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New Rule Lets First Home Buyers Become Landlords Instantly
194 Plays15 days ago
A major rule change in Queensland now lets first home buyers rent out spare rooms without losing stamp duty concessions — and some banks are even factoring that rental income into loan applications. Learn how this shift could boost your borrowing power by up to $50,000, the pros and cons of sharing your new home, and how QLD stacks up against other states. If you're house-hunting in Australia, this is an episode you can’t afford to miss.
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Transcript
Introduction of new rental policy for first home buyers
00:00:01
Speaker
I've got massive news for Queensland first home buyers. You can now rent out your spare room in your new home without losing your stamp duty concessions or first home buyer benefits. This is a huge policy shift that has just become permanent. Even better, there's some banks now factoring that potential rent into your loan application.
00:00:17
Speaker
And this can make a huge difference to your borrowing power.
Impact of room rentals on borrowing capacity
00:00:20
Speaker
Adding just $150 a week can increase your borrowing capacity by $30,000 to $50,000. Just imagine that extra borrowing capacity can be the difference between a one and a two bedroom, an apartment to a townhouse. So it can really make a huge difference.
00:00:34
Speaker
So today i want to walk you through exactly what this new Queensland rule means. We're going cover how it boosts your borrowing capacity and I'm to show you some real world numbers. And it's not all good news. There is some downside to this. So we're gonna go through warts and all.
00:00:47
Speaker
And finally, if you're interstate, I'm gonna show you how this stacks up with what's available in the other states. Welcome to the buying your first home podcast, your personal guide through the Australian housing market. Here we tackle the big questions and the small details that come up when buying your first home.
00:01:04
Speaker
From financial prep to finding the right neighbourhood, we're here to ensure that you've got all the knowledge at your fingertips. So let's take the first step towards unlocking the door to your new home.
Historical context of stamp duty concessions
00:01:19
Speaker
all right, so let's break down this big change in Queensland first. For the longest time, if you bought your first home and you got a great stamp duty concession, which is a huge amount, you can save $20,000 to $30,000 if you're buying your first home to live in, there was a bit of a catch.
00:01:32
Speaker
You had to move in there and live in there for a solid 12 months without renting out any part
Details of the new room rental rule
00:01:37
Speaker
of that property. If you decide to get a mate in to help you pay with a mortgage, you actually risk having to pay back that stamp duty de concession.
00:01:43
Speaker
Not really ideal, right? Well, that's all changed. The new rule, which has become permanent in late 2024, basically says you absolutely can rent out the spare rooms in your house even if you're living there. Well, guess it's actually provided that you're living there in that first 12-month period.
00:01:58
Speaker
The main condition, and it's an important one, is that you, the owner, have to continue living in that house too. It has to be considered your principal place of residence. So you can't just buy it and rent out the whole thing straight away.
00:02:10
Speaker
That would make an investment property and there's extra stamp duty and stuff involved with that. But if you're living in the property, you're renting out a room or two to a mate, then you're good to go. And also, it doesn't need to be made. So you can have a proper tenancy agreement in there.
00:02:21
Speaker
As long as you're living in there as your main house, that's the biggest condition. You might be wondering why the government decided to make this change. Well, there's a couple of reasons. so Well, firstly, it's a direct way to help first home buyers like you actually afford the mortgage repayments, especially in those early days.
00:02:34
Speaker
And secondly, every spare room that gets rented out is another spot for someone to live. It's obviously going to help ease the rental crisis we're seeing at the moment. So it's a pretty common sense move. All right, so that's the rule change. But here's the part think is really going to make you sit up and listen.
00:02:46
Speaker
This is how these changes actually help you borrow more money. Now, I'm not advocating to get into more debt, but over the last few years, with all the interest rate rises, we've seen most people's borrowing capacity come down by 30 to 40%.
00:02:58
Speaker
So if you're getting an assessment before COVID on 100 grand, the banks were lending you $750,000 as loan. Fast forward to you're looking at about a $500,000 to $550,000 loan. It's crazy. It's dropped and it's all because interest rates.
00:03:12
Speaker
So little changes like this can make a huge difference to help get your borrowing capacity to where you probably want it to be. You see, lenders are starting to finally recognize that renting of room in your house is a legitimate way to help you pay the mortgage. And they're willing to consider part of that income in your homeland application.
00:03:27
Speaker
Because previously, the banks would only look at it if it was your home to live in. That's it. It's a home to live in. Doesn't matter if you're getting rental income. They don't care. They just say, well, you're living in there. That's the benefit. That's all. If it's an investment property, on the other hand, well, that's fine. They'll use rental income, but then they need to work out where you're living, reduce rent, going to reduce your borrowing capacity.
Loan capacity considerations with room rentals
00:03:43
Speaker
But recently, the Commonwealth Bank has updated their lending policy and they'll consider up to $150 a week for one border as part of your income when they're working out your capacity to service a loan. Now, i know 150 a week might not sound like a fortune. They do cap it. So even if you're getting $300 $500 a week, that's the maximum they're going to use. But that's still an extra $7,800 in income every year in the bank's eyes.
00:04:04
Speaker
And when they plug it into the calculator, it means that you can afford to service a bigger loan. Let me give you an idea of what this actually looks like with some real numbers. And just remember, these are approximate figures for a single applicant with no other major debts like HECS or HELP.
00:04:15
Speaker
So let's say your income is $70,000. Without any border or extra rental income, you might be looking at borrowing around $360,000. But if the bank factors in that $150 a week from a future tenant or friend, your borrowing capacity jumps up to $405,000. That's an extra grand you're going to get in capacity.
00:04:32
Speaker
It's crazy. That's almost a 12.5% increase in how much you can borrow just by having someone rent out a room. Let me show you another example. If you're earning, say, $90,000, your borrowing might go to about $470,000. Stick a tenant in a room, it's going to go to That's a lift.
00:04:47
Speaker
$120,000 takes your capacity from 630 to 680,000. That's a $50,000 boost. You see the pattern right here? In all cases, this change in policy is adding a good chunk to borrowing capacity.
00:04:59
Speaker
And for a lot of people I talk to, this can be the difference between getting in the market into something you can afford and potentially rent out an extra room and not. But so how do the banks actually assess this? Well, using the CBA as an example, they'll only count a maximum of $150 a week.
00:05:13
Speaker
Even if you plan as to charge more, they're pretty conservative. And they'll typically earn a factor in the income from one border. So even if you've got a four or five bedroom in place, they're only going count this $150 a week. The nice thing is they've made it pretty simple to verify the documents. They don't need a rental agreement.
00:05:27
Speaker
They don't need near all these sorts of different arrangements. They just want a statutory deck saying that you promise you're going to rent out a room. It's going to be at least $150 a week and it's going to be used to help you pay towards a mortgage payments.
00:05:38
Speaker
And that's definitely where you need to be borrow or beware. Just because the bank's giving that extra money doesn't mean you can afford it. You need to make sure you can comfortably afford those mortgage repayments. And even think about if you didn't have a rent in there for a couple of weeks, do you have a safety net to cover you? Because at the end of the day, the bank's lending you that extra $50,000 assuming that room's rented out.
00:05:55
Speaker
You really don't want to stretch yourself too thin. So make sure you sit down with your broker and understand what the repayments look like now and in in the future. So the money side of things sounds pretty good, doesn't it? But the one thing to consider is, well, sharing a new home.
00:06:07
Speaker
This is where this becomes not just a financial decision, but a bit of a lifestyle one too. The reality is this isn't going to be for everyone. Let's talk about the good stuff. Like obviously the biggest one is the financial gain. You're going to an extra $150 a week, $200, $250.
00:06:18
Speaker
Depending on the place and the location, you you might get more. You can potentially split your internet bill, your power, electricity, all the other stuff there. So it's going to help give you a bunch of breathing room and help make that mortgage even more manageable.
00:06:30
Speaker
But it's not all upsides. You've got to think about sort of the loss of privacy. If you do a lot of work from home, how that's going to work. If your friend or your flatmate is going to work from home a lot as well, are going to manage that throughout the week? It can be awkward if someone's working out of the kitchen, just sort of going and making a tea and coffee and they're doing Zoom calls.
00:06:46
Speaker
I mean, if you've lived in a share house before, you know what it's like. You need to agree who cleans the sink, who's doing the dishes, doing the bins, all that sort of stuff. But just keep that in mind. As much as the financial part is amazing, you need to think about the secondary and third effects if you have someone else living in your new house.
Becoming a landlord: tax and lifestyle implications
00:07:01
Speaker
you got to keep in mind too that it's your house, you do technically become a landlord. Even if it is just renting out one room, it's worth considering getting a written agreement, even a simple rooming accommodation agreement. You can find them on the ah RTA website in Queensland. Online, it says who's responsible for the bills, how much you're going pay, what are you going to get paid, where they need to pay it, all that sort of stuff, just so it's all nice and clear and in writing.
00:07:21
Speaker
Because that brings up another question, what about tax? Well, that rental income you earn, well, potentially you have to declare it to the ATO. it is income after all. So this is where this is general advice when you need talk to an accountant to get specific advice.
00:07:34
Speaker
But if you are renting out the house, it does also mean that you can claim deductions on certain things like the utilities, internet, maybe even a portion of your interest. But there's also downsides because it could affect your capital gains tax concessions as well, because it's not just your own occupied home. Part of it's you can use as investment property.
00:07:51
Speaker
So I'm only touching on this. I'm not going to go into any more detail than that. Speak your accountant and get super specific with the advice here. If you're considering this, have a chat to your accountant about all the pros and cons and the best way to approach this to make sure you don't get caught out in the future. You also have to check out your home insurance because it does change that as well because you're going have to let them know that you potentially have a tenant, part the property is rented out, and there might be specific clauses around that.
00:08:13
Speaker
Look, I'm not trying to scare you off. I don't want to sound like you ask your dad something tells you all the bad things to think about. But the reality is you need to consider all aspects before you do this. Your home is your literal biggest investment. It's the hundreds of thousands of dollars, sometimes millions. It's crazy that you're spending on a property and you don't want to lose some of those concessions, you know potentially effective tax.
00:08:35
Speaker
pay more at the end of the day just for a couple hundred dollars a week. So you need to make sure you're comfortable, even to help your borrowing capacity, just sit down and work through this stuff, have a chat to your accountant, look at the insurance and make sure it's not going to impact any of that in the future. so you might be wondering, was Queensland a bit of a laggard with this sort of changes?
00:08:51
Speaker
What are the other states doing?
Comparison with other states' policies
00:08:52
Speaker
Well, in places like New South Wales and Victoria, it's generally accepted that you can rent out rooms for your first home as long as you're living there as a main residence for at least the required time. So usually it's like 12 months.
00:09:02
Speaker
Their rules weren't as well explicitly prohibitive as Queensland's was because they said previously you couldn't even rent out any part of the house. Otherwise, it would affect your concessions. But the new Queensland state rules are yeah a lot clearer and a lot more user friendly, I guess, if you're first home buyer trying to rent out those rooms.
00:09:18
Speaker
In South Australia, the revenue SA actually explicitly say that you can rent out a room while you're doing your six-month occupancy. And for other states like WA, Tassie, ACT and NT, it's a similar story. It's generally okay to live there as long as you meet those occupancy conditions.
00:09:33
Speaker
So really, Queensland was like the strict outlier with not being able to rent out your home for the first year. But with this change, really, it's aligned with other states. And in my opinion, the new explicit permission around this makes it the clearest and probably more in supportive environment for first home buyers who are considering this sort of house hacking.
00:09:50
Speaker
So pretty much no matter where you are in Australia right now, if you're a first home buyer, the idea of getting a flatmate could help with your costs without losing your stamp duty concessions or any of your first home buyer benefits. I think just always double check the wording, especially because there's different states and semantics, different things. You want to make sure it's not going to affect it in your particular state. And like I said, have a look, chat to your accountant, look forward first just to make sure it's not going to affect anything bigger picture in the future.
00:10:13
Speaker
And so if you are considering this strategy, how can you make it happen smoothly? Well, I think definitely first up, budget carefully. If the bank says you can borrow extra with the rental income, make sure you can handle the repayments on your own.
00:10:25
Speaker
Think of the rent as a bit of a bonus, like a bit of a safety net that's going to keep you afloat. But you want to be able to afford that, have a bit of a buffer left just in case, like i said, your tenant leaves, they lose their job and they can't afford their rent. You just want to make sure you're protected yourself.
00:10:38
Speaker
Now, I know I sound like a broken record, but definitely speak to an accountant first before you do this. Understand the tax side, especially capital gains. Do this before you're even considering advertising for a tenant. It's going to save you heaps of headaches in the future.
00:10:50
Speaker
And when it comes to finding a tenant, if it's not someone you know, make sure you screen them thoroughly. Websites like flatmates.com.au are really great, but you need to always ask for references. I think like with this sort of stuff, in they trust your gut, having a compatible housemate is going to make all the difference. You don't want a stressful home life.
00:11:06
Speaker
And definitely, like I said before, like obviously get written advice around this, but a rooming accommodation agreement, you can find templates online. There's stacks of them just to make sure it outlines clearly who, you how much your rent's going to be, when it's due, the bills, the house rules, the notice periods. If ever you need to, don't know, inspect their bedroom, if they lock it all the time, just want to make sure it's all really clear up. And don't forget to let your insurer know that you can have a tenant just to make sure you've got the right coverage in place.
00:11:30
Speaker
Look, I think this change is really positive, especially with some of those banks incorporating that income into applications. So if you think like your borrowing capacity isn't enough, if you're looking at options, what it looks like if you were to rent out a room, if your first home buyer looking at getting the market, hit us up at
Conclusion and guidance for first home buyers
00:11:44
Speaker
Hunter Galloway. We're the home for home buyers across Australia.
00:11:47
Speaker
We'd love to help out. We help people not just in Queensland, interstate. So like I said, if you want to get a free assessment, hit us up at huntergallow.com.au. We'd love to help out. Leave a comment below. Let me know what you think.
00:11:57
Speaker
Thumbs up if you get time. i appreciate it so much. And until next time, I'll see you guys later. um