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With the federal and state governments promoting multiple schemes to help property buyers, there is a lot of discussion around how to apply for them but little focus on possible pitfalls. Despite the tangible financial respite these schemes offer, many of them may not be the best way forward for a potential property buyer. Here’s a look at things you need to keep in mind before opting for a scheme or grant.
- Property Price & spend constraints: All schemes have property price caps or minimum spend constraints. The HomeBuilder scheme, for instance, has a minimum spend limit of $150,000 to receive a $25,000 grant. This kind of spend limit may be too high or unnecessary for many eligible applicants. Same is the case with property price caps. For example, the property price cap for the ‘First Home Loan Deposit Scheme’ (FHLDS) for NSW’s metro region is $950,000. With median house prices in Sydney being well over $1.1 million, there is a strong probability that you may not be able to find a suitable property in accordance with the scheme limit. In either case, don’t change your strategy or budget for property purchase, construction or renovation to be eligible for a scheme or grant.
- Property Age: Several schemes are only applicable for new properties. Newer properties are usually built on smaller land parcels. Since the physical structure of a property is a depreciating asset, and the land it is constructed on is an appreciating one, the return on investment for larger properties built on a small piece of land may not be very high. Older properties tend to have larger plot sizes with lower built-up areas and may therefore offer better investment returns. So, don’t write-off a suitable property that isn’t new, to apply for a scheme or grant.
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- Focus on finding the right property: Property purchase is a massive financial commitment and may as well as be one of the biggest ones you’ll make. It is also a long-term commitment. Focus on identifying the right property that fulfils your liveability and investment-return goals. It’s best to start researching your eligibility for schemes and grants once you’ve found the right property deal instead of restricting your choices by looking for a property that qualifies for a grant or scheme.
- Please seek professional help: It is easy to get swayed and let scheme promotions influence your property purchase, renovation or construction decisions. The easiest way to address this issue is to rely on professional advice. Engage a mortgage broker to guide you on what schemes and grants you are likely to benefit from and how to go about applying for them.
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