Victorian Homebuyer Fund

The Homebuyer Fund allows eligible Victorian home buyers to enter the market with 5% deposits. The government will contribute up to 25% of the purchase price, but will own a share of the home in exchange.

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The Victorian state government has set up a shared equity scheme to support home buyers. The Victorian Homebuyer Fund will cover up to 25% of a property's value while the buyer only has to provide a 5% deposit.

This allows the buyer to enter the market much faster with a small deposit. They can also avoid paying lenders mortgage insurance (LMI), which borrowers with small deposits usually have to pay. But there's a catch: The Homebuyer Fund is paying for part of your property, which means the fund owns part of it.

How does the Homebuyer Fund work?

If you have saved a 5% deposit and are looking to buy a home in Victoria, you can apply to the Homebuyer Fund. If you meet all the eligibility criteria (including property value, location and income), the fund will pay up to 25% of your property's value.

Here's a simple example:

  • You buy a property in Melbourne for $700,000.
  • You have a 5% deposit, or $35,000.
  • The Homebuyer Fund agrees to cover 15%, or $105,000. This makes 20%, meaning you can avoid LMI.
  • You get a home loan to cover the remaining 80% of the property. The Homebuyer Fund owns 15% of your property.
  • 7 years pass and your home's value grows to $800,000. You've been repaying the home loan, but the Homebuyer Fund still owns 15%, which now equals $120,000.

What happens after you buy the property?

Once you own the home you start repaying the home loan, and other normal property obligations like council rates and body corporate fees. But the Homebuyer Fund, being a part-owner of your property, will impose some extra obligations.

The Victorian Homebuyer Fund expects you to hold an insurance policy over the property and maintain the property. And you will need to complete an annual review to prove you're repaying the loan, paying your insurance premiums and paying all your bills.

Repaying the Homebuyer Fund

There is an income limit for applicants to the fund. If your income increases above the threshold ($125,000 for an individual or $200,000 for 2 buyers) after you've bought the property, then the Victorian Homebuyer Fund expects you to start repaying its share of the property.

You can also make voluntary repayments of the Homebuyer Fund's share of the property. But you must make these repayments in specific amounts that equal at least 5% of the fund's share. For example, if the fund owns 25% of your home then you can make a 5% repayment, but not a 2% repayment.

Who is eligible?

To apply for the fund you need to meet multiple criteria:

  • You need to be a citizen or permanent resident aged 18 or older.
  • You need a gross annual income of $125,000 or less (for 2 borrowers, $200,000 or less).
  • The property needs to be your principal place of residence, meaning you must live in it and not rent it out.
  • You can't buy a property from a family member.
  • You need to be a natural person, meaning you are not buying as an organisation or trust.
  • You can't own any interest in any land at the time of the purchase or be a shareholder in any private corporation that owns land.

Check out the Homebuyer Fund's eligibility quiz to see if you qualify.

What are the rules and restrictions around the properties you can buy?

You can purchase a property in Melbourne, Geelong or in a long list of regional Victorian locations.

Price caps

If you're buying in Melbourne or Geelong the maximum purchase price of an eligible property is $950,000. In regional Victoria the maximum price is $600,000.

Can I get a home loan from any lender?

No. To get help from the Homebuyer Fund you need to also get approved for a loan with 1 of the 2 lenders participating in the scheme:

Am I eligible for other grants and concessions?

You can take advantage of the Homebuyers Fund and still qualify for other schemes like stamp duty concessions and grants for first home owners (if you are eligible).

What are the advantages of buying a home with the Homebuyer Fund?

Saving a standard 20% deposit is getting increasingly difficult for many Australians. And it gets harder every year that property prices rise.

The biggest advantage of the fund is that you only need a 5% deposit. And if the fund covers at least 15% of the purchase price you can avoid paying LMI completely. This can save you thousands of dollars in LMI premiums.

What are the disadvantages?

The Victorian Homebuyer Fund is a shared equity scheme. Equity is the value of the property, minus any debts you owe. Because the fund is paying for the part of the property, it will own that proportion of the property.

You will have to repay the fund, either in instalments or when you sell the property.

Apart from shared ownership, the fund also imposes other obligations, like the annual review mentioned above. And if you want to sell or refinance in the first 2 years you need the fund's approval.

You are also limited in your choice of lender.

Before entering into a shared equity arrangement with the Homebuyers Fund you need to understand these extra obligations.

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2 Responses

    Default Gravatar
    DawitOctober 18, 2021

    Hi,Am locking to buy a house if you need me am happy than you

      Avatarfinder Customer Care
      RichardOctober 21, 2021Staff

      Hi Dawit,

      Are looking to buy a home in Victoria? If yes, you can check the eligibility requirements on this page. You can also check out the Homebuyer Fund’s eligibility quiz to see if you qualify. For home loan options, you can check out our guide here. You can compare the home loans and once you’ve chosen a particular lender, simply click the Go to site icon. Make sure that you meet the eligibility requirements and review their Product Disclosure Statements and Terms & Conditions.

      I hope this helps!

      Cheers,
      Richard

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