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Can You Use the First Home Owner Grant as a Deposit?
By Deltos Finance on March 28, 2024
Dreaming of owning your first home in Australia? While you can use all your savings to pay for your home deposit, you must know that there are government grants that can help lower the initial cost of your first home purchase. Today, we’ll zero in on one of those grants: the First Home Owner Grant (FHOG). We will also try to answer this commonly asked question: ‘Can you use the First Home Owner Grant as a deposit?’
Understanding the First Home Owner Grant
The FHOG is a government incentive that supports first-home buyers in making their dream of homeownership a reality. This grant provides a one-time payment to eligible individuals purchasing their first residential property. While the FHOG can provide significant financial assistance and make homeownership more affordable, it is vital to understand how it can be used in the context of a home deposit.
Using the First Home Owner Grant as a Deposit
So, can you use the First Home Owner Grant as a deposit?
The short answer is yes. You are free to use it as a deposit towards your new home. However, it is crucial to note that it may not be sufficient to cover the entire deposit amount required by lenders. Typically, lenders require 20 percent of the property’s purchase price as a deposit, and the FHOG can help meet this requirement.
How to Apply for the First Home Owner Grant
Follow these steps to apply for the First Home Owner Grant (FHOG) in Australia:
- Check your eligibility.
Before applying for the FHOG, see if you meet the eligibility criteria. These criteria can vary depending on the state or territory. Generally, you need to be an Australian citizen or permanent resident, over 18 years old, and have never owned a property before.
- Determine the grant amount.
The amount of the FHOG can vary depending on the state or territory. For example, in Queensland, the grant amount is $15,000 or $30,000 for buying or building a new home, while in Tasmania, it is $30,000 for buying or constructing a new home.
- Apply for the FHOG.
You can apply for the FHOG through an approved agent, such as a bank or lending institution, or directly to the relevant state or territory revenue office. The fastest way to receive the grant is to apply through an approved agent, who will confirm your eligibility, manage and forward your application to the necessary office. When you apply for the FHOG, you must provide supporting documents, such as proof of identity, proof of citizenship or permanent residency, and evidence of your income.
- Wait for the grant to be paid.
The FHOG is paid at different times. It is based on how and when you apply for the grant and whether you are constructing or buying your first home.
How Long Does It Take for the FHOG to Be Paid?
Factors that can affect the time it takes to receive FHOG in Australia include:
- State or Territory Processes: The processing time for the FHOG can vary depending on the state or territory where you are applying. Each state or territory may have different procedures and timelines for assessing and approving grant applications. Read our blog about FHOG in Tasmania if you want to learn more about the processes and requirements in Tasmania.
- Completeness of Application: Want to use FHOG for your house deposit? Note that the time it takes to receive the grant can be influenced by the completeness of your application. Providing all required documentation and information can help expedite your grant application.
- Verification Processes: The verification of your eligibility for the FHOG, such as confirming your identity, residency status, and property details, can also impact the time it takes to receive the grant. Delays in verifying this information may prolong the processing time.
- Volume of Applications: The number of applications received by the relevant state or territory revenue office can also affect the processing time for the FHOG. A high volume of applications may lead to longer processing times.
Supplementing Your House Deposit
We’ve already answered the question: ‘Can the First Home Owner Grant be used as a deposit?’ Now, let’s talk about how you can supplement your FHOG.
In most cases, the FHOG can be used in conjunction with your savings to form a suitable or high deposit for your new home. So, while the FHOG can provide a financial boost towards your deposit, you may still need to tap into your savings account or contribute additional funds to meet the lender’s deposit requirements.
What Are the Best Ways to Save for a House Deposit in Australia?
Reports have shown that it takes years for first-home buyers to save for a house deposit in Australia. So, apart from leveraging grant schemes like FHOG, you must figure out different ways to boost your savings to own your first house faster.
The best way to save for a house deposit in Australia is to follow a few key steps. First, it’s important to know how much you need to save. Most lenders suggest a loan-to-value ratio (LVR) of 80%, which means you should aim to save 20% of the purchase price of the property you plan to buy. This will help you avoid paying Lenders Mortgage Insurance (LMI), which can add significantly to your costs.
Next, you should decide on the deposit amount for your home purchase. While a larger deposit can help you secure a lower interest rate, you should also weigh the upsides and downsides of having a higher deposit versus a lower one. Some lenders may offer a lower interest rate and better terms to borrowers who can provide a larger deposit for a home. However, if you can’t provide a 20% deposit, you may still secure a home loan with a smaller deposit, although you’ll need to pay LMI.
Once you’ve decided on an amount, it’s time to start saving. Review your finances and spending habits to identify where to cut back and save more. Consider setting up a separate savings account specifically for your house deposit and make regular contributions to it. You may also want to consider other ways to boost your savings, such as by taking advantage of the First Home Super Saver Scheme (FHSS), which allows first-home buyers to make voluntary concessional and non-concessional contributions to their super fund, which can later be withdrawn for a house deposit.
More importantly, it’s important to be patient and disciplined. It can take time to save up enough for a deposit, but the effort will be worth it in the long run.
Consulting with a Mortgage Expert
To determine how to best utilise the FHOG as part of your home loan deposit and find ways to save faster for your deposit, it is advisable to consult with a reputable mortgage broker or financial adviser. Our mortgage brokers in Hobart can help assess your financial situation, guide you on the deposit requirements set by lenders, match you to the best first-home buyer loans in Australia, and help you navigate the process of using the FHOG effectively in your home-buying journey.
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