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Building a new home can be an expensive process. With home insurance, conveyancing or solicitor fees, and mortgage insurance, costs start to add up quickly. One of the largest payments you’ll make during this process is stamp duty. Although the added cost is substantial, there’s no avoiding it unfortunately, since every real estate purchase accrues a stamp duty cost. But what is it? We’ve got a quick summary of what stamp duty is and why you need to pay it.

What is Stamp Duty?

Stamp duty is a form of tax written on certain transactions, like real estate, that is imposed by state and territory governments. It is paid by the purchaser of the property. The amount imposed on the transaction will vary from state to state, but each state and territory in Australia imposes stamp duty on real estate purchases.

Stamp Duty

How is Stamp Duty Calculated?

The amount of stamp duty you’ll pay depends on a number of factors. The location of the land or property being purchased, whether you’re a first home buyer, and whether you’re buying land or a dwelling, and whether you’re purchasing an investment property or plan to live in the property all contribute to the final amount of stamp duty calculated for your purchase. The amount is calculated on either the expected value of the land and buildings or the purchase price of the land and existing dwelling as at the date of the contract of sale, which is the date when the contract of sale is signed and the deposit is paid by the purchaser. Many financial institutions and State Revenue Office websites offer stamp duty calculators so you can estimate how much stamp duty will be applied to your real estate purchase.

Stamp Duty Exemptions

There are some instances where stamp duty may be reduced depending on your circumstances. These include purchases by first home buyers, pensioners, low property value, deceased estates, and off the plan purchases. When you’re ready to purchase land or a home, research the stamp duty exemptions in the state your purchasing in order to see if you qualify for a reduced stamp duty rate.

When is Stamp Duty Paid?

Stamp duty is paid to the State Revenue Office in the state of purchase prior to the lodging of the transfer of land to the land titles office. Usually the purchaser’s lender or legal representative pays stamp duty after settlement, often with funds that the purchaser contributed before settlement occurred.

Stamp Duty

How to Reduce Your Stamp Duty

The most obvious way to reduce the amount of stamp duty you’ll pay is to buy a less expensive property. However, with the cost of real estate fluctuating this isn’t always possible. In most states and territories, stamp duty increases significantly when the purchase price goes over $500,000. You may opt to look for property in a regional area or even in a different state to decrease the amount of stamp duty you’ll pay. If you’ve purchased a house and land package and will be building a new home, the stamp duty is calculated on how much the property is expected to be worth, so reducing the cost of the build by sticking with the standard inclusions offered by your builder will help keep the build costs low and subsequently lower the property’s initial value.

When purchasing a new home, whether it’s land or a dwelling, you’ll be required to pay stamp duty on your purchase. This is something you should budget for when saving a deposit to purchase so there are no nasty surprises. Researching estimated stamp duty costs using online calculators will help you allow for this payment on top of you deposit, ensuring you’re not out of pocket with an expense you weren’t expecting. For more home building tips, visit the Hotondo Homes website today.

Hotondo Homes is not a licensed financial expert and we recommend speaking to a licenced financial professional before making a real estate purchase.

Buying your first home and feeling a little confused about what conveyancing is? You’re not alone! This is a vital part of the purchasing process, but is often a service you pay for without really understanding it. We’ve got a simple breakdown of what conveyancing is, why you need to do it, and why it’s an important part of the home buying process.

 

What is Conveyancing?

This is the essential step of transferring the ownership of land or a property from one owner to another. Buyers can handle the conveyancing themselves, though it can be quite time consuming and complex. This is why most people choose to use a licenced conveyancer or solicitor to do the work for them. Conveyancing covers a number of things, such as the payment of the deposit, the balance of the purchase price and competing the correct forms to ensure the land or property is properly and legally transferred to the correct person. It also includes making enquiries about outstanding debts, obligations, potential defects or disputes on the property.

Conveyancing

Buying or Selling?

Legally, a conveyancer cannot carry out any conveyancing work for the buyer until after the contract has been signed. Once you’ve committed to buying land or a property, the conveyancer can then commence their work, and advise you with comprehensive advice about the contract of sale, the Section 32 Vendor’s Statement, and what your rights and obligations are under the contract, as well as any special conditions or issues with the property. As a seller, a conveyancer or solicitor will prepare the legal documents for you, which includes the contract of sale and the Section 32 Vendor’s Statement.

The Conveyancing Process

Once you have signed a contract to purchase a home, the conveyancer or solicitor will commence their work. They will investigate whether a government body has an interest in the land or whether there are any proposed developments or notifications that could affect the property by gathering information and making enquiries about the land and title from relevant authorities to ensure there are no hidden defects, debts, or mortgages on the property. They will also ensure the property is in compliance with council and state regulations and law. They will then draw the relevant documents to ensure the property is transferred to the correct owner at the end of the process, which is the settlement date in the contract of sale. The conveyancer or solicitor will also represent you as the buyer or seller and liaise with the other party directly. This includes the exchange of transfer documents, ask any questions about the property, and communicate with the financial institution involved as well as attend the settlement on behalf of their client.

Conveyancing

What Happens After Settlement?

Once settlement is over, the conveyancing process is typically finished. In some cases, the conveyancer or solicitor may attend to stamping and lodging of the transfer documents. This means they may assist in the preparation of the documents so that a new Certificate of Title is issued in the name of the land or property’s rightful owner.

Conveyancing is an essential step of transferring ownership of property when its being bought or sold. Because this is such a significant financial investment, using a professional to assist you with the process is invaluable during your home purchase or sale. When you build with Hotondo Homes, your local builder will be able to to assist you with your conveyancing needs during the building process. For more building tips and information, visit the Hotondo Homes website today.

Hotondo Homes is not a licenced conveyancing service, and we recommend speaking to a licenced professional when you’re buying or selling land or property.

Have you been chatting to a mortgage broker about obtaining finance to buy or build your first home and you’re feeling a little bit confused about all the different loan terms being discussed? Don’t worry, we’re here to help! We chatted to our friends at Professional Mortgage Managers and they have a thorough list of all the loan terms, what they mean, and how they can benefit you!

Variable loans

Variable loans are loans that are subject to interest rate fluctuations. Whenever your bank increases or decreases interest rates, you will end up either paying more or less for your loan, depending on what the bank has decided to do. The benefit to the customer is that often (but not always) once discounts are applied that lower rates, there is the flexibility to pay down loans quicker, you can have 100% offset accounts and can discharge from your loan at any time without breaking fees.

Fixed-rate loans

Fixed loans allow you to lock in a specific interest rate over a set period of time, generally between one and five years. This loan ensures that repayments don’t rise for the fixed rate period. The main risk is that if variable rates fall, you are locked in at a higher rate. The cost of breaking a fixed rate loan contract can be substantial. The benefit to the customer here is the element of repayment certainty in times of rate fluctuation.

Principal and interest repayments

Repayments are based on the principle rate, the amount borrowed from the bank, and the interest, the amount to pay for having borrowed the money.

Interest-only repayments

Repayments are made just on the interest, which is the amount you repay for having borrowed the money, and not on the principle borrowed amount. This is generally available for 1 to 5 years for owner occupied loans, and one to ten years for investment loans.

Split-rate loans

You can take out a mortgage with one portion of the loan variable, and the other fixed. In many ways, this offers the best of both worlds and you have the flexibility to repay more on the variable loan and reduce risk through the fixed loan.

Low-doc loans

This loan is better suited to the self-employed as low-doc loans require less proof-of-income paperwork, but the interest rate levied is often higher than the standard variable rate.

Professional or packaged loans

Some lenders offer mortgages that provide ‘lifetime’ discounted interest rates, fee waivers and linked savings accounts and credit cards. These options are generally offered on high loan amounts.

Construction loans

These loans allow amounts of finance to be drawn down progressively to cover the various stages of a construction project. Repayments (generally only on interest for the first twelve months, then on principal and interest thereafter) are only made on the amount of the loan facility that has been drawn down. However, there are line fees on the undrawn amount, or in most cases on the total facility limit.

Line-of-credit facilities

This is a way of tapping into the equity in an existing home loan and drawing down funds as required for different purposes, such as renovations. Similar to a credit card, repayments are only made on the amount drawn down. Line-of-credit loans are often interest-only for a significant period, but can revert to principal and interest repayments down the track. Most lenders charge extra for line of credit accounts, either through a facility fee, undrawn funds fees and/or a higher interest rate.

Bridging loans

Bridging loans are designed as short-term financing options for borrowers who need funding to buy a new residence before selling their existing home. The interest rates on these loans are higher than the standard variable interest rate.

Now that you’re ready to get finance approval for your first home purchase, having a sound understanding of common loan terms will help you understand the types of loans your broker will suggest that suit your lifestyle and budget. This should also help you in the future in the event that you need to reassess your home loan and make changes where necessary. To find a builder local to you, head to the Hotondo Homes website today. Our builders can assist you with getting in touch with a finance expert to help you start the process of obtaining finance for your new home.

Hotondo Homes is not an authorised financial institution and we recommend home buyers always seek the advice of a registered financial professional before purchasing a home.


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