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How the Victorian Homebuyer Fund can help you own a home sooner

In an exciting move, Victoria has established a $500 million homebuyer fund that will help buyers get into the property market with a deposit as low as 5%. Given how house prices have soared in recent years, affordable housing has become harder and harder to obtain.

This program intends to alleviate financial pressure on low and middle income buyers so that they can own a home sooner. Government homebuyer assistance schemes typically only apply to first home buyers, so this program could help out more Victorian buyers who may have owned property in the past.

Here we’ll explain what the fund is, how it works, how to apply for it, who’s eligible and what else you need to know.

What is the Victorian Homebuyer Fund?

The Victorian Homebuyer Fund is expected to assist about 3,000 homebuyers with low deposits to enter the property market. While the buyer must have a minimum deposit of 5%, the state government is set to provide up to 25% of the property purchase price in exchange for a stake in the property. The remaining percentage of the purchase price will be covered with a regular lender-provided home loan.

So, the Victorian government will effectively be acting as an equity partner in the property purchase. The fund expands on the previous $50 million HomesVic Shared Equity Initiative pilot program which helped over 335 Victorian households purchase their first home.

If you are Aboriginal or Torres Strait Islander, you only need a 3.5% deposit to apply for the fund program. Plus, the government can contribute up to 35% in exchange for a matching share in the property.

Is interest charged on the government contribution?

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No, the Victorian government’s contribution will not attract interest. But, the value of the government’s share will change as your home’s value changes. So if you decide to buy out the government’s share, your repayments will reflect any capital gains/increased value on your home.

Can you buy out the government’s share in the property?

Yes, homeowners can buy out the government’s share over time if they wish, but it is not required. If you never buy out the government share in the property, you simply give back the same proportion of the share when you sell.

When you sell or buy out the government share, the funds are then reinvested back into the scheme so that other buyers can benefit.

Where can I buy property under the fund?

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In order to use the fund, the property you opt to purchase must be in metropolitan Melbourne, Geelong or an eligible regional location. Some of these regional locations include:

Bacchus MarshHorshamPortland
BairnsdaleInverloch/WonthaggiSale
BallaratKilmoreSeymour
BannockburnKorumburraShepparton
BenallaKynetonSwan Hill
BendigoLatrobeTrafalgar
CastlemaineLeongathaTorquay
Clifton SpringsLeopoldWallan
ColacMaffraWangaratta
Creswick/ClunesMansfieldWarragul
DaylesfordMaryboroughWarrnambool
DrouinMilduraWodonga
EchucaOcean Grove/Barwon HeadsWoodend
GisbornePortarlingtonYarrawonga

For a full list of eligible locations head to the Victorian State Revenue Office website.

Are there price caps on properties purchased under the fund?

Yes, if buying in metropolitan Melbourne or Geelong, the property you purchase cannot cost more than $950,000. For regional Victoria (excluding Geelong), eligible property prices are capped at $600,000.

Do I have to be a first home buyer to apply for the Victorian Homebuyer Fund?

No! Unlike most other home buyer assistance schemes which typically only apply to first home buyers, the Victorian Homebuyer Fund can be used by those who have previously owned property. However, if you want to apply, you cannot currently own a property.

Who is eligible for the Victorian Homebuyer Fund?

There is an eligibility criteria that home buyers must fit in order to qualify for the fund. They must:

  • Hold Australian citizenship or permanent residency and be at least 18 years of age
  • Be earning no more than $125,000 per year as an individual, or $200,000 per year for joint applicants
  • Be applying as a person, not as an organisation, trust, or company
  • Use the purchased property as their principal place of residence
  • Not be a shareholder in any corporation that owns land (excluding public companies) or act as a trustee of a trust
  • Not purchase the property from a seller who they are related to
  • Not own interest in any land at the time of purchasing

The Victorian State Revenue Office (SRO) has a tool that you can use to assess your eligibility for the fund.

Which lenders are involved with the Victorian Homebuyer Fund?

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Currently Bank Australia and Bendigo banks are the lenders participating in the Victorian Homebuyer Fund. You cannot use another bank as your loan must be approved by a participating lender.

How to apply for the Victorian Homebuyer Fund?

Once you’ve determined your eligibility using the Victorian SRO tool, you’ll receive an email that explains the next step to take. You’ll then be able to contact a participating lender who will assess your ability to service the loan and double-check your eligibility for the fund.

If you’d like an expert to assist you with this process, it might be helpful to get in touch with a mortgage broker who’ll do all the leg work for you.

Bear in mind that even if you are eligible for the fund, you may not be eligible for a loan with a participating lender. Also remember that on top of the minimum 5% deposit, there are other fees involved which may include:

  • Stamp duty/transfer duty (if it applies to you)
  • Legal costs
  • Conveyancing
  • Pest and building inspections
  • Possible home loan application or establishment fees

Can I use other government assistance schemes?

Yes, you can apply for the Victorian Homebuyer Fund in conjunction with other buyer assistance programs. These may include:

What if I have a deposit larger than 5%?

That’s fine, 5% is the minimum deposit required, so you can have a larger amount saved up. However, the deposit must be made up of genuine savings.

If you’d like to know more about the Victorian Homebuyer Fund and your home loan options, get in touch with a Lendi Home Loan Specialist today.

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The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.

Tags: home loan, first home, first home buyer, first property, new purchase, victoria, low deposit

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