Stamp duty paused in NSW for first home buyers

Stamp duty paused in NSW for first home buyers

First home buyers rejoice. Stamp duty - one of the biggest upfront costs and barriers for would-be-buyers in New South Wales - has been temporarily axed for new homes up to $800,000.

Today’s announcement from Premier Gladys Berejikilian comes in an effort to boost housing construction in NSW, and support jobs in the building industry. The changes will apply from August 1st, 2020 and last for 12 months.

RateCity has crunched the numbers and found that for first home buyers, this change may shave over a year off the time it takes to save up a deposit.

What are the new stamp duty rules?

Previously, stamp duty exemptions applied to new homes for first home buyers up to the value of $650,000, with stamp duty concessions available for properties between $650,000 to $800,000.

Current stamp duty concessions

First home purchase price Ordinary stamp duty Savings for first home buyers

of new dwellings*

Savings for first home buyers

of existing dwellings*

$650,000 $24,740 $26,857 $26,857
$700,000 $26,990 $18,786 $18,786
$710,000 $27,440 $17,172 $17,172
$750,000 $29,240 $10,950 $10,950
$775,000 $30,365 $6,922 $6,922
$800,000 $31,490 $2,896 $2,896

Source: NSW Government as of 2017. Notes: *Total of stamp duty exemptions plus first homeowners grant plus savings from LMI duty abolition (Genworth LMI Premium Estimator based on a first home buyer with a $50,000 deposit).

Now, stamp duty exemptions will carry up to the full $800,000 property price, with concessions available up to $1 million.

For vacant land, the stamp duty threshold will increase from $350,000 to $400,000, with concessions up to $500,000.

Also, the $10,000 first homeowners grant will still be available for those buying new properties worth $600,000 and under, or those buying land and building a new property up to $750,000.

Premier Gladys Berejikilian said the government expected “more than 6,000 first home buyers would benefit from the changes” potentially saving them thousands of dollars.

How much could this save first home buyers?

Before August 1, would-be buyers looking to get a property from $650,000 to $800,000 would have still had to pay some stamp duty costs, but they were reduced.

This meant that on an $800,000 property, first home buyers were still expected to save an additional $28,594 for stamp duty on both new and existing dwellings.

Now, these stamp duty exemptions mean for new dwelling purchases, first home buyers can not only potentially pocket that $28,594, but also shave significant time off of how long it takes to save a deposit.

Keeping in mind that these exemptions only apply for the 12 months following August 1, 2020. If borrowers were already close to saving a 20 per cent deposit, here is how much time is saved by not having to save up to pay stamp duty.

Time saved by not saving for stamp duty:

Median House Price Stamp duty concession costs New stamp duty exemption costs Total 20% deposit needed including stamp duty concessions New total 20% deposit needed including stamp duty exemption Time taken to save based on weekly deposit of $400 New time taken to save based on weekly deposit of $400 Time saved with new stamp duty exemptions
$650,000 $0 $0 $130,000 $130,000 5 years 11 months 5 years 11 months /
$700,000 $8,204 $0 $148,204 $140,000 6 years 9 months 6 years 5 months 4 months
$710,000 $10,268 $0 $152,268 $142,000 6 years 11 months 6 years 6 months 5 months
$750,000 $18,290 $0 $168,290 $150,000 7 years 7 months 6 years 10 months 9 months
$775,000 $23,443 $0 $178,443 $155,000 8 years 1 month 7 years 1 month 1 year
$800,000 $28,594 $0 $188,594 $160,000 8 years 6 months 7 years 3 months 1 year 3 months

Source: RateCity.com.au, NSW Government website, NSW State Revenue Stamp Duty Calculator.

Notes: Savings based on deposit of $400 per week into savings account paying 1.50 per cent per annum

Home loan rates for first home buyers

For some borrowers who choose to still save a larger total deposit size by factoring in stamp duty to their savings, this may help them to nab a more competitive interest rate from lenders.

Home loan lenders typically reward borrowers with small LVRs (loan-to-value ratio) with more competitive interest rates, as having a larger chunk of the property’s price paid off upfront presents you as a more reliable borrower.

While no low rates are ever guaranteed, it’s always worth considering making your home loan application look more desirable by saving a larger deposit, if financially possible.

Here are some of the most competitive home loan rates available to first home buyers:

Variable, owner-occupier home loans paying principal and interest

Home loan Advertised rate Comparison rate
Freedom Lend Freedom Variable Home Loan

2.17%

2.17%

Reduce Home Loans Super Saver

2.19%

2.19%

Mortgage House Essentials Low Rate Home Loan

2.34%

2.52%

Source: RateCity.com.au. Data accurate as at 27.07.2020.

Fixed, owner-occupier home loans paying principal and interest

Home loan Advertised rate Comparison rate
Homestar Finance Star Essentials Fixed Home Loan 2 years

2.06%

2.38%

HSBC Premier Fixed Rate Home Loan

2.09%

3.10%

Greater Bank Great Rate Fixed Home Loan

2.09%

3.53%

Source: RateCity.com.au. Data accurate as at 27.07.2020.

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How can I get a home loan with no deposit?

Following the Global Financial Crisis, no-deposit loans, as they once used to be known, have largely been removed from the market. Now, if you wish to enter the market with no deposit, you will require a property of your own to secure a loan against or the assistance of a guarantor.

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e.g. To see how much you could save in two years by switching mortgages,  set the slider to 2.

Does each product always have the same rating?

No, the rating you see depends on a number of factors and can change as you tell us more about your loan profile and preferences. The reasons you may see a different rating:

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What is the average annual percentage rate?

Also known as the comparison rate, or sometimes the ‘true rate’ of a loan, the average annual percentage rate (AAPR) is used to indicate the overall cost of a loan after considering all the fees, charges and other factors, such as introductory offers and honeymoon rates.

The AAPR is calculated based on a standardised loan amount and loan term, and doesn’t include any extra non-standard charges.

How much deposit do I need for a home loan from NAB?

The right deposit size to get a home loan with an Australian lender will depend on the lender’s eligibility criteria and the value of your property.

Generally, lenders look favourably on applicants who save up a 20 per cent deposit for their property This also means applicants do not have to pay Lenders Mortgage Insurance (LMI). However, you may still be able to obtain a mortgage with a 10 - 15 per cent deposit.  

Keep in mind that NAB is one of the participating lenders for the First Home Loan Deposit Scheme, which allows eligible borrowers to buy a property with as low as a 5 per cent deposit without paying the LMI. The Federal Government guarantees up to 15 per cent of the deposit to help first-timers to become homeowners.

What is the flexibility score?

Today’s home loans often try to lure borrowers with a range of flexible features, including offset accounts, redraw facilities, repayment frequency options, repayment holidays, split loan options and portability. Real Time Ratings™ weights each of these features based on popularity and gives loans a ‘flexibility score’ based on how much they cater to borrowers’ needs over time. The aim is to give a higher score to loans which give borrowers more features and options.

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The proportion you have already saved to go towards your home. 

How long does NAB home loan approval take?

The time required to get your home loan from NAB approved can vary based on a number of factors involved in the application process. 

Once you have applied for a home loan, a NAB specialist will contact you within 24 hours over the phone to take down relevant information, including your total income, debts (existing loans, credit cards, etc.), assets (car, shares, etc.), and your monthly expenses (food, utility bills, etc.). Your lender might also ask for information related to the property you want to purchase, including the type of dwelling and preferred postcode.

NAB will then verify all your information and check your credit score, and if the details stack up, you should be given a conditional approval certificate. This certificate stipulates how much money NAB is willing to lend you and is typically valid for 90 days. 

Once you have your conditional approval, you can start browsing for properties that you like and that fit within the budget that NAB has provided. After you find a suitable property, you’ll need to give a copy of the signed deed to NAB, following which you should get full approval and access to the funds. This process can take up to 4-6 weeks. 

How will Real Time Ratings help me find a new home loan?

The home loan market is complex. With almost 4,000 different loans on offer, it’s becoming increasingly difficult to work out which loans work for you.

That’s where Real Time RatingsTM can help. Our system automatically filters out loans that don’t fit your requirements and ranks the remaining loans based on your individual loan requirements and preferences.

Best of all, the ratings are calculated in real time so you know you’re getting the most current information.

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An complaints officer – previously referred to as an ombudsman -looks at formal complaints from customers about their credit providers, and helps to find a fair and independent solution to these problems.

These services are handled by the Australian Financial Complaints Authority, a non-profit government organisation that addresses and resolves financial disputes between customers and financial service providers.

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Can I take a personal loan after a home loan?

Are you struggling to pay the deposit for your dream home? A personal loan can help you pay the deposit. The question that may arise in your mind is can I take a home loan after a personal loan, or can you take a personal loan at the same time as a home loan, as it is. The answer is that, yes, provided you can meet the general eligibility criteria for both a personal loan and a home loan, your application should be approved. Those eligibility criteria may include:

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  • Clear credit history with no delays in bill payments or defaults on debts
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A personal loan after or during a home loan may impact serviceability, however, as the numbers can seriously add up. Every loan you avail of increases your monthly installments and the amount you use to repay the personal loan will be considered to lower the money available for the repayment of your home loan.

As to whether you can get a personal loan after your home loan, the answer is a very likely "yes", though it does come with a caveat: as long as you can show sufficient income to repay both the loans on time, you should be able to get that personal loan approved. A personal loan can also help to improve your credit score showing financial discipline and responsibility, which may benefit you with more favorable terms for your home loan.