely enough to cover a deposit. If you don’t have any existing savings, you can ask a parent to act as a guarantor on your loan.

The First Home Owner Grant’s whole purpose is to help you manage the costs of owning a home, though it may not be enough to form your whole deposit.

Your application for the First Home Owner Grant usually only takes a week or two to be processed, however exactly when you receive the Grant depends on whether you are buying or building.

If you’re buying a home that’s already built, you’ll usually receive the funds when the property settles – that’s the stage when all the paperwork is completed, and the keys to your home are handed over to you.

If you’re building a new home, the First Home Owner Grant is usually paid when you first draw down your loan – and that’s typically when the slab is laid.

What Can Count Towards A Deposit

What you can use, besides your savings, to secure a deposit on a house? When it comes to getting a deposit together for that first home, it makes good financial sense to aim for an 80% or lower LVR (loan to value ratio). Why? Because it can save you around $25,000 over the life of a typical $350,000 home loan, that includes avoiding the cost of Lender’s Mortgage Insurance, which can be well over $10,000.

If you can’t quite manage to amass a 20% deposit from your savings, there are other strategies you can consider. Here are three things you can use for a deposit:

First Home Owners Grant (FHOG)

Using a First Home Owners Grant for a deposit is great if you’re buying or building a new house or unit, although, in some places, it can be used for established homes as well. Most states and territories offer grants of $10,000, but some offer more, such as the Northern Territory, which has a generous $26,000 grant.

The value of the grant you’re eligible for can depend on who you are, where you live and what you are buying. You can read a summary of what is available state by state here.

Out of the 74 lenders CANSTAR rates for first home buyers, 50 institutions allow customers to use a First Home Owners Grant as a deposit.

It’s also possible to combine the FHOG with other government incentives for first home buyers, including the First Home Loan Deposit Scheme (FHLDS), which launched on 1 January 2020. It’s a new government measure in which the Australian government guarantees 10,000 low-deposit loans a year for eligible low- and middle-income earners who have saved up a deposit of as little as 5% of a property’s value.

If you’re currently considering a home loan, the comparison table below displays some of the variable rate home loans on our database with links to lenders’ websites that are available for first home buyers.

Before committing to a particular home loan product, check upfront with your lender and read the applicable loan documentation to confirm whether the terms of the loan meet your needs and repayment capacity. 

Using a guarantor

A guarantor is someone willing to take on the responsibility of paying off a loan if you’re ever unable to meet the repayments. If you’re lucky enough to know people that trust you enough to let you use them as security for a home loan, they can be your guarantor. Typically, these people are the borrower’s parents, as some banks only allow family members to act as guarantors.

Having a guarantor means you don’t have to pay lenders mortgage insurance. It also means you can borrow up to 100% of the property price.

If your guarantor is especially generous, many lenders will even allow them to provide the deposit themselves. Read more about some pros and cons of parents going guarantor.

Using a financial gift as a deposit

Some parents like to give their children money for a deposit as a gift. Many lenders allow this; however, certain conditions usually apply, such as keeping the gift money in an account for a set period of time. The lender might also require a written statutory declaration stating that the money is a gift.

The first home buyers grant is rigid in its use. Once you are deemed eligible, it can basically only be used to contribute to your outstanding loan. This also makes it pretty hard to use for a deposit.

The grant is not paid to the buyers; instead, when you get to the settlement period, the money is transferred to your lender and directly taken from your mortgage. If you’re buying a house and land package, sometimes the grant is approved once you start the construction process.

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